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In a recent commentary shared on currency by adding Ethereum (ETH), while maintaining a position in Bitcoin (BTC). Hougan offered three compelling reasons for investors to adopt ETH, while also presenting a critical viewpoint for remaining invested solely in BTC.

Ethereum vs. Bitcoin: 3 pro-Ethereum reasons

Hougan began by emphasizing the importance of diversification within crypto investments. Drawing an analogy with the early days of the Internet, he highlighted how difficult it is to predict which technologies or companies will dominate in the long term. “It’s very difficult to predict the future accurately,” Hougan remarked, referring to investors who bet on early Internet companies like AOL and Pets.com, which failed to deliver on their initial promises despite the overall growth of the Internet.

Applying this lesson to cryptography, Hougan advised a diversified approach to protect against similar uncertainties. Ethereum’s current market cap is around $420 billion, which is substantial but only about a third of Bitcoin’s market cap of $1.3 trillion. Given these numbers, Hougan proposed a default starting allocation of 75% Bitcoin and 25% Ethereum for investors seeking broad market exposure.

Hougan’s second point was about the functional differences between Bitcoin and Ethereum. He described Bitcoin as primarily “a new form of money,” highlighting its design choices aimed at improving its utility as a robust monetary system. “Every design choice made by the Bitcoin ecosystem is designed to make Bitcoin the best form of money that has ever existed,” he said, highlighting the focused development of Bitcoin towards optimizing its use in as currency.

Conversely, Ethereum is characterized by its role as a fundamental technology for the creation of new applications taking advantage of its ability to create programmable money. This includes everything from issuing stablecoins to building complex decentralized finance (DeFi) ecosystems.

“The main function of Ethereum is to make money programmable,” Hougan explained. He argued that ongoing development within the Ethereum ecosystem provides broader exposure to the potential applications of blockchain technology, which is still in its infancy.

The third argument in favor of Ethereum centered on historical performance data. Hougan pointed out that historically, portfolios including Ethereum and Bitcoin have shown better performance indicators, both in absolute terms and after adjusting for risk, over full crypto market cycles.

“My favorite thing about this chart is that the +ETH wallet offers both higher yields and a lower maximum drawdown,” he emphasized. This historical analysis suggests that Ethereum could offer better downside protection and higher potential returns, although Hougan cautioned that “past performance does not guarantee future returns” and noted that over shorter, recent periods , a Bitcoin-only strategy would have outperformed.

Counterpoint: Why a Bitcoin-only Strategy May Be Better

Addressing the other side of the coin, Hougan explained why many investors might prefer a Bitcoin-only strategy. This perspective is particularly relevant for those interested in macroeconomic issues such as fiat currency debasement and inflation.

Hougan posited that Bitcoin’s dominant position and its community’s drive to become a new form of currency allows it to continue to dominate this space. “It has a significant lead and size matters in terms of money,” he said, supporting the idea that Bitcoin’s simplicity and targeted use as digital gold could be more attractive to some strategic investments.

“Silver is a huge market. There is plenty of room for BTC to operate if successful. […] My take, in a nutshell: If you want to bet broadly on crypto and public blockchains, you need to own multiple crypto assets. If you want to bet specifically on a new form of digital currency, buy Bitcoin,” concluded Hougan.

At press time, ETH was trading at $3,514.06.

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