Wondering if Ethereum can flip Bitcoin is one thought that ponders on the minds of several crypto investors and analysts, but the real question now is, will Ethereum market capital flipping that of Bitcoin be good for Bitcoin?
Looking at Bitcoin’s use cases, it is gold 2.0, you buy it, you hold it, and you preserve your wealth with it. Bitcoin is an inflation hedge and that’s all. It is more portable and divisible; Bitcoin is looking at replacing gold as the ultimate store of wealth. That gives us a market capital of over ten trillion long-term for Bitcoin. That is a big target for Ethereum to one day overtake Bitcoin.
Bitcoin is digital gold, you buy and you hold it, Ethereum, on the other hand, is different. Ethereum has an interesting store of value properties but it goes deeper than Bitcoin. For Ethereum, you can buy it, hold it, and stake it to get passive income which Bitcoin does not allow. EIP1559 will introduce a deflationary mechanism for Ethereum that could make it a better store of value; on Ethereum, you have Defi, NFTs, decentralized trading, borrowing and lending, synthetic stocks, stable coins, and commodities being issued out. Ethereum has become a unit of account in NFT market places, in DeFi, and the insurance markets.
There are so many use cases for Ethereum than there are for Bitcoin; Bitcoin’s simplicity is why it is good in many ways but Ethereum does more which means that there is more long-term demand for the asset because of the activity that will be and is already happening on Ethereum.
Looking at the institutional adoption of cryptocurrency, the big stories over the past two months are of massive companies buying Bitcoin to diversify from holding large stacks of cash; Tesla was the most famous buy of Bitcoin of about $1.5bn. Ethereum has not had that same level of institutional adoption, people are looking at the digital gold narrative but different companies have different needs. The companies that want to diversify from cash holdings will probably continue to choose Bitcoin, but companies that want to invest in the next tech stock which is a cryptocurrency asset will be investing in Ethereum.
The gains and the potential for Ethereum have been bigger; since Tesla bought Bitcoin, their price has gone up by about 48% while that of Ethereum has gone up by about 110%.
If Ethereum were to do a 3x overnight, it would flip the market capital of Bitcoin, but if we keep the digital gold narrative in mind, Bitcoin is potentially looking at a ten trillion dollar market capital over time.
The question which people need to start asking now is if Ethereum can get to a ten trillion dollar market capital. If you were to take companies like Amazon, Apple, Facebook, and Google and combine their market capitals all together, it will not even get up to ten trillion.
Seeing Ethereum reach a market capital of ten trillion dollars is quite crazy. It is quite an outstretched price target.
