Between them, Bitcoin and Ethereum make up 75% of the world’s cryptocurrency market. They both run on blockchain, both can be traded and used to make peer-to-peer payments, and both now have their own exchange-traded funds, as of earlier this year. However, they have their inherent differences. Bitcoin is more recognizable and, despite not having the same utility as Ether, it is the crypto that has posted the most positive gains.
Bitcoin And Ethereum
Although they are both cryptocurrencies, Bitcoin and Ethereum are different. They each have their own layer 1 network, and the two networks aren’t directly compatible. As such, users need a separate Ether and Bitcoin wallet for Android or other devices. And, when spending or sending money, the sender must choose the appropriate crypto they are using. Because they are different, this can also lead to stark differences in price movements.
Bitcoin is the world’s largest cryptocurrency and Ethereum is the largest altcoin. Between them, they have a total market capitalization of around $2.4 trillion, which makes up three-quarters of the total crypto market cap. But, when you compare them side by side, Bitcoin is outperforming Ether by some margin.
Year-To-Date Price Performance
Since the turn of the year, Bitcoin has seen its price increase from $42,000 to very nearly $100,000 which is an increase of more than 130%. Ethereum has only posted a 47% increase during the same period – its price rising from $2,300 at the start of the year to £3,350 in recent days.
While Bitcoin is at its All-Time High (ATH) and looks set to break strong psychological resistance at $100,000, Ether is down from its ATH of $4,700 which was posted in November 2021.
First To Market
Bitcoin was the first cryptocurrency, launched in 2009. Its sole purpose was to facilitate the transfer of value from one person to another. After a relatively inauspicious start, its popularity grew, and when its prices started to increase, it gained a lot more media coverage and further popularity.
Ethereum is actually quite a modern cryptocurrency, with the likes of Litecoin and even Doge launching before it. And, rather than being a coin used primarily for value transfer, it is a utility coin. Ether is the native cryptocurrency that is used to pay for the use of the Ethereum network. This utility helps underpin Ether’s value and has helped it rise above other coins, but it doesn’t necessarily make it as appealing as a form of investment.
Bitcoin is Cryptocurrency
Bitcoin is the first coin people think of when they hear the term cryptocurrency. It was first to market, and it is synonymous with the industry. When consumers decide they want to invest in crypto for the first time, it is Bitcoin they are usually considering. This is further fuelled by the fact that Bitcoin prices are the ones that media outlets talk about.
Recent headlines include the fact that Bitcoin is heading for $100,000 and not that Ether might top $3,500. Because it’s Bitcoin that gets all the headlines, this makes new investors all the more likely to turn to Bitcoin rather than Ether, which means it is BTC prices that experience sharper rises.
Bitcoin’s value and recognition mean that it is no longer tied to fundamentals, in the same way gold is not considered a convenient investment at high levels. The same is true of Bitcoin, especially due to its high price and its lack of utility.
Name Recognition
A lack of recognition is harming Ether’s chance of posting the same gains Bitcoin experiences.
Doge has, especially in recent years, gained a lot of exposure after being shilled by the likes of Snoop Dogg and Elon Musk. This has become especially pertinent once again, following the recent election. Musk became Trump’s de facto right-hand man for several rallies, and, following Trump’s victory has even been named the head of a new government department, the Department of Government Efficiency (DOGE). This exposure has seen DOGE post more than double the gains of Bitcoin.
Endorsements
Even during the election run-in, Trump talked about becoming the crypto President and making the US the cryptocurrency capital of the planet before floating the idea of using Bitcoin to help eradicate the country’s national debt. He specifically named Bitcoin in his plans and did not make mention of Ethereum or any other cryptocurrencies, showing that, despite its apparent lack of utility, Bitcoin still runs the cryptocurrency roost.
Institutional Investment
Another likely reason that Bitcoin continues to outperform Ether is the inflow of money from institutional investors. Bitcoin ETFs were finally launched in January, after years of dispute between fund managers and the SEC.
This saw billions of dollars of money pour into the funds and, therefore, into Bitcoin’s stock. Ether ETFs were launched in May. Many investors expected similar performance, potentially inflating Ether’s price on the rumors of fund launches, but it never materialized in the same way.
The Emergence of Better Alternatives
Ether is used to establish dApps and smart contracts on the Ethereum network, but while there has been an influx of new meme coins and other tokens, projects have opted to use other networks, especially Bitcoin and Solana.
Solana started the year having just broken the $100 resistance mark. It is now at its all time high of $258, which is a rise of more than 150% so far this year. Solana is closing in on Tether and if its market capitalization continues to increase as it has over the rest of the year, it will likely become the third-largest cryptocurrency behind Bitcoin and Ether.
Investors also widely expect Solana to be the next cryptocurrency to be granted its own ETF products. This will likely give it something of a price boost, although as we saw with Ether, it won’t necessarily lead to the kind of massive gains that Bitcoin experienced. The problem for Ethereum is that Solana and other networks are quicker and less expensive to use, which means developers are more likely to use them.
Expected Changes
For Ethereum to be able to close the gap on Bitcoin’s market dominance, it needs to gain greater global recognition, not just from within the crypto industry. It needs to improve its own transaction speeds and costs to compete with some of the layer 2 networks, and it needs to compete with other altcoins across a variety of metrics.
Vitalik Buterin, Ethereum’s co-founder, recently said that one of the next steps in the altcoin’s journey is to reduce transaction time. Currently, it takes around 15 minutes for a transaction to complete, which can also cause further lag on the network.
He once again mooted the idea of using a single-slot finality to help achieve this, while suggesting that it was also a goal to make Ether more accessible to a wider range of users.
Conclusion
Bitcoin is the cryptocurrency top dog. It was first to market, has become synonymous with cryptocurrency as a whole, and it has seen substantial institutional investment following the introduction of Bitcoin ETFs at the beginning of the year.
Ethereum, on the other hand, is being outclassed by networks like Solana, although it is promising to ring the changes that will help make this happen. For now, however, Bitcoin only looks likely to further widen the gap between it and its closest competitor.
