It is said that "Ethereum's market value will exceed Bitcoin", but there are still three uncertain factors

Wu Shuo Author | Tan Shu

Editor of this issue | Colin Wu

The topic of Ethereum surpassing Bitcoin in market value has been rekindled. However, there are still three problems: uncertainty in technical prospects, pessimism from institutions, and a large number of competitors.

According to coinmarketcap, the current total market value of Bitcoin is $1,091 billion, while the total market value of Ethereum is $447.5 billion, nearly half of Bitcoin's total market value. In the past year, Ethereum has risen 17 times, while Bitcoin has risen 4.7 times. This also brings up a question that has existed for many years: When will Ethereum's total market value be able to "turn the tables" on Bitcoin?

The total supply of Bitcoin is 21 million, while Ethereum has no upper limit. The current number of Ethereum is about six times that of Bitcoin. Therefore, when the price of Ethereum exceeds one-sixth of Bitcoin, the market value will be reversed. At present, it seems that mainstream public opinion believes that Ethereum will reach 10,000 US dollars after EIP-1559. Jiang Zhuoer even believes that Ethereum will reach 20,000 US dollars in this bull market. Is this possible?

In the long run, Ethereum does have the potential to overtake Bitcoin, and some data has already shown signs of this. According to Cointelegraph[report](1), on May 4, the total transaction volume of ETH contracts on the entire network reached 87 billion US dollars, exceeding the total transaction volume of Bitcoin contracts of 81 billion US dollars, for the first time in history.

In addition, according to Google trends, the search volume for the keyword Bitcoin has not yet exceeded the peak of the previous bull market at the end of 2017, while the search volume for Ethereum has already exceeded the previous high and continues to rise, showing the enthusiasm of new users.

In terms of on-chain transaction data, Bitcoin’s on-chain transaction volume has remained flat for many years due to the block size limit, while Ethereum’s on-chain transaction volume has been steadily increasing. It can be predicted that from the perspective of on-chain data, ETH will further surpass BTC in the future.

More importantly, the burning mechanism of EIP-1559, the non-growth of ETH locked in ETH2.0, and the ETH locked in DeFi have all led to a decrease in the circulation of ETH, which are also the core reasons for the increase in the value of Ethereum.

Uncertain factors in ETH's reversal of BTC

At present, BTC has become synonymous with cryptocurrency, and its image of "value storage" has been deeply rooted in people's minds. If ETH's market value wants to exceed BTC, it still faces many challenges.

1. Potential technical risks

Bitcoin is well-known for its system stability and is extremely conservative about any system changes. The activation of the new function Taproot currently only has the support of 25% of the mining pool computing power, but it requires 90% computing power (but most mining pools have expressed support). Bitcoin was once criticized for its conservatism, but in this round of bull market, it has been recognized by institutions and has become the real "digital gold".

Conservatism brings great stability to Bitcoin. After more than ten years of operation, it is basically believed that the Bitcoin network is unlikely to have any technical problems. Dogecoin, which is based on the same code system as Bitcoin, has not undergone any development for many years, and the system is still safe and stable, which further proves the stability of the Bitcoin system.

Ethereum, on the other hand, is an evolving system. Due to the large number of functions that need to be implemented, the system complexity is more than one order of magnitude higher than Bitcoin. The excessive complexity of technology inevitably brings invisible risks, the most typical of which is the DAO fork in 2016, which directly led to the creation of ETC. The potential risks in technology make institutions choose to act cautiously when entering.

2. Number of Institutional Investors

Although Ethereum also has a corresponding ETF, it is still far from enough compared with the more than ten Bitcoin ETFs and the huge Grayscale Fund. There are many listed companies in the market that publicly hold Bitcoin, including giants such as Tesla, while only a few companies such as Meitu publicly hold Ethereum. The lack of institutional investors also means the lack of financial derivatives. Although the trading volume of Ethereum contracts exceeded that of Bitcoin for the first time on May 4, the more meaningful data indicator for contracts is the position. In this regard, the total position of Ethereum contracts is still only about half of the position of Bitcoin contracts. In addition, for institutions, most transactions are conducted on compliant exchanges. On May 4, the trading volume of Bitcoin contracts on the compliant exchange CME was US$2.6 billion, while the trading volume of Ethereum was US$1.1 billion, and the gap is still large.

3. Issues with future challengers

As a means of "value storage", Bitcoin already has enough first-mover advantages, and its position as digital gold has been established. Challengers many years ago have been defeated, and there are few challengers in recent years. As a decentralized computing system, Ethereum still has many challengers. Apart from other things, challengers such as Cardano and Polkadot, which were founded by the co-founders of Ethereum, plus BSC of Binance, which ranks first in transaction volume, and the emerging Huobi and OKEx ecological chains, have all brought certain challenges to Ethereum. From this perspective, Ethereum's position as the world's leading smart contract platform is not as stable as Bitcoin's position as digital gold, which also brings uncertainty to its market value reversal.

[1]:https://cointelegraph.com/news/flippening-record-10b-ethereum-futures-volume-briefly-outpaces-bitcoin-s

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