Bitcoin vs. Ethereum – Which Will Come Out on Top?

Bitcoin and Ethereum are undisputedly the two most well-known cryptocurrencies on the market. Although they differ in their history and uses, they’ve both been able to maintain interest from keen crypto investors. But which coin comes out on top? We compare the two to help you decide which is the better investment.

The cryptocurrency market experienced a huge surge in popularity in 2021. With that has come the emergence of thousands of new crypto assets, with a total of 5,840 on the market as of September 2021, a stark increase from the 66 that existed in 2013. 

But as these new cryptocurrencies battle to gain market share, Bitcoin and Ethereum have remained relatively unshaken by the competition, holding their positions as the two biggest coins by market capitalization as other cryptocurrencies have come and gone. 

Bitcoin vs. Ethereum: the history

Bitcoin, the world’s most valuable cryptocurrency, was founded by the pseudonymous programmer Satoshi Nakamoto. It was the first cryptocurrency ever invented and was first traded in 2009, shortly after the 2008 financial crisis, with the aim of creating a decentralized digital cash system. 

At that time, you could purchase Bitcoin for less than one cent, a far cry from its April 2021 all-time-high of $60,204. The creation of Bitcoin laid the foundation for a new class of digital currency and six years later, Ethereum debuted. 

When Vitalik Buterin founded Ethereum, the goal wasn’t to revolutionize the financial system. Instead, it operates as a decentralized network that other developers build applications on top of. To use the Ethereum platform, users pay fees in ether, which is Ethereum’s digital currency. When it debuted in 2015, it was trading at less than $3. In August 2021, it hit an all-time high of $3952. Ethereum has captured interest from cryptocurrency investors in recent years, particularly with the rise of DeFi and NFTs, but is it a better investment than Bitcoin?

Bitcoin (BTC) 

The world’s leading cryptocurrency has been around for over a decade and at the time of this article, its market cap sits at $862 billion. Here are a few of the reasons why you might consider investing in Bitcoin over Ethereum:

1. Acceptance: as the oldest cryptocurrency, Bitcoin has the advantage of being well-known and largely accepted. It’s difficult to talk about cryptocurrency without mentioning Bitcoin and although the future isn’t guaranteed when it comes to global adoption, Bitcoin is well-placed due to its long track record and ever-growing adoption thanks to the lightning network.
2. Stability: Bitcoin has maintained its position as the most valuable cryptocurrency over time, despite the volatility of the market. Although its price has experienced significant fluctuations, its overall value as a digital asset has remained relatively stable compared to the competition, leading many to regard it as digital gold.
3. Finite supply: Bitcoin has been compared to digital gold, partly because of its limited supply. There will only ever be 21 million tokens mined so the scarcity of the asset has helped it to grow in price. As of August 2021, there are already 18.8 million tokens in circulation and through a process called Bitcoin halving, the rate of new tokens created gets smaller over time.

Ethereum (ETH)

It may not have had as many years in the market as Bitcoin, but Ethereum has amassed a market cap of $380 billion at the time of writing, close to half of Bitcoin’s. Here are three reasons why Ethereum is worth considering as an investment:

1. DeFi and NFTs: the Ethereum blockchain is a platform for applications and smart contracts to be built on, putting it in a great position for increased attention as DeFi and NFTs continue to grow in popularity. Since Ethereum operates as an open-source technology, anyone can use it to create new applications so there’s no limit to its growth. 
2. EIP-1559: the Ethereum network has been undergoing significant development in the last few years, most recently following the EIP-1559 upgrade in August 2021. This upgrade introduced the burning of ether fees which reduces the amount of ether in circulation. As we’ve seen with Bitcoin, limited supply can increase the value of an asset. 
3. PoW to PoS: Ethereum’s coming pivot from Proof of Work to Proof of Stake means that eth holders can earn eth rewards by staking their own holdings. The previous PoW system, that Bitcoin still uses, required miners to solve complex problems to get eth rewards. PoW has attracted criticism for its energy usage, which contributed to a huge drop in Bitcoin’s price in May. Ethereum’s new staking model is more energy-efficient and therefore attractive as an environmentally-conscious investment.

Should I buy Bitcoin or Ethereum? 

Ultimately, Bitcoin and Ethereum have very different value propositions, but both have proven to be valuable over time. Bitcoin is a well-established cryptocurrency that has been the more stable of the two, thanks to widespread acceptance. Although Ethereum is the riskier asset, it does have solid growth potential and indeed has grown far faster than Bitcoin recently as DeFi and NFTs have gained popularity. 

Investing in any cryptocurrency requires a high level of risk tolerance, and long-term goals should play a key part in your decision-making. As with any investment decision, diversification is generally a wise choice, so it’s worth considering both assets and the role they may play in your portfolio. 

Whatever you decide, always do your own research and remember that this guide is for information purposes only and does not constitute financial advice.

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