Bitcoin vs. Ether


The talk that ether is replacing bitcoin has become part of the daily discourse about cryptocurrency. You need to ask a question, what do the differences between ether and bitcoin potentially mean for the future development of blockchain and crypto applications?

Bitcoin has long established itself as a leader among cryptocurrencies. With a market capitalization of more than $1 trillion, large purchases by household names such as Tesla, and crypto payments becoming available to major payment systems, it is logical to conclude that the superiority of bitcoin is virtually guaranteed.

On the other hand, ether and the Ethereum blockchain have quickly moved up in terms of valuing cryptocurrency and other applications that are being developed on this blockchain. Taking a step back and putting aside the price surveillance that captivates analysts and market participants on a daily basis, Ether and Ethereum were indeed the leading news in the last half of 2020 and 2021.

While Bitcoin has consistently (and deservedly) continued to lead the broader discussion about cryptography, there is reason to believe that in terms of applications and use cases, ether and Ethereum will lead the next phase of blockchain implementation. In other words, it looks like for the first time in the financial markets conversation, there will be an open competition to determine which protocols and cryptocurrencies will drive the sector forward. Let's see what fundamental points the market will need to evaluate in the future.

Applications versus transactions. One of the most heated debates over the past few years has been the debate over whether cryptocurrency can actually be used for transactions, rather than just stored as a speculative investment. In the United States, at least, it seems that the tax regime will continue, and all cryptocurrencies are still considered as property, this has far-reaching consequences.

Have ether prices become excessively high after their last rise? The 27-year-old co-creator of Ethereum has become the youngest crypto billionaire in the world. In addition to not fully reflecting the functionality or use cases of many cryptocurrencies, especially stablecoins designed to be used as a medium of exchange, reporting and potential tax liabilities continue to discourage the use of cryptocurrency as a transaction medium. In other words, every cryptocurrency transaction potentially entails a tax liability - not good news for bitcoin maximalists predicting the inevitable replacement of fiat currencies. However, Ethereum blockchain has proven time and again to be a solid foundation for new use cases, such as decentralized finance (DeFi) and non-fungible tokens (NFT).

Diversification and prices. The number of cryptocurrencies, coins, tokens, and the array of crypto assets in general continues to expand. Of course, many of these new iterations of cryptocurrency lack many of the attributes that make the more widely known cryptocurrency so interesting to investors, but the market is still expanding. How does this relate to the exchange of bitcoin and ether?

Talking about the growing number of crypto assets goes far beyond simply acknowledging that the number of investment options is constantly growing. Returning to the first point, we can say that any number of applications run on the Ethereum blockchain: Stablecoins, DeFi, NFT are connected to this non-bitcoin platform. As blockchain and cryptocurrency use cases continue to diversify, it makes sense that capital will flow to a platform that supports many, if not most, of these new applications.

Platform vs asset. An additional factor in the competition between bitcoin and ether is what will ultimately be more valued by the market-the ecosystem compared to a particular crypto asset. Going back to more specific terms, what is the true value of an organization like Apple? The specific product or network effects (and information) that these devices provide? There may be some disagreement about the immediate cause, but it usually turns out that network effects, which serve as a reliable platform, play a big role in the success of firms like Apple.

Does it make logical sense that blockchain and crypto applications will turn out any differently?

There will undoubtedly be a lot of discussion and debate about what the recent rise in the popularity of ether means for the long-term maturation of the crypto and blockchain space. However, and leaving aside the price volatility that continues to exist in the crypto space, there are a few fundamental questions that are beginning to propel the broader conversation. It is still too early to say what prices will finally be set for various cryptocurrencies, how new applications will develop, or what options will come to the fore. Nevertheless, the breadth of creativity and innovation should be noted.

Comments (36)

  • Prospect in IB - Gen
Jul 18, 2021 - 4:50pm

TLDR. Don't buy crypto it's just a speculative token, not a currency. Have nothing against blockchain, think the technology is extremely useful for title transfers and various other uses. Crypto is shit though and the "bitcoin maximalists" are just cultists being pumpers.

  • Prospect in IB - Gen
Jul 18, 2021 - 5:12pm

Yup those massive gains like going down 50% in the matter of days in May. Still is half of its peak and not even close to resurgence. It's not stable and Bitcoin is even worse. Enjoy your gambling. Hopefully you sell before it's too late. Your paper profits mean nothing. 

Jul 18, 2021 - 6:10pm

TLDR. Don't buy crypto it's just a speculative token, not a currency. Have nothing against blockchain, think the technology is extremely useful for title transfers and various other uses. Crypto is shit though and the "bitcoin maximalists" are just cultists being pumpers.

Some rando prospect thinks he knows more than the hundreds of professionals starting crypto funds, major asset managers creating dedicated crypto platforms, some of the top private investment firms in the world making substantial investments in the space, and a number of the most celebrated entrepreneurial minds of the century taking significant stakes in Bitcoin/Ethereum/etc. Peak WSO right here. 

Array

  • 1
  • Prospect in IB - Gen
Jul 18, 2021 - 6:14pm

Appeal to authority and ad hominem fallacy. There are also several top people who oppose bitcoin and crypto currencies too. But of course someone who has GME to the moon in their name wants to cherish every single bubble out there with no actual regard to fundamentals.

  • Prospect in IB - Gen
Jul 18, 2021 - 6:16pm

What value are you storing? Bitcoin literally has no use. It's just a digital token. A store of value can't go up or down 10-20% in one day or 50% in the matter of a month. It's too volatile to be a store of value. It's not scarce either. There are literally 4000 other cryptocurrencies. And it's funny because you bitcoin pumpers will discredit dogecoin with the same arguments that could be said against bitcoin. Decentralization might not even be entirely true either. How did the government agencies help colonial pipeline get the crypto ransom it paid back then?

Most Helpful
  • Prospect in IB - Gen
Jul 18, 2021 - 6:36pm

Purchasing power of what? In relation to dollars? A store of value has to have intrinsic value on its own. Like gold and other natural resources have actual tangible uses that are preserved over time. Bitcoin has no actual use other than a speculative token. Dogecoin has actually outperformed bitcoin substantially this year. So if the price of an asset going up is all it needs to be a store of value, then why isn't dogecoin better? Sure, there are 21 million bitcoin but there's no differentiation between it and other cryptocurrencies. It's all based on faith, which is the exact problem with fiat money. There may be 21 million bitcoin but when you venture into the various 4000 other cryptocurrencies out there there's an unlimited supply of crypto.

And sure if you want to play semantics with anonymity vs. decentralization, maybe you're slightly right. They got DarkSide's private key. But for a crowd that claims the government can't do anything with crypto, it should be concerning that an agency can basically take control and recover bitcoin from other property owners. Not saying I supported the ransom, but if bitcoin is supposed to never be able to obtained by government, doesn't really hold up. The government is already starting the Patriot Act bs against bitcoin too. You guys are delusional if you think they're not going to try to regulate that shit because of "illicit practices and money laundering." It's already costly as hell to transact in, but the government is only going to make that worse.

  • Prospect in IB-M&A
Jul 18, 2021 - 5:12pm

College sophomore here: I have 95% of my net worth in ETH. I've made more in the last six months than I'll make in my two years as an analyst. I've also lost $300,000 in unrealized gains since May though lmao 

Jul 18, 2021 - 7:33pm

Think of Bitcoin as your savings account and Ethereum as your method to transact. The smart contracts built into Ethereum give it an absurd amount of utility that even Bitcoin (at least currently) cannot match. But it is not a finite asset like bitcoin and therefore won't have a similar store of value. I see Ethereum as being the digital future for integrating financial services while Bitcoin will essentially become the new digital gold. That's not to say something better can't come along and displace either of them, but I don't think anyone can really predict something like that.

Array

  • 1
  • Analyst 2 in IB - Cov
Jul 19, 2021 - 5:06am

This is not entirely correct - once ETH moves to proof of stake, the ETH burnt by GAS fees is likely to be greater than the ETH issued, and supply will start to be diminishing. 

  • Analyst 2 in IB - Cov
Jul 19, 2021 - 10:22am

Would agree with this - if you look at the investments the likes of A16Z make, it also seems to be predominantly in companies building something on the Ethereum platform

Jul 19, 2021 - 10:25am

Alias voluptates ratione esse impedit ut libero. Blanditiis minima in ea dolorem officia est deleniti.

Nov 15, 2021 - 8:54pm

Fugit possimus ducimus est accusantium qui eaque et. Maxime et temporibus voluptas beatae ab. Et laudantium voluptatem ex dolores dignissimos rerum.

Fugiat aspernatur ut rerum rem rerum. Quae blanditiis iste eaque sint necessitatibus. Ullam placeat et molestiae quia iure. Ratione eligendi quae animi totam delectus. Doloremque illum incidunt quae ut omnis laboriosam.

Ut voluptatibus consequatur sequi omnis velit culpa vitae. Beatae suscipit ipsa quo tempore eaque qui. Similique maxime rerum ipsa.

Dicta et molestiae ratione saepe veniam earum. Ipsum suscipit alias tenetur accusamus officiis ullam enim aspernatur.

Start Discussion

Total Avg Compensation

January 2022 Investment Banking

  • Director/MD (5) $604
  • Vice President (22) $385
  • Associates (147) $240
  • 2nd Year Analyst (85) $153
  • 3rd+ Year Analyst (15) $150
  • 1st Year Analyst (296) $142
  • Intern/Summer Associate (64) $142
  • Intern/Summer Analyst (225) $90