The talk of ethereum surpassing bitcoin in market cap has been rekindled. However, there are still three problems: uncertainty about the technology outlook, lack of institutional bullishness, and a high number of competitors.
According to coinmarketcap, Bitcoin’s total market cap is currently $109.1 billion, while Ether’s total market cap is $447.5 billion, nearly half of Bitcoin’s total market cap. Ether has risen 17 times in the last year, compared to Bitcoin’s 4.7 times. This brings up a question that has been around for years: when will Ether’s total market cap “overtake” Bitcoin’s?
The total supply of bitcoin is 21 million, while ethereum has no cap, and there are currently about six times as many ethereum as bitcoin, so when the price of ethereum exceeds one-sixth that of bitcoin, the market cap will be overturned. It seems that the mainstream opinion now is that Ether will reach $10,000 after EIP-1559, and Jiang Zhuoer even thinks that Ether reaches $20,000 in the current bull market. Is this possible?
In the long run, there is a real possibility that Ether will flip Bitcoin, and some data already shows the end. According to cointelegraph report, on the day of May 4, the total trading volume of ETH contracts across the network reached $87 billion, surpassing the total trading volume of bitcoin contracts by $81 billion for the first time in history.
In addition, according to Google trends, internet users’ searches for the keyword Bitcoin have so far not surpassed the search volume from the last bull market’s late 2017 high, while searches for Ethereum have long surpassed the previous high and are continuing to climb, showing the enthusiasm of new users.
In terms of on-chain transaction data, Bitcoin’s on-chain volume has been flat for years due to block size limitations, while Ether’s on-chain volume has been steadily increasing. It is foreseeable that ETH will leave BTC behind even more significantly in the future from the indicator of on-chain data.
What’s more, the burning mechanism of EIP-1559, the ETH lock-in of ETH 2.0 which doesn’t count as growth and the lock-in of ETH in DeFi have all led to a decrease in the circulation of ETH, and these are also the core reasons for the rise in value of Ether.
Uncertainty factor of ETH flipping BTC
At present, BTC has become a synonym for cryptocurrency, and its image of “store of value” has been deeply rooted in people’s hearts.
I. Potential Risks in Technology
Bitcoin is known for the stability of its system, and is extremely conservative about any changes to the system. The activation of the new Taproot feature is currently supported by only 25% of the pool’s computing power, but 90% of the pool’s computing power is required to pass (though most of the pools have expressed support). Once criticized for being conservative, Bitcoin has gained institutional recognition in this bull market and has become a true “digital gold”.
Conservatism has given Bitcoin tremendous stability, and after more than a decade of operation, it is basically safe to believe that the Bitcoin network is unlikely to have any technical problems. Dogcoin, which is based on the same code system as Bitcoin, has not been developed for years and is still safe and stable, further proving the stability of the Bitcoin system.
On the contrary, ethereum is an evolving system, which is more than an order of magnitude higher than bitcoin in terms of system complexity due to the numerous functions that need to be implemented, and the technical complexity inevitably brings unseen risks, the most typical one being 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.
Second, the number of institutional investors
Although Ether has a corresponding ETF, it is still very inadequate compared to Bitcoin’s ten or so ETFs and huge amounts of gray funds. There are a number of publicly traded companies in the market that hold bitcoin publicly, and there is no shortage of giants like Tesla, while there are only a few that hold ethereum publicly. The lack of institutional investors also means a lack of financial derivatives. Although the trading volume of Ether contracts exceeded that of Bitcoin for the first time on May 4, a more meaningful data indicator for the contract is the number of positions. In this regard, total positions in the Ether contract are still only about half of the positions in the Bitcoin contract. Moreover, for institutions, most of the trading takes place on compliant exchanges. On the day of May 4, the volume of bitcoin contracts on the compliant exchange CME was $2.6 billion, while the volume of ethereum was $1.1 billion, still a big difference.
The Problem of Future Challengers
As a means of “storing value”, Bitcoin has enough first-mover advantage and its status as digital gold has been established. Ether, on the other hand, is a decentralized computing system, and challengers are still popping up like wildfire. Other than that, Cardano and Polkadot, which were founded by the co-founders of Ether, and BSC of Coinan, which ranks first in terms of trading volume, as well as the emerging Firecoin and OKEx eco-chains, have all posed certain challenges to Ether. In this respect, Ether’s position as the world’s premier platform for smart contracts is temporarily not as solid as Bitcoin’s position as digital gold, which also brings uncertainty to its market cap flip.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/ether-market-cap-to-surpass-bitcoin-there-are-still-three-uncertainties/
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