Bitcoin vs. Ethereum Value Analysis and Targets
After we did our bitcoin price prediction video two weeks ago and the Ethereum price video last week, the comments blew up asking which is the better investment, Bitcoin versus Ethereum?
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Bitcoin vs. Ethereum: Which One Will Give the Highest Return?
So in this video, I’ll give you a head-to-head crypto grudge match comparing bitcoin and Ethereum. I’ll show you the similarities and differences in the two cryptocurrencies. We’ll look at price predictions and how much each of these is worth. Then, I’m going to reveal why bitcoin is the better investment currently but why Ethereum could produce higher returns in the future.
If you didn’t catch those last two videos, I’m putting all our cryptocurrency videos in a special playlist on the channel, a step-by-step to investing in cryptocurrencies.
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Bitcoin and Ethereum Similarities and Differences
Now I want to start with the similarities and differences between Bitcoin and Ethereum…and I know a lot of you want to skip forward to the price analysis and which is the better investment, but understanding this is going to help you see WHY one is a better investment. I will leave a clickable index in the video description though if you want to jump around though.
So bitcoin and Ethereum are similar in that each is a digital currency, they’re each decentralized tokens making use of the distributed ledger technology known as blockchain.
Bitcoin was launched in 2009, introduced in a white paper by Satoshi Nakamoto as an online currency with no central authority, no country’s central bank. There are no physical bitcoins but your balance is associated with a crypto-secured public ledger.
Over time though, people started to realize that the blockchain technology could be used for a lot more than just cryptocurrency, that the potential for an open-ended decentralized software platform could be huge for business applications.
This is when Ethereum was launched in 2015, to enable this kind of app development. The platform runs on its own programing language on the blockchain and is powered by the token, abbreviated as ETH.
And this is where we see the most differences between bitcoin versus Ethereum. Ether transactions are confirmed in seconds, so much faster than the minutes it can take for bitcoin transactions. More importantly though, the two really have different primary goals.
Bitcoin was Created to be an Alternative Currency
Bitcoin was created primarily for that purpose as an alternative currency, as a medium of exchange and a store of value. Ethereum, while it can also be used as a digital currency, was primarily created to facilitate the applications side of the blockchain technology.
So you’ve got those key differences between bitcoin and Ethereum that is going to drive the investment thesis of these two tokens.
Before we compare these two against each other for returns, let’s look at the price predictions and valuation on each.
Bitcoin Grew Up to $60,000 So Far
The price of bitcoin has surged over the last year, from about ten grand to almost sixty-thousand each recently for a six-fold return. And there’s two ways we looked at bitcoin for its investment value in our prior video.
Ark has some strong research on how much bitcoin would be worth with that adoption as a cash reserve for corporations or investment allocations by money managers. Here we see that Ark estimates the value of bitcoin could rise by nearly $100,000 if just the companies in the S&P 500 were to allocate 1% of their cash into the crypto like we’ve already seen with Square and Microstrategy. And with the higher allocation that could be possible after a dollar crash or just faster inflation, a 2.5% allocation by corporate America would send the value of bitcoin up more than two-hundred grand!
I was a little more conservative in my value estimate using the network effect and Metcalfe’s Law to price bitcoin. On the rate of growth in bitcoin users, we estimated a value between $94,000 to $190,000 over the next few years.
That’s a solid return of between 74% to 250% and even if it takes five years to get there, that’s as much as 28% annualized return on your money!
Ethereum to Beat Bitcoin
But there’s good reason to believe the return on Ethereum could beat that! Ethereum has already beaten bitcoin on returns over the five-year and one year periods. Ethereum is up 593% in the last year versus that 460% run in bitcoin and here we see Ethereum has rocketed up 13,600% in the last five years…that’s 136-times your money!
On the network valuation basis alone, we’re seeing much faster growth in Ethereum. Again, the number of users on a platform is extremely important because it’s directly related to the price. Active addresses grew six-fold for Ethereum in the last four years, that’s the red line here while bitcoin usage grew 50% over the same period.
Now the Ether coin isn’t limited like bitcoin. There are currently just over 100 million Ether versus about 21 million bitcoin, so that explains some of the price difference. The Ether crypto trades for just over $1,800 each versus nearly $54,000 for bitcoin but based on the network effect, I think it should be much higher compared to the more popular crypto. We can see active addresses for Ethereum have reached about 750,000 which is just below the 900,000 unique bitcoin addresses.
That would justify a market cap of nearly half a trillion, or about three-times the current price for each Ether…and that’s just the current network of users. With the greater business adoption of the crypto and increase in users over the next few years, I think price for Ethereum goes to seven or eight thousand each.
Now, Which is the Better Investment? Is it Bitcoin or Ethereum?
But now for the main event! Which is the better investment bitcoin or Ethereum? Bitcoin has the advantage in the popularity and a limited supply of tokens. Most investors aren’t yet sold on cryptocurrencies in general but when they do decide to invest, they mostly go to bitcoin so that kind of demand is a plus for the larger crypto asset.
And really where we’ve seen bitcoin do so well is because the present investment case for cryptocurrencies is in that use as an alternative currency and for investment. Looking here at the Ark Invest Big Ideas research showing a timeline of important bitcoin events and it’s all as a use for cash or investment from companies like Microstrategy, Square and Paypal putting cash reserves in bitcoin to banking approvals.
So bitcoin has had the clear advantage over Ethereum but there is one very important reason why I think Ethereum will be the better investment going forward.
Over the next few years, I believe the investment thesis is going to shift from that cryptocurrency, digital money idea to the use of the blockchain technology in applications and this is where Ethereum has the overwhelming advantage. The Ethereum platform has more developers than any other token and it’s giving it a massive lead as businesses adopt the technology. Of the top 50 companies tracked by Forbes that are adopting blockchain technology in their business, 32 have chosen Ethereum.
Amazon Web Services has adopted the ETH platform for a new open-blockchain standard in a service to help businesses adopt the blockchain technology. And JP Morgan built its digital token, the JPM coin, using the Ethereum platform to facilitate the $6 trillion it moves around the world on a daily basis.
In all, the Enterprise Ethereum Alliance, has signed 150 organizations including Cisco Systems, Microsoft and Mastercard to the largest open-source blockchain initiative in the world. This scale and lead in applications development should drive the coin’s value. The fact that Ethereum is not as popular right now as bitcoin tells me there might be a better opportunity here to get ahead of that trend.
Now that said, I own both bitcoin and Ethereum and will probably continue to regularly add to both positions but I’m overweighting my Ethereum purchases. For example, if I buy another $5,000 in crypto, I might buy three thousand in Ethereum and just the two in bitcoin.
What do you think about this in depth comparison? Is it Bitcoin for you? Or is it Eth that you foresee will make huge returns in the future?