Bitcoin was the original cryptocurrency and has always been the most valuable as hundreds more tokens have come into being. In the last nine months Bitcoin has lost two-thirds of its value. At the same time the second leading cryptocurrency, Ethereum, has gained in value against Bitcoin. Proponents of Ethereum are predicting a “flip” in which their token actually passes Bitcoin in value. If this happens, when will Ethereum pass bitcoin in value and what factors will contribute?
Value of a Cryptocurrency System
In regard to Ethereum passing Bitcoin the issue is not the value of a single token but the total value of all tokens in a system. According to Fortune, the most recent surge in the value of the Ether token has made a so-called “flippening” closer than ever. After Ether’s recent uptick in value compared to Bitcoin the total value of all Ether tokens versus all Bitcoin tokens is still a bit less than one half. Part of the optimism about Ethereum taking over the number one spot has to do with the upcoming Ethereum software upgrade. One of the signs of increasing interest in Ether has been a surge in call options at the QCP crypto trading shop. But there is more to the future value of Ethereum!
Ethereum Offers More Than Bitcoin
When you look at the total crypto market you can see that Bitcoin has gone from 70% of total value in late 2021 to 40% in August of 2022. Some technical crypto traders see a trend in Bitcoin value (downward) and thus choose to sell. Those investors who look for some sort of fundamentals to base their investment on have been disappointed by Bitcoin which turned out not to be a store of value as inflation rages or a safe haven in times of social and economic distress but rather an investment that follows the Nasdaq in lockstep as it rises and falls. We have written about how Bitcoin could end up as low as $600 if it falls until it reaches a value based on its fundamental uses outside of sheer speculation. Ethereum’s value, we believe, will eventually be based on its practical uses in decentralized finance, non-fungible tokens, and the Metaverse. The smart contracts inherent in Ethereum give it an advantage over Bitcoin in the realms of gaming, advertising, supply chain management, decentralized finance, and identity management. Its ability to be used in smart contracts, especially, gives it a huge advantage over Bitcoin.
Eventual Values of Ethereum and Bitcoin
The Federal Reserve is raising interest rates to fight inflation. At the recent Jackson Hole symposium of the St. Louis Federal Reserve the Fed rolled out the big guns to make the point that they will do what it takes to break inflation even though it causes the pain of unemployment, an economic recession, and a falling stock market. The immediate reaction of the stock market was to fall several points. Both Ether and Bitcoin went down by percent as well. It is our belief that the coming recession and lower stock market will drag all cryptocurrencies down as well. What will save the Ether token from falling as badly as Bitcoin will be that it is used and will be used even more for the Metaverse, decentralized finance, and NFTs with smart contracts making the Ethereum system ever more useful and profitable. We expect to see Ether and Bitcoin merge in value and then the Ethereum system to become increasingly dominant and valuable.
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