As I write this,
Ethereum
(CCC:
ETH-USD
) has a market capitalization of $201 billion. The full supply of
Bitcoin
(CCC:
BTC-USD
) now is valued at only over $1 trillion.

Source: Shutterstock

The relative size of the two cryptocurrencies’ market place caps “feels” correct. Information technology seems about self-evident that Bitcoin should be the more valuable of the two. Bitcoin is the nearly well-known, the most widely adopted and the well-nigh owned of all the cryptos. It gets the most attention.

Merely I’m not sure information technology actually has the nearly potential. In that location’s a case that, over the long haul, it’south Ethereum, non Bitcoin, that proves to be the most valuable cryptocurrency out there.

The Instance Confronting Bitcoin

At this bespeak, nosotros’ve largely answered what Bitcoin is: a and then-chosen “store of value.” As even
Coindesk
puts it, Bitcoin is “digital gold.”

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That’s fine as far as it goes. The crypto’south pattern aids in this process, given the cap of 21 million Bitcoins that can exist mined. That fixed supply does assist create the case for Bitcoin as a store of value, or something with intrinsic worth.

But it’due south worth noting that Bitcoin wasn’t conceived as a store of value. The original white newspaper by the pseudonymous Satoshi Nakamoto presented an idea for a “peer-to-peer electronic cash system.” Bitcoin was supposed something much closer to a currency, rather than a shop of value.

The fact that the bull case for Bitcoin has pivoted over time isn’t necessarily a trouble for the store of value argument. (I accept my doubts, simply so again I’ve been wrong on the crypto pretty much from the spring.) Merely that argument does go out Bitcoin as a somewhat fixed technology.

Meanwhile, it does leave an opening for an actual method of exchange to gain adoption. On that front, Bitcoin just is too slow, owing in part to its scalability problem.

In other words, if Bitcoin tin can’t truly exist the ‘currency’ part of a ‘cryptocurrency’; if information technology can’t provide instant, seamless, transactions; what tin?

The Case for Ethereum

The answer might well be Ethereum.

The broader Ethereum platform has the power to actually do what Satoshi Nakamoto believed Bitcoin would: to decentralize finance. And experts generally (though not unanimously) agree that Ethereum has a big edge in so-called ‘DeFi’ projects.

2 points need to exist made. First, Bitcoin does have DeFi applications, though not as many as Ethereum. Its lack of complex “smart contracts” is a hindrance, merely ane that could be improved by new coding language.

Second, Ethereum has its own issues, notably high gas fees. Those fees create roadblocks to creating microtransaction payments, amidst other bug.

But Ethereum too should improve, notably through Ethereum 2.0, which can meliorate gas fee problems. The flexibility of the platform allows for a range of projects to be created. Faster speeds get effectually a core stumbling block with Bitcoin. The shift from proof-of-work to proof-of-pale essentially means that stakers instead of miners control the platform. This is turn creates a healthier, and likely more than productive, ecosystem.

Merely put, Ethereum has a far broader set of use cases than does Bitcoin. For bulls who see crypto as creating an economical and financial revolution, that would seem to make ETH the more attractive choice.

How This Plays Out

And, in fact, Ethereum has outperformed Bitcoin handily so far in 2021. The run extends even farther. Over the past 12 months, it’s returned ane,300% against 931% for the ameliorate-known crypto.

Now, to be clear, that recent outperformance doesn’t necessarily accept to go on. Bitcoin’s more uncomplicated case may help its toll, by alluring traders and investors who aren’t every bit technically versed in, or bullish on, decentralized finance. That bated, the very fact that Bitcoin is more than popular itself tin can keep it more than popular going forward. More coverage and more than attending may mean more trading activity, which by and large (though not always) leads to higher prices.

And, of course, the crypto universe extends far across its two most valuable members.
Ripple
(CCC:
XRP-USD
) is a centralized offer, and has its share of bug at the moment, merely still has an intriguing use case. Myriad other ‘altcoins’ claim the power to tackle pregnant financial and even societal problems.

Information technology’s not necessarily an either/or proposition between Ethereum and Bitcoin. Even if it is, nothing says that requires that one has to ascension and the other autumn. Bitcoin itself is barely 12 years onetime; Ethereum went live in 2015. We’re in unchartered waters hither, and the valuation of any cryptocurrency is at the moment mostly in the eye of the beholder.

Still, it is worth at to the lowest degree considering the possibility that Ethereum proves to be the biggest, or at least bigger, winner in crypto. Given a market place cap barely one-fifth that of Bitcoin, such a possibility would probable suggest enormous upside.

On the date of publication, Vince Martin did not accept (either direct or indirectly) any positions in the securities mentioned in this article.