If you could have only one cryptocurrency in your wallet, what would it be? most people would probably answer bitcoin (btc 0.34%), and for good reason. Bitcoin is not only the best known and most popular crypto, but it is also often the benchmark against which all other cryptos are compared. In terms of market cap, bitcoin has always been head and shoulders above its rivals.
So, is it possible that ethereum (eth 1.32%) is actually better than bitcoin as a long-term investment? for years, ethereum has played second fiddle to bitcoin. however, there are several key reasons why ethereum could now be a superior buy in the long run. More importantly, the technology platform that powers Ethereum is about to receive a major upgrade.
Reading: Bitcoin or ethereum long-term
If there’s one reason to rethink your ethereum investment thesis, it has to be the merger. this is the much-promised moment when the ethereum blockchain finally converts from a proof-of-work mechanism to a proof-of-stake consensus mechanism. In layman’s terms, it means that ethereum will soon be running on superior technology that will make it possible to do everything on the ethereum blockchain faster, cheaper, and better.
by contrast, bitcoin remains stuck in its low-performance, power-intensive proof-of-work mining technology. By some accounts, the July crypto rally has been fueled by optimism about the expected merger in September, and for good reason.
real world utility
Which brings us to the second reason why ethereum is a better long-term buy than bitcoin. there is simply more real-world utility for ethereum than there is for bitcoin. Developers have created non-fungible tokens (nfts), smart contracts, and decentralized finance (defi) protocols, all of which run on top of the ethereum blockchain. there is a whole ecosystem around ethereum that doesn’t exist with bitcoin.
Of course, bitcoin may have more social media avatars trying to push it higher, but ethereum has more developers, entrepreneurs, and IT professionals bringing real-world applications to life. you can use bitcoin to pay for transactions or sit on it as a long-term store of value, hoping it will rise in value as a result of digital scarcity. but due to its underlying technological infrastructure, bitcoin is much more limited than ethereum.
changing investment narratives
And that brings us to the final reason ethereum is a better long-term option than bitcoin: the entire investment narrative surrounding bitcoin is starting to unravel. Until the market crash this year, the basic argument for holding bitcoin long-term was that it was uncorrelated to traditional investments like stocks. In other words, even if the overall stock market crashed, bitcoin wouldn’t. in this sense, it would act as “digital gold”. would have intrinsic value when everything else was melting.
As more investors began to think of bitcoin as “digital gold”, it made sense that people would want to hold btc during any crisis or recession. But what happened during the last market downturn? bitcoin fell like any other cryptocurrency and in some cases stronger and faster. so some of the allure of bitcoin as “digital gold” is starting to wear off.
At the same time, the switch to a proof-of-stake mechanism as a result of the merger will transform eth into a deflationary asset, further increasing its attractiveness as a potential inflation hedge. Additionally, due to the way staking works, an increasing amount of eth will be “locked in” and unavailable for trading. this will naturally drive up the price of eth, simply based on the principle of supply and demand.
the future is built on ethereum
As if that wasn’t enough, a growing number of high-profile companies around the world are building on top of the ethereum blockchain. Quite simply, due to its flexibility and scalability, Ethereum is becoming the blockchain of choice for large institutions. if bitcoin is “digital gold”, ethereum is “digital oil”. in the long run, ethereum will be the most valuable crypto because it has more practical uses.