Bitcoin and Ethereum are the two major cryptocurrencies and have been the trendsetters of the market in the past. However, interpreting which would be a better investment is very difficult.
The recent rally in the price of bitcoin may have supported the narrative of digital gold and as an effective store of value, Ethereum, on the other hand, is also aiming to make a big impact in the market with some serious network upgrades.
Let’s take a look at which investment would be better.
Bitcoin or Ethereum?
With the much-anticipated Phase-0 launch of ETH 2.0 on December 1, Ethereum took a huge leap towards improving the scalability, speed and security of the network.
Its migration to the role of a new proof-of-stake system, ETH or Ether, is no longer limited to just a store of value asset and fuel for transactions, it will be used for large-scale staking to ensure the security of the system .
The final phase of the upgrade is expected to be completed in 2023 and will mark a significant change in fundamentals and may see its price move on its own instead of following bitcoin.
The relationship between Ethereum and Bitcoin seems to be slowly weakening near the December launch of ETH 2.0. Many crypto analysts believe that the correlation could disappear anytime due to a change in fundamentals.
Furthermore, Ethereum is not up much higher than Bitcoin and is still trading down over 50% from an all-time high of $1,432.
Bitcoin, on the other hand, is witnessing an increase in value due to three factors – increasing scarcity levels, rapid mainstream adoption and large numbers of institutional investors investing.
Having proven itself as an efficient store of value asset and its unique economics will continue to support its prices more. According to the popular stock-to-flow price model, the price of bitcoin is projected to reach $100,000 by December 2021 and $1 million by the end of this decade.
Conclusion
Technically, after the launch of ETH 2.0, Ethereum is far superior to Bitcoin as it has unlimited use cases and the model is highly scalable. This also made ETH the first cryptocurrency to be classified as a capital asset, commodity and store of value.
But, that doesn’t make bitcoin any less important. Its ability to hold value even in times of crisis makes it an ideal hedge against inflation and also a hedge against the failure of the centralized monetary system.
Therefore, incorporating both in your portfolio will offer diversification and reduce portfolio risk.
