Ethereum
Will Ethereum Catch Up With Bitcoin?
Getty Images
Getty Images
When two related assets diverge, there is a simple choice to make. The assets will remain divergent and perhaps diverge further or revert at some point in the future. You can use these relationships to try to profit from a reversal and you can even use a long short strategy to remain neutral on the market while you do so.
Most people expect a resynchronization of past value ratios, but this is not mandatory.
Gold versus silver is a good example. Throughout history, gold has been 5 times, 10 times, 20 times, or even 80 times more valuable than silver, as it is today.
While there are still a legion of believers in precious metals who long for the days of silver and gold, the 20:1 ratio of gold to silver of the good old days of recent times will never return, although some certainly dream that it might.
But that won’t be the case.
In crypto, the similar metaphor is Bitcoin (BTC) to ether (ETH). Since the bottom of crypto winter, bitcoin has outperformed.
Here is the table :
Bitcoin has outperformed Ethereum since the last trough
Credits: ADVFN
I am positioned on crypto via ether because historically it has performed further and longer than bitcoin in the near past, but for now it is underperforming.
If you wanted to explain this, you could suggest that Ether developers continue to play with the blockchain, regularly injecting their new ideas into the system, which may or may not solve the blockchain problems they want to solve, and that tinkering deflates the value of Ether because it injects uncertainty. A bunch of geniuses tinkering with a crypto financial system is sort of exactly the kind of thing governments do with fiat currency, and the reason why people who hate fiat and love crypto want to get out of fiat currency. So Ethereum developers acting as a central bank might just be a drag on its valuation. “Code is law” isn’t so compelling when faceless young programmers can act like Judge Dredd with your bags of crypto.
Bitcoin
Bitcoin
on the other hand, is almost free of this kind of interference and there is no upheaval of the system every time some developer thinks there is something wrong. The very idea of decentralization is still strong in Bitcoin and changing its system is simply incredibly difficult and its structure is as decentralized as it gets. Unfortunately, Ethereum’s recent proof-of-stake structure, while cuddly for the environment, leaves all sorts of risk surfaces open, while Bitcoin continues to operate, seemingly impenetrable to any human influence.
However, these are purely theoretical details.
If bitcoin takes the next long-awaited leg up, then ether will jump with it and most likely catch up to bitcoin in percentage terms and perhaps continue to run further, as was the case during the last crypto surge in 2021. An “all-in” ether investor would also suggest that ether will dethrone bitcoin in the future, and if bitcoin were to break above $100,000, that could mean $25,000 per token for ether. I’m not in the ether enthusiast camp, but you can understand the reasoning, as optimistic as it is. Another bitcoin rally above $100,000 would easily see ether at $8,000.
Ether
Ethereum
it will do well if Bitcoin does well and it has a chance to catch up if we see this final leg of this crypto cycle repeat past performance.
Meanwhile, Ether ETFs are coming and will absorb large amounts of Ether, which should support the price. The ETFs started trading today, although the SEC is not exactly enthusiastic about crypto ETFs.
So the question is not whether Ether will catch up with Bitcoin, but whether the crypto will produce another rally before this cycle ends. If you think that’s the case, then Ether is sure to perform and has good potential to outperform Bitcoin in the end.
Cryptocurrencies aren’t for the faint of heart, but they’re a good diversifier and can add some spice to a balanced portfolio. They’re also pretty much the only thing left for action-hungry speculators – which is of course why so many people are flocking to the markets. There’s no shortage of fireworks in the run-up to Christmas.
Disclaimer: I own bitcoin and ether.