Starting at a tenth of a cent and reaching the high of $61,965 in April 2021, Bitcoin with a 619 559 900% ROI enjoyed by the pioneers is not a bad prospect if you’re considering investing.
Even buying bitcoins at $600 each, as VC Tim Draper did, well into the process, would mean significant dividends, especially considering he bought a pack of almost 30 000 at once.
The proof of the pudding is in the eating, and Bitcoin is proving to continue becoming an exceptionally large and tempting pudding by the minute with companies like MicroStrategy pouring mastodon funds into its crypto assets, user base in hundreds of millions, and companies like Google, Facebook, and Amazon adopting the technology behind it (although all the while making up for lack of competence with enthusiasm, that’s another story).
But will Bitcoin be replaced by a newer system, as seems to be the way with all technologies? Designed pretty much to be laser-focused on exceptional security that allowed it to remain an ever-elusive target of the world’s best hackers for decades, Bitcoin is a remarkable system, but, as you can imagine, millions of people and thousands of projects are dreaming of repeating its success, and some of them are leveraging different strengths. Will that make them more successful?
For example, Ethereum is spectacularly more flexible. Given its formidable growth (260% on the year) plus growing attention from UBS, Mastercard, and JPMorgan, will flexibility ever become so in-demand that you’ll regret investing in Bitcoin and wish you invested in Ethereum instead? Since DeFi, NFTs, and dApps with their mastodon markets all work on the Ethereum blockchain, will Ethereum show geometric growth and kick Bitcoin to the same dark place where Blockbuster is quietly lingering right now? Who should you go with?
How to make an educated choice? Let’s do some research and find out
1. What is Bitcoin?
Everyone’s favorite (at least for now and judging by price and adoption), Bitcoin is the first cryptocurrency invented by the admittedly genius coder Satoshi Nakamoto in 2008.
Why genius? That’s instantly evident not only from his* code but also thanks to the fact that a little while into the project, upon hearing the FBI wants to have a cup of tea and a chat, Satoshi vanished without a trace. If that’s not genius, what is?
Joking aside, Satoshi used an actually remarkable skill set to combine already existing systems that didn’t quite work out, added his own code, and made everything work. One of these systems, for example, was Nick Szabo’s concept of BitGold. The product he delivered to the people eventually became what is now known as one of the most successful projects in the world, and Satoshi himself is one of the richest people in the world.
What’s ironic, Satoshi also used in his work a system of cryptography that the government paid to R+D. That system of encrypting data, combined with a few other projects loitering around doing nothing much at the time and geniusly put together by Satoshi now forms a network of computers around the world that work through, under, and against government surveillance.
Bitcoin allows people all over the world access to making, sending, and what’s even more interesting, program, alter, and design money itself. Coding money is insanely intriguing if you’re a geek but if you’re like most other people what you’ll find most interesting is that if you bought $10’s worth of Bitcoin back in the day, you’d have millions and millions now. And you didn’t really have to even do anything! And in case you’re wondering, this frivolous claim is actually backed by statistics that prove HODLing is more beneficial in the long run than trading.
Will Bitcoin be growing?
What are the reasons behind Bitcoin’s success? Bitcoin is being constantly developed by the best specialists out there, many more companies are using blockchain every day, it’s in demand, and its price is extremely likely to keep rising according to many industry experts.
There’s also one mastodon reason why Bitcoin will extremely likely keep growing. Unlike the US Dollar, which buys you less than 15% of what it used to in the 50s thanks to inflation, Bitcoin has a limited supply. This means that as the government is printing trillions of dollars, steadily making each one of them cheaper, there’s less and less of bitcoin, which is capped at 21 Million coins. Is that helping it become more expensive? See for yourself:
Will that keep going? Make your own conclusions after reading this article from Hackernoon.
The First Halving
The first halving occurred on November 28th, 2012 when one BTC was worth around $11. A year later, bitcoins price surged to a mouth-watering $1,100 in 2013, a price never before seen with Bitcoin. It had only been one year since the halving and Bitcoin had grown 100x.
The second halving took place in July 2016. Bitcoin maintained a price of around $600–$700 before flying to $20,000 in the great bull run of 2017.
Bitcoin had grown over 33x from it’s the price before the second halving and over 1,818x from its price before the first halving.
“You know there are people who debate what the size of the gold market is but let’s just use easy numbers. Let’s say that it’s $8 trillion. That puts Bitcoin at, depending on how many are lost or stolen, $400,000 to $450,000 today. Do you think that Bitcoin is going to be the equivalent of the gold market? I don’t. It’s better. It’s going to capture more markets.”
Whether it’s gold or any other type of market, the need for Bitcoin is colossal according to industry experts like Andreas Antonopoulos. What other reasons are there to think Bitcoin is on the rise?
This is just the beginning, but considering the adoption that already took place, the money gathered and transferred, the business use cases are all less than a percent of what Bitcoin’s infrastructure is capable of.
If you need one example of how the code behind crypto can benefit businesses, here’s one of the world’s biggest banks, HSBC, claiming
“putting all of Asia Pacific’s trade-related paperwork onto the blockchain like this could cut the time of exporting goods by up to 44% and cut costs by up to 31%.”
Will Bitcoin keep growing? Extremely likely yes. Growing adoption of it as means of payment, the urgent need for safe assets as governments keep printing trillions causing the Dollar to grow cheaper and cheaper, exemplary security, exceptional speed, ridiculously low fees, tons of institutional investment, and exponentially growing interest from whales – what’s not to love?
What is the future of Bitcoin?
As any self-respecting trader will tell you, predicting future outcomes based on past history is a no-no but based on previous performance the prognosis is optimistic, to say the least. What’s to come? Growing profits, world dominance, ever-evolving architecture, code that interacts with real-world using oracles, payments using subdermal wallets, smart homes, and drones delivering milk when your smart fridge senses yours is coming to an end…if you can think of it, technology can do it, and as one of the most advanced technological systems, today’s crypto will inevitably be a vast part of the future.
What else has it got going for it? It may sound prosaic, but there’s nothing people have historically shown more interest in than money.
What else? What made Bitcoin successful is its stellar team, and, judging by the fact that now the community of its amazing developers has increased by orders of magnitude, nothing but success expects this project (unless a new phase of evolution comes along and outclasses it the way Bitcoin outclassed most banks, email outclassed paper mail, and cars outclassed horse carriages).
Is Bitcoin Overvalued?
There are sceptics who think Bitcoin is far from being adopted by the masses. Indeed, in terms of percentages, not that many people know about or need Bitcoin yet. In that way, the world will still need some time with crypto. Plus it’s a speculative asset, which implies dramatic price movements, which means trade is a problem for now.
Is Bitcoin hype? In a sense, yes. Markets are built on the principle of manic buying and panic selling, which means it often works in avalanches either way. Actual interest or usefulness may be minimal, and then movements start and it’s impossible to stop.
However, you have to consider that Bitcoin is far more than a speculative asset. It provides real value for companies, whether the benefit is saving money, time, effort, doing business more effectively, or winning customer trust. There are immeasurable quantifiable wins for everyone involved, from traders to CEOs. If HSBC believes that, you ought to at least give Bitcoin the benefit of a doubt.
2. What is Ethereum?
The brainchild of a Canadian code magician Vitalik Buterin, Ethereum is another project that truly showed the world what crypto is capable of. For example, only one of the projects that runs on the Ethereum blockchain, the industry of DeFi, whose total locked value is now standing at $76.5 000 000 000, only took around 2 months to gather around half of that money.
If we’re talking willing investors, there’s no better pudding around (with the possible exception of the YFI token that went up in price from $3 to $43 000 in the same space of time, but that’s another story).
Ethereum is a blockchain (some view it as a rival to Bitcoin but it really isn’t) that emerged soon after Bitcoin and offered functionality Bitcoin can’t by default. You can build anything on Ethereum. In exceptional time. Like, 20 minutes kind of exceptional.
Stuff to be found on Ethereum, like smart contracts and decentralized lending with 0 capital entry barrier, is fascinating to say the least. The world has never seen this much opportunity to literally achieve anything given intellect, dedication, and a good sense of humor. Ethereum has been quickly growing in price of late, and it’s also seeing serious investments from companies with global reputations.
Why will Ethereum be growing?
The reason for Ethereum’s growth is the same as with more or less all inventions in the crypto niche. Next-gen systems offer unparalleled benefits to those who wield new-age weapons:
“Ether is one of the main beneficiaries in the wider explosion in the cryptocurrency market,” – Nigel Green, CEO and founder of deVere Group, says – “The boom over recent months has been fueled by soaring interest from major institutional investors and the growing recognition that borderless digital currencies are the future of money. This momentum is likely to build further in the near-term”. Fortune
Is Ethereum actually growing in popularity faster than Bitcoin? The Independent seems to think so:
“The latest gains are even more impressive when compared with those of bitcoin. The world’s first cryptocurrency has seen its own record highs in 2021, but they have been dwarfed – in percentage terms at least – by those seen by its less famous cousin.”
One mastodon reason why Ethereum will highly likely be growing is the sector of DeFi which we mentioned earlier. But that’s not all (by a long shot). Quickly learning that one of the reasons behind Bitcoin’s success is a continual evolution and incredible hard work on what it’s lacking, Ethereum engineers are constantly working on improving everything they can in terms of functionality and user value.
One quantifiable example of these continuous improvements is Ethereum 2.0, a new solution that will allow scaling the blockchain and making it a lot more safe in order to ease mass adoption. This is mostly about using the (apparently) better algorithm of Proof-Of-Stake rather than Proof-Of-Work (although please don’t mention that in front of hardcore Bitcoiners like Andreas if you’re planning to live to an old age).
Ethereum 2.0 includes a few fascinating concepts like shard chains, vastly increased throughput, RanDao, and much more. You probably expected this, but who to recommend learning Ethereum 2.0 from if not the man who literally wrote the book on it?
What is Defi?
Ethereum may be the world’s second largest cryptocurrency, but it packs a few surprises of its own: this protocol has enabled a new way of doing finance. It is called DeFi and it can be defined as “financial applications built on top of Ethereum.” DeFi includes various financial instruments such as lending, loans, derivatives, securities exchanges and even banking services (plus many, many more, such as something as wildly impressive as decentralized lotteries, but that’s also for another article).
DeFi is the new frontier of crypto. Ethereum’s dominance in decentralized finance will likely be based on DeFi’s widespread adoption, and there are already myriads of DeFi applications running on it. The simplest way to think about what DeFi is, is as an alternative to traditional financial institutions like banks or credit card companies.
When you make a transaction with a company like Visa or Mastercard, they
- charge considerable fees for their services;
- these transactions are tracked by the company and used for future marketing;
- they can block them anytime they like, sometimes based on plain pride
- classical financial systems make access to finance impossible for millions of people who just don’t happen to be good enough for them;
- They extend you the privilege of taking your money for 1% saving interest, then turn around and give it to the guy right next to you in the queue for 25%. If they should go bankrupt, deny service, or excommunicate you – the responsibility is on you.
Since that doesn’t seem entirely fair, DeFi provides people with easy and fast access to money with no prejudice of any kind and often with no need for documents for incomparably smaller fees; processes happen faster by an order of magnitude; plus there are a row of other benefits. No wonder DeFi is this popular! You can find out more about all this brave new world in upcoming articles (or here).
Popular yield aggregators and farming projects
The APY of liquidity mining projects changes all the time, so to maximize the profit you’d need to keep shifting your crypto from one protocol to another. Doing it manually is difficult and costs a lot in gas fees, but there are aggregators that will do it for you.
What is the future of Ethereum?
Again, there are no guarantees when it comes to growth projections but it would seem, judging from previous performance, that Ethereum’s growth is an indicator of better things to come.
The fact is that Ethereum’s smart contracts can outperform the now-in-effect outdated legacy systems that are weighed down with paperwork, expensiveness, and slowness. With real world use cases and proved quantifiable results, Ethereum is now more powerful than ever. The fact that it keeps evolving faster and faster with ever-growing interest and new staggering inventions like NFTs is even more hopeful: the more real use cases and spectacular results, the more popularity of Ethereum and its adoption will grow.
Is Ethereum Overvalued?
As with any speculative asset, there is a lot of FOMO and hype. However, like with Bitcoin, Ethereum offers real-world quantifiable results that cannot be ignored.
If you can use a tool that will pay for itself many times over plus keep offering you better and improved ways of making your business even better, you’re going to take it. The extreme likelihood is that the current growth of Ethereum’s popularity will continue, although not necessarily quickly and furiously but in leaps as this class of assets historically does.
3. What’s the difference between BTC and ETH in terms of Investment?
According to experts, contrasting and comparing Bitcoin and Ethereum side by side is not a sound idea.
“Bitcoin is kind of like a pet rock that just sits there and doesn’t do anything. It’s very slow and inefficient and really the only thing that the bitcoin blockchain is good for storing value and facilitating high-value transactions. But that’s fine because that’s all it needs to be. It’s just a hyper-secure blockchain for storing and transferring bitcoin,” Watkins said.
“Ethereum can host a variety of different assets, not just its own native assets. It has all these different applications being built on top of it. From an investor perspective, it just kind of bootstraps its own economy, and the asset Ether is at the center of it.”, Ryan Watkins, a senior research analyst at crypto research firm Messari, Steve Ehrlich, CEO and co-founder of crypto-asset broker Voyager Digital for The Street.
Another industry expert, a security engineer with over 40 years of experience in cybersecurity, likens Bitcoinlikens the Bitcoin and Ethereum to a lion and a shark. Both are powerful, but there’s no sense in comparing them side by side and assessing their capabilities in the other’s shoes (neither of them wears shoes and neither do virtual systems but you know what we mean).
In brief, the answer is this: both Bitcoin and Ethereum (and even dark horses like YFI) have immense investment potential. Why decide to choose just one?
Time is a must!
As you can see, things are picking up fast in the crypto sphere. Although you must watch your step and in no way rush things, it makes sense to move reasonably fast if you want to make money:
“In the past 12 months, bitcoin has surged by more than six times while Ethereum has skyrocketed by almost 16 times.”, The street
Do your own research
Make sure to carefully inspect the sources we referenced in the article (and more) and study as much as you physically can on the subject matter before you make the final decision.
Diversification is indescribably important.
You can dedicate half of your portfolio to better-performing assets with most potential, whether you think that is BTC or ETH or most likely both, but don’t forget to dedicate maybe a part to smaller coins and those with promising prospects.
In fact, balancing your portfolio is a very delicate and complicated business which you could (and likely should) delegate to professionals. But one thing is for sure: it’s totally worth it to have Ethereum and Bitcoin and some other crypto as well as cash, precious metals, and other forms of value which you think may become in-demand soon. The more you diversify, the better (but within reason).
DYOR, keep up with the latest news (do you need to get some DOGE real fast?), and don’t bet all on red!
*her? Their? Apparently there’s evidence that the code was written by a group of people, but that’s not for sure.