Bitcoin (CRYPTO: BTC) has long been the most popular cryptocurrency and is becoming almost synonymous with the category in the public consciousness.
Almost as long ether (CRYPTO: ETH) has played the bridesmaid as the second most popular digital currency.
However, one expert believes that Ethereum has several aspects that could give it a fighting chance to overtake Bitcoin.
According to Mads Eberhardt, Saxo Markets’ cryptocurrency analyst, Ethereum last had the chance to do so during the 2017 boom.
“In late 2017, the most debated topic in the crypto space was … whether Ethereum would flip Bitcoin in terms of market cap,” he said.
“It never happened in 2017 as the Ethereum bull run in 2017 was a bit unsustainable as it was mainly driven by the ICO [initial coin offering] Bladder.”
Ethereum’s “crypto winter” boost
After that, cryptocurrency prices plummeted and moved sideways for much of 2018 and 2019.
During this “crypto winter”, Bitcoin’s lead as a “safe haven” grew. But functionally, Ethereum was starting to have a remarkable time.
“In the crypto winter, serious innovations took place in the crypto community, while numerous new use cases were presented on Ethereum … non-fungible tokens (NFTs), stablecoins, decentralized trading, insurance and loans, counting logs such as MakerDao, Uniswap, Compound and OpenSea” said Eberhardt.
After cryptocurrencies regained momentum last year, Ethereum took off. It rose from $ 213 in late March 2020 to more than $ 4,000 now.
Eberhardt believes that these real world applications developed over the crypto winter convinced the market of the usefulness of ether.
“Investors have the feeling that Ethereum, in stark contrast to previous highly speculative ICOs, can enable authentic use cases.”
In some measures, ether is already larger than Bitcoin
According to Eberhardt, the Ether-Bitcoin “flip” has already happened with some metrics.
“The use of decentralized protocols and stablecoins in particular with Ethereum has resulted in Ethereum processing more than 3 times the value of Bitcoin on its network every day, while the total amount of fees paid daily is 50 times higher than with Bitcoin.”
This does not surprise Eberhardt because of the utility of Ethereum, as opposed to Bitcoin’s role as just a “store of value”.
“In this context, the transaction fees paid clearly say something about the fact that the scalability of Ethereum is almost as bad as that of Bitcoin,” he said.
“Since Ethereum can only process around 15 transactions per second, the fees have increased significantly in the past year, which effectively affects the growth of Ethereum.”
However, this scalability issue will be addressed in an upgrade called ETH 2.0 due next year.
Is turning around inevitable?
According to Eberhardt, technology upgrades are critical to Ether’s ability to overtake Bitcoin in market capitalization.
“The aim is to increase scalability within an acceptable short time frame and to keep the intense competition at a reasonable distance,” he said.
In terms of regulation, decentralized protocols using Ethereum can be subject to strong regulation, potentially limiting the growth of Ethereum. On the contrary, the green agenda can harm Bitcoin because of its extreme energy consumption. “
The other side of the equation is whether bitcoin’s role as a store of value will continue to be recognized by institutional investors.
Well-known publicly traded companies such as Tesla Inc (NASDAQ: TSLA) and MicroStrategy Incorporated (NASDAQ: MSTR) announced earlier this year that they had billions of dollars worth of Bitcoin on their books.
“After buying several companies earlier this year, it was expected that others would follow suit. Since then, some smaller companies have bought Bitcoin, but not to the extent previously expected. “
So it remains to be seen whether Ether can overtake Bitcoin. Both currencies will face challenges over the next 12 months or so.
JP Morgan analysts reported this week that institutional investors have reduced their exposure to Bitcoin and transferred it to Ethereum.
“Researchers have found that large investors are shunning Bitcoin futures and instead gaining Ethereum as the number two cryptocurrency by value, thanks to the ongoing non-fungible token craze and expectations that Ethereum-based decentralized funding will compete with traditional funding.” reported Forbes.