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Bitcoin versus Ethereum

Updated: Dec 12, 2021

Bitcoin and other cryptocurrencies have returned as headline news. Investors have been selling Bitcoin mining stocks and popular cryptocurrencies such as Bitcoin over the past few weeks. As I pencil in this blog, Bitcoin has fallen another 2,234.09 points or -4.44%, Ethereum is down 295.13 or -6.65%, Litecoin sold-off 11.18 or 6.77%, Chainlink has plummeted another 2.21 or -9.65%, and Moneo is down 18.79 or -8.95%.


The recent sharp declines in Bitcoin are taking down the entire Cryptocurrencies, pulling down the crypto sector, and hurting the miners. Bitcoin briefly established an all-time high of 68,978.64 (11/10/21) and has suddenly fallen over 20,813.5 points to 48,1955.18 in nearly a month.


Cryptocurrencies attracted intense interest this year soon after news circulated that several tech giants expressed their support for digital currencies. For instance, Amazon.com, Inc (AMZN) announced they are considering accepting digital coins as payment initially sparked the cryptocurrency recovery. Also, bullish comments from the CEOs of Tesla (Elon Mush) and Twitter (Jack Dorsey) earlier in the year excited traders as they plan to incorporate virtual currencies into their respective businesses.


Many technology strategists and pundits also expressed their favorable views and the importance of Blockchain technology. Blockchain remains a complicated subject, but this technology is here to stay and is the future. Companies will need to incorporate this technology into their business models to compete. The technology behind Blockchain is not only fascinating but is revolutionary.


Will cryptocurrencies become the future of money continues to be a hotly contested subject? Although many investors remain enamored by cryptocurrencies and focus exclusively on Bitcoin, it may be a mistake because the future is Blockchain technology.


The analogy is comparing cryptocurrencies to email services during the early days of the internet. Bitcoin represents the email service, and Blockchain represents the internet in this analogy. During the start of the internet, there were many email services such as CompuServe, Altavista, Lycos, Excite, MySpace, and others. Most of these early email and internet portals ultimately failed. The two largest internet portals today, Google and Facebook, did not exist back then.


Bitcoin remains the largest and the most popular of cryptocurrencies, hence the massive appeals from traders and investors. Bitcoin is nearly half of the overall market value of the cryptocurrency marketplace. Ethereum, on the other hand, is now the second most valuable crypto and is emerging as the crypto of choice for many non-fungible token (NFT) deals.


At its simplest form, Ethereum is a distributed public blockchain network. The open architecture allows developers to build and circulate decentralized applications. Ethereum platform is the Ethereum Virtual Machine (EVM). It is a Turing complete software that runs on the Ethereum network, allowing any developer to run any program and programming language. EVM enables thousands of Blockchain applications to run under a single platform. Ethereum continues to be the favorite of Blockchain developers.


Conceptually, Bitcoin and Ethereum may be similar since both run on a distributed blockchain network. However, Bitcoin and Ethereum differ in their purpose and capability. Bitcoin is primarily a digital currency and is only one particular application within blockchain technology. Its sole purpose is to act as a peer-to-peer electronic cash system that facilitates online Bitcoin payments and the tracking of the ownership of digital currency, namely, bitcoins. Ethereum, on the other hand, focuses exclusively on running the applications and the programming codes of the decentralized application. In the Ethereum platform, instead of mining for Bitcoins, the objective is to earn enough Ether to fuel the network.


Blockchain technology is more than digital currencies. Many of the new blockchain applications currently developed today will make their way into new technologies, including electronic voting, digital recorded property assets, regulatory compliance, and even trading. Blockchain applications running on the Ethereum platform are faster, powerful, and secure because of the decentralized platform. While Blockchains can process codes, most are limited in their set of operations. Ethereum stands out from the rest because it allows the developers to create unlimited applications to fulfill multiple purposes and solutions.


Enclosed is a relative strength chart of the popular Bitcoin (BTCUSD) and Ethereum ($ETHUSD). The enclosed chart clearly shows the relative performance between Bitcoin versus Ethereum since the 2019 peak. It has been over two years that Bitcoin has underperformed Ethereum, suggesting a shift in the leadership role of the two Cryptocurrency.


Source: Courtesy of StockCharts.com

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