Bitcoin vs. Ethereum: Which Is a Better Buy?
It's no surprise that investors are interested in cryptocurrencies. Bitcoin was first traded back in 2009. Back then, you could buy one of the new digital tokens for less than $0.01. Prices steadily rose until peaking above $20,000 per coin in late 2017. Ethereum debuted in 2015 at $2.83, and in under three years was worth over $1,400.
By comparison, General Electric Co. (ticker: GE) shares first hit $2.83 in 1995, adjusting for dividends and stock splits. Today, a quarter century later, it goes for about $12.
Although they're the two biggest cryptocurrencies by market capitalization, similarities more or less end there. Bitcoin and Ethereum are totally different animals, developed for different reasons and with different internal dynamics.
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But enough history -- investors want to know which is the better buy: Bitcoin or Ethereum?
Here's a quick rundown of some of the biggest considerations regarding the investment outlook for each cryptocurrency.
Bitcoin
The de facto cryptocurrency leader, no other coin even comes close to Bitcoin, or BTC. At the time this article was written, the dollar value of all outstanding Bitcoin was $150 billion. The total market capitalization for all cryptocurrencies is $230 billion, and the second-most valuable digital currency was Ethereum, with a market value less than $18 billion.
Here are some key things investors should know about BTC in the Bitcoin versus Ethereum investment debate:
Upcoming halving event.
The reward for bitcoin miners will be cut in half in mid-2020. Miners verify transactions on the Bitcoin network and are rewarded for doing so with a set reward for every block of verifications. The reward is how new bitcoins are put into the system, and that rate automatically halves every 210,000 transactions.
The reward is falling from 12.5 BTC per block to 6.25 BTC, and this will slow the expansion of supply. There's a maximum of 21 million bitcoins that can ever exist; nearly 18.2 million are already in circulation.
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Highest attention from large investors.
"Bitcoin has the most traction amongst major financial institutions and private equity investors," says Alex Adelman, CEO & co-founder of Lolli, the first bitcoin rewards application allowing people to earn bitcoin while shopping online.
The Winklevoss twins, the famous Harvard alumni who claim Mark Zuckerberg stole the idea for Facebook ( FB) from them, famously tried to start a bitcoin ETF, but they were rebuffed by the Securities and Exchange Commission.
Relative stability, simplicity and acceptance.
"Bitcoin's strict purpose is basically being an alternative to fiat currency," says Cindy Yang, team lead of the fintech industry practice group at the law firm Duane Morris.
A decentralized currency, beyond the grasp of the Federal Reserve or any other central bank and with a predefined maximum supply, is a concept that people worldwide can resonate with. This, what Yang refers to as the crypto's "simplistic nature," has real-world repercussions on the digital asset itself.
"Bitcoin has been used for payment, you can buy property with it, you can buy coffee with it -- it's farther along in adoption in terms of people using it as a store of value," Yang says.
Ethereum
Before asking yourself " Should I buy bitcoin or ethereum?" you should understand the different motivations behind the Bitcoin and Ethereum platforms.
Ethereum: a different goal than Bitcoin.
The two leading cryptocurrencies have "very different use cases, with Bitcoin acting as store of value and Ethereum acting as a new decentralized computing network for application development," says Zac Prince, founder and CEO of BlockFi, a crypto lender and wealth management company backed by investors like Peter Thiel and the Winklevoss Twins.
Yang agrees. "I think they're so different that it's actually like choosing between two stocks from different sectors," she says.
The ability to use the Ethereum platform to change the way mortgage transfers, securities trading and many other fields work has naturally brought about the next characteristic.
More development.
Naturally, because Ethereum's utility is only limited by the ingenuity of the world's developers, there's more activity surrounding the platform. Technically, the cryptocurrency used to facilitate Ethereum transactions is called "ether," but it's popularly referred to as ethereum.
Either way, the number of Github ethereum-related repositories is 223 to Bitcoin's four. Repositories are similar to project folders where developers collaborating through Github can access project information.
A fundamental change in how blocks are created.
Instead of miners with the most computing power having the greatest advantage in successfully creating new tokens, those with the largest ownership stakes will be granted that right. Some believe this could pose risks.
Ethereum will soon "become a 'proof of stake' coin rather than a 'proof of work' coin," says Clem Chambers, CEO of Online Blockchain and ADVFN, a leading global investor website.
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"This has a fair chance of killing Ethereum as a top crypto. It might not, but it certainly can and there is little upside from the change if the scheme works. As such, why take the risk on Ethereum when Bitcoin has proven its robustness time and again?" Chambers says.
>Brass tacks: should you buy bitcoin or ethereum?
When it comes right down to it, there appears to be broad consensus among sophisticated cryptocurrency investors, entrepreneurs and subject matter experts: Bitcoin is, all-things-considered, a better buy than Ethereum.
"Our belief is that Bitcoin has the highest near-term probability of adoption and inclusion in mainstream portfolios," says a spokesperson at Galaxy Digital, a merchant bank focused on digital assets and the blockchain.
"If you ask yourself: 'Is this an investment worth having over 10 years time?' Bitcoin stands out," Yang says. She cites its more conservative nature, evidenced by fewer changes on the horizon, a stronger brand name and impressive adoption.
As for Ethereum, "it may not be the most elegant right now but there's so much development you can't take your eyes off of it."
"It's two different storylines and two different personalities," Yang says.
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