In this Wild West of crypto, the battle is between Bitcoin and Ethereum, the two largest digital currencies by exchange volume and market cap.
Each of these cryptocurrencies is unique, so it would be helpful to know a bit about each before investing. Bitcoin and Ether, Ethereum’s native cryptocurrency, have recently experienced all-time highs, particularly Ether, since the Merge will happen on September 15. Ethereum 2.0 promises to be a game changer, and investors are increasingly interested in buying this cryptocurrency. Plus, Ethereum has some additional purposes that make it even more attractive in developers’ eyes. That is why some prefer Ethereum to Bitcoin, but let us explain them both and see their major similarities/distinctions.
This way, you can make a more informed decision regarding your next investment.
Bitcoin (BTC)
Released in January 2009 as a cryptocurrency by Satoshi Nakamoto, Bitcoin has rapidly become popular. Some consider it an alternative form of money, and it is normal since BTC is the most liquid existing cryptocurrency. What does this mean? This liquidity relates to the ability of a cryptocurrency to be traded rapidly and without much hassle. Generally, the more liquid a virtual coin is, the nearer it is to actual fiat money (cash). Like most cryptocurrencies, Bitcoin operates on the blockchain, an innovative technology that allows super-secured and fast transactions without third-party implications.
Known as “digital gold”, Bitcoin is often used by investors as a store of value and a protector against inflation. Investing in Bitcoin has long been compared with investing in gold or other alternative properties such as horses or art rather than investing in the stock market. That is because it has a limited supply, and you know that what comes in low amounts is usually of higher value. That is right – while there are infinite shares a company can issue, there will only ever be 21 million Bitcoins.
Ethereum (ETH)
Ethereum, on the other hand, is not “digital gold”, but this does not mean it does not have an outstanding value. Aimed to operate as a decentralized world computer, Ethereum lets developers create dApps (decentralized applications) and use the platform for more than one purpose, as in the case of Bitcoin. This is what makes Ethereum so valuable – the number of possibilities it provides. In other words, Ethereum is not just about gaining. Instead, its protocol functions as a global cloud computer that developers can use to build everything from DeFi (Decentralized Finance) protocols and NFTs (non-fungible tokens) to self-executing contracts.
This leads us to the first and most obvious distinction between Bitcoin and Ethereum: the former is meant to be a cryptocurrency platform, while the latter is designed as an application development platform. With thousands of crypto token projects that run on Ethereum, the platform is likely to be a game changer; it is already the first choice for decentralized app creators. Nonetheless, developers must pay the so-called “gas fees” to use the Ethereum platform. These fees have to be paid in Ether (ETH), so anyone willing to use the platform to its full potential has to buy Ether. The good news is that these high transaction costs will be reduced once the Ethereum 2.0 upgrade is up.
The platform is predicted to boom this autumn as Ethereum 2.0 (a more up-to-date version of Ethereum) is to be launched on September 15.
Bitcoin vs. Ethereum – What Differentiates Them
As previously mentioned, Ethereum is more for developers aiming to create dApps, while Bitcoin is invested merely for its gaining potential. Another significant distinction is that Bitcoin is based on a PoW protocol, while Ethereum is forecast to switch to a PoS consensus. This change means a lot in the crypto universe, as more and more investors will be interested in investing in Ether. PoW may guarantee a more secure platform, but it consumes a lot. PoW promises to consume less energy and update some of the most troublesome features users often encounter.
Plus, more transactions per second are going to be carried out, which will likely attract more users. But more about this upgrade, we will learn soon.
Price Volatility
Since the cryptocurrency industry is still in its early stages, it is normal for prices to fluctuate. Bitcoin and Ethereum are both volatile in nature, one more than another. Indeed, the latter is somewhat more volatile than the former. These price movements are due to the greater concentration of Ethereum among investors and traders.
Some may assume that Bitcoin is more volatile since it has the highest value. Still, volatility has not that much to do with the value in dollars of a particular asset. It depends more on factors such as the utility of a token or coin at a particular moment, its liquidity, and supply. Remember when we said there are only 21 million Bitcoins out there? Well, in the case of Ethers, there is no specific number, hence the high concentration.
The reality is that both cryptocurrencies are volatile, so it is not that big of a deal if you invest in either Bitcoin or Ether. The factor influencing your decision-making should be the importance and purpose of that crypto for you. You can even invest in both of them, as they both have advantages. Nonetheless, price is not to be ignored entirely. Before taking that leap, ensure you verify the Bitcoin price and the price of any other crypto that has grabbed your attention multiple times. Try to monitor the price changes over a certain period and see if these align with your expectations. Platforms like Binance provide updated information on crypto prices, charts, and market capitalization.
What to Choose in 2022
Although Bitcoin and Ethereum are reliable long-term investments, there are many other cryptos having just the same potential.
Forbes states that the best cryptocurrencies to buy in September 2022 are:
- Bitcoin (BTC)
- Ethereum (ETH)
- Tether (USDT)
- Binance Coin (BNB)
- Ripple (XRP)
- Cardano (ADA)
- Solana (SOL)
- Dogecoin (DOGE)
Bitcoin and Ethereum are both good investments but remember they have distinct uses, so choose something based on your needs and aspirations.