Crypto has made a partial recovery from the depths of crypto winter. However, only the top few tokens are thriving while the vast majority of altcoins are still in the dumps. The top two tokens for holding long term for profits appear to be Ether and Bitcoin. Much of this has to do with regulation by the Securities and Exchange Commission which has said a large number of crypto tokens are actually securities. Of Ether vs Bitcoin, which is a better investment for the long term?
Holding Crypto for the Long Term
Back before the dark days of crypto winter, a large swath of crypto investors believed that Bitcoin and the rest would go up in price virtually forever. Crypto was (believed to be) a solid hedge against inflation. It was expected to be a safe haven in times of economic and social unrest. But then the worst inflation in four decades hit and the US Federal Reserve and other central banks started to raise interest rates. The dollar gained impressively in value and crypto sank to lower and lower depths. Algorithmic stablecoins collapsed. Only those, like Tether, that were backed by hard currencies survived. Holding crypto for the long term is still a viable option because markets do go down and then recover. However, every time there is a market crash there is a wholesale sorting out of winners and losers. In general, the best time to invest in the winners is as the recovery starts. That having been said, is Ether, Bitcoin, or some other token your best pick for long term profits?
Investing in Tokens That Are Safe From Regulators
Both Ether and Bitcoin have come out of the worst of the crypto market crash in decent shape. Both have recently benefited from the flight of investors from altcoins that have been labeled as securities. Looking for a secure long term investment in crypto, which of these two tokens is the better choice? The recent shocks to the altcoin world as well as regulatory problems for Binance, Coinbase, and others are instructive. What sort of regulatory problems might Bitcoin or Ether encounter going forward? An issue that we see for both Bitcoin and Ether is wash trading.
What Is Wash Trading?
Washing trading is when traders buy and sell a security (or token) solely in order to mislead other traders in a market. Wash trading can involve a trader and a broker, a pair of traders, or one trader acting alone. The goal of wash trading is to cause other traders to believe that the market for a security is much more active than it really is. Traders who are thus misled will often bid up the price of a security as they believe it is going to rally. They generally lose money because the security (or Bitcoin or Ether) is not trading any differently than usual. Wash trading is illegal in the US stock markets. The IRS bars wash traders from declaring losses on their taxes.
Those who have investigated this issue have estimated that as many as 70% of Bitcoin trades in some markets are wash trades. Estimates for Ether wash trades range as high as 60%. This practice with Ether appears to be more common in regard to non-fungible tokens which commonly are bought and sold using Ether. To the extent that regulators force crypto exchanges to be transparent with their trades, wash trading with Ether and Bitcoin will be easier to spot and deal with. To the extent that regulators are able to eliminate wash trading, both Bitcoin and Ether may experience a drop in their prices in the short term.
Is Bitcoin or Ether a Better Bet for the Long Term?
We have previously written that we think Ethereum with its Ether token, smart contracts, and foothold in the world of decentralized finance is in a better position to provide value in the crypto world going forward. Our opinion is that tokens that have practical uses other than for speculation will rise in value over time. Bitcoin will never go away but we believe it will be bypassed by Ether over the years.
Ether vs Bitcoin Which Is a Better Investment? – SlideShare Version
