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The Great Crypto Flippening: Can Ethereum Overtake Bitcoin?

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The Great Crypto Flippening: Can Ethereum Overtake Bitcoin? The great crypto flippening: Can Ethereum overtake Bitcoin? https://cointelegraph.com/news/the-great-crypto-flippening-can-ethereu... ANDREW SINGER 5 HOURS AGO The great crypto !ippening: Can Ethereum overtake Bitcoin? Is BTC, crypto’s !agship, prepared to fend o" Ethereum with its “incredible network value, rich community and pace of innovation?” 10446 72 10:01 ANALYSIS “Ethereum’s ascent to the top of the cryptoverse seems unstoppable,” declared Nigel Green in mid-August, and it’s not hard to see why the deVere CEO thinks this. DeFi is on a tear, NFTs are mushrooming, Ethereum (ETH) remains more scalable than Bitcoin (BTC) and it also o"ers more uses including smart contracts. Moreover, Ethereum will soon move to a proof-of-stake (PoS) consensus algorithm, looking to be more eco-friendly than Bitcoin’s energy-intensive proof-of-work (PoW) protocol. 1 of 7 8/31/21, 2:39 PM The great crypto flippening: Can Ethereum overtake Bitcoin? https://cointelegraph.com/news/the-great-crypto-flippening-can-ethereu... “Ethereum is already years ahead of Bitcoin in everything but price and fame,” said Green earlier this year, adding: “There’s a real sense that 2021 is the year for Ether. Its time has come.” But, is it really a foregone conclusion that the world’s #rst, largest and best-known cryptocurrency is ready to relinquish its market-cap crown? Maybe not. “If you look at CoinMarketCap’s homepage over the past #ve years, Ethereum is usually sitting in second position, right under Bitcoin — and it really hasn’t moved from that number two spot in any permanent way since its launch,” Molly Jane Zuckerman, content lead at CoinMarketCap, told Cointelegraph, adding: “History shows us that there is only one cryptocurrency that can ever claim the ‘king of the cryptoverse’ title.” So, is there a chance for a !ippening — the term often used to describe a reversal of ETH and BTC? Are altcoins still bene#ting from the light that shines upon Bitcoin or are they stepping out and becoming popular by themselves? Ultimately, can the two even be compared since they are seen to serve di"erent purposes within the crypto and the wider #nance space? Not a done deal “Ethereum’s eventual dominance is hardly a sure thing,” commented Eswar Prasad, professor of economics at Cornell University and author of the soon-to-be-published book, “The Future of Money.” There could be technical complications with Ethereum’s switch to the PoS consensus protocol, “and there are many risks of attacks on DeFi products that could undermine con#dence in those products and in Ethereum itself,” he told Cointelegraph. Still, Bitcoin hasn’t proven itself as an e"ective medium of exchange, added Prasad, and its blockchain has only “limited functionality” compared with Ethereum, speci#cally when it comes to decentralized #nance (DeFi): “Ethereum provides more !exibility, especially for DeFi products and services, and it has the potential to become a viable and e$cient medium of exchange, featuring both low latency and high throughput for transactions.” Maybe Green went a bit too far, suggested associate professor of #nance at the University of Western Australia Lee Smales. “Inevitable” is a strong word, after all, he told Cointelegraph, “but, I’d say it’s highly likely that this will occur — although the recent rally in Bitcoin has outpaced that in Ethereum and has maybe delayed the timing a little bit. I would suspect it [!ippening] happens in the next two to three years.” 2 of 7 8/31/21, 2:39 PM The great crypto flippening: Can Ethereum overtake Bitcoin? https://cointelegraph.com/news/the-great-crypto-flippening-can-ethereu... So, how long? Many seem to be betting on Ethereum and the question is often: not if but when? Ether could surpass Bitcoin as the crypto world’s top store of value in the coming years, said Goldman Sachs analysts in July, while deVere’s Green put the !ippening “probably within #ve years.” “I think it will be di$cult for ETH to !ip Bitcoin any time soon,” Justin Hartzman, CEO and co- founder of Canadian-based crypto exchange CoinSmart, told Cointelegraph. “The next [BTC] halving is in 2024, which will inevitably push the price up. Also, keep in mind that ‘Ethereum killers’ like Cardano and Tezos are coming up big time. If they work out, they could siphon out a lot of potential market cap from Ethereum’s kitty.” If the trading of places does occur, “I could see it potentially happening in #ve to six years.” “I don’t believe in terms of market cap and overall valuation that Ethereum will surpass Bitcoin,” CEO of Banz Capital John Iadeluca told Cointelegraph, adding: “Bitcoin stands as the global ‘introduction’ to cryptocurrency, at least for the foreseeable future. For example, I don't see any scenario where the SEC approves an Ethereum ETF prior to approving a Bitcoin ETF.” Jason Peckham, an analyst at investment management #rm Invictus Capital, told Cointelegraph: “I disagree that it’s inevitable. In fact, #ve years is enough time for an outsider to !ip ETH and BTC both.” A lot hinges on how the two crypto communities manage their regulatory challenges, he added, as well as internal factors, like the pace “at which ETH has been burnt at post-EIP-1559,” which should make it less in!ationary and potentially more attractive to investors. He added: “If I had to pin it on one thing, I would say that ETH needs the supercycle/double bubble thesis to play out. That should allow for its various sectors to continue prospering in a way that won’t be possible in a bear market, which would likely be bearish for ETH relative to BTC as we have seen historically.” Environmental factors must also be taken into account. Bitcoin mining’s prodigious use of electricity has been long known, but when Elon Musk drew wider attention to it earlier this year, BTC’s price plunged. While Bitcoin has rallied since then, “the energy [issue] continues to garner attention,” said Smales, and that should only intensify. “So, the Ethereum move to PoS creates an additional advantage that could result in the !ip occurring sooner.” 3 of 7 8/31/21, 2:39 PM The great crypto flippening: Can Ethereum overtake Bitcoin? https://cointelegraph.com/news/the-great-crypto-flippening-can-ethereu... What could derail Ethereum? Green recounted that ETH had already gained 300% in 2021, compared with only 55% for BTC, and it has outperformed all other assets during the #rst half of the year. Is there anything that could halt its momentum? In order to stay in contention for !ippening BTC, Ethereum needs to maintain its role as the biggest smart contract platform, however, some new competitors continue to emerge. “POS is not completely proven as of yet,” said Smales, and it could evolve so that the market is dominated by a few very large players — essentially centralizing it — creating market frictions and possibly even higher transaction fees. The EIP-1559 upgrade was supposed to make Ethereum gas fees more manageable, but according to YCharts, the average gas fees have reached a three-month high. Given that the gas fees have placed a continuous strain on the usability of the network, the upgrade to Ethereum 2.0, or Eth2, cannot come soon enough. Moreover, Bitcoin isn’t standing still, technologically speaking. “The planned Taproot upgrade could signi#cantly enhance Bitcoin’s e$ciency, privacy and the functionality of its blockchain,” said Prasad. Bitcoin also enjoys the “#rst mover” advantage which can be critical with networks. “The case for BTC's dominance boils down to its superior Lindy E"ect,” Peckham told Cointelegraph, referring to a concept popularized by Nicholas Taleb which holds that the older a technology is, the longer will be its life expectancy. “Together with this is the long-term trend towards stronger-handed market participants holding the majority of Bitcoin while the rest of the world continues to be drawn into owning their stake in the headline cryptocurrency,” added Peckham. Still, Ethereum seems to have momentum now. “The trends in the crypto markets have indeed been shifting towards Ethereum ever since the explosion of the DeFi summer, followed by the continuing popularity of NFTs,” said Zuckerman, as Peckham added: “Cohorts of users were drawn into Ethereum for DeFi and for NFTs, while Bitcoin is less diverse in its range of uses by comparison. Most of what crypto natives like myself are excited about in crypto right now is either built on Ethereum or an Ethereum 4 of 7 8/31/21, 2:39 PM The great crypto flippening: Can Ethereum overtake Bitcoin? https://cointelegraph.com/news/the-great-crypto-flippening-can-ethereu... competitor.” Ethereum has the richest ecosystem in the crypto space, and DeFi, which largely lives on Ethereum, today holds vast amounts in total value locked, despite the early summer downturn and assertions that DeFi was just a bubble with no inherent value. “DeFi had its strictest test yet and passed with !ying colors. The number of DeFi users has already passed 3.25 million as utility and use cases increase every day,” said Hartzman, adding: “With more applications and users coming in, Ethereum could leverage Metcalfe’s Law and exponentially increase its overall network value.” Are Bitcoin and Ethereum really comparable? Upon further re!ection, though, does it even make sense to compare Bitcoin with Ethereum? One is a (putative) form of money, the other is a platform, a new supercomputer powering Web 3.0, upon which one can build new technologies, arguably. Right now, the two platforms perform di"erent tasks.
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