ETHEREUM IS NEXT!
It's no surprise that overall, 2021 has been a breakthrough year in so many ways. For example, recently, in November, a brain implant that can translate a paralyzed man's thoughts into text with 94% accuracy was just developed. A new lithium metal battery technology promises 80% further range (it can double the capacity of electric vehicles), bioengineered bugs that can break down plastics have been developed. Everyone's favorite, Bitcoin, just recently hit $69,000 (its all-time high).
Although investors celebrate the almighty number of meme coins (Shiba Inu, Dogecoin, and the likes), there's another topic gaining some mainstream attention, and that all has to do with 'Ethereum.'
So far, Ethereum has increased in price roughly 1000%, outpacing the return of Bitcoin by approximately 3x.
Now what's interesting is that this isn't just a one-time occurrence. Since 2016, Ethereum has consistently posted higher annualized returns than just about anything else. This has even led some people to believe that if Ethereum continues at its current rate, it could lead the crypto market through an ominous-sounding event known as – "The Flippening." This is where it overtakes the market gap of Bitcoin, and everyone loses their minds.
So, given how analysts are now predicting both Bitcoin and Ethereum to continue their seemingly unstoppable momentum, let's talk about exactly what's going on, whether or not a reversal is actually possible, and the impact this could have throughout the entire market.
After gathering every piece of data that I could find, the results were pretty surprising and left me reconsidering how I plan to invest in the future and where my money might be best allocated. So with that said, let's begin!
ETHEREUM EXPLAINED:
First off, we need to understand what Ethereum is and how it is different from other technologies. I'm sure most people just see it as a less expensive Bitcoin and maybe a faster way to buy things. But both of those descriptions couldn't be further from the truth in terms of really understanding why Ethereum has such mainstream popularity.
The concept of Ethereum was first described in 2013 by then 19-year-old – Vitalik Buterin, who created it to facilitate programmable contracts using its own currency. I know that sounds incredibly confusing, so we'll break it down a little bit further.
Bitcoin's creation began by replacing the intermediary -- the banks -- between what we do and how our information is processed. For example, while you're reading this article I created for you, the internet is the intermediary between us. Or if you want to send money between people, a third party like Venmo, PayPal, Opay, Kuda, or a bank (GT Bank, Zenith Bank, etc.), they're the intermediary between you and that person. By having an intermediary, you are trusting that company with your information. They also control how your data is presented.
Ethereum, on the other hand, is based on the same blockchain network like Bitcoin, except it allows for an open-source platform, where programmers could build applications that facilitate the exchange of money, property, shares, or anything of value in a transparent. This conflict-free way helps avoid the services of a middleman in the form of what's called the "Smart Contracts."
Smart contracts are a form of digital agreement that performs a specific task when certain conditions are met. Where this gets interesting is that these smart contracts could be built for pretty much anything. If I lend you ₦1m, the smart contracts would make sure that I get paid back by a specific day and time directly from your wallet, without any work on your end, straight from the Ethereum blockchain.
It basically removes the middleman and allows transactions to happen in real-time without any human involvement. The thought is that this would create more trust between parties because there's no gray. The contract takes no sides, it just does what both parties agree on, and that's it.
So, in this case, Ethereum is the network that programs are created on, and Ether is the currency that powers it. Kind of like Ethereum is the car, but Ether is the fuel that powers the vehicle. Although the fuel itself was really never meant to be an investment or store of value, to begin with, even though it certainly can be. Because even oil is indeed skyrocketing through the roof.
But instead, Ethereum is about creating a completely decentralized peer-to-peer network on a level playing field, with Ether being the currency that powers it.
Now, initially unlike Bitcoin (which is limited to a total of 21 million coins to ever exist), Ethereum was recently reported to be potentially infinite, with a mining limit of 18 million new coins every year.
ETHEREUM UPGRADE:
However, in August of 2021, the Ethereum network underwent the 'London hard fork,' which is a fancy way of saying – their program was updated to improve its efficiency and price. Before this upgrade, Ethereum transactions were processed and prioritized by whoever was willing to pay the most. Kind of like someone offering to pay a little bit more to cut the line and get VIP access.
So as soon as Ethereum began to grow in popularity, so many people started using the 'VIP service' and cutting the line that their transaction fees increased to a point where it no longer made sense to move smaller amounts because the cost was so high.
But with this new upgrade, a base fee is implemented for every transaction. Of which is automatically 'burned,' thereby reducing the overall supply of Ethereum and creating a deflationary effect that winds up increasing its price.
As a result, over 800,000 Ethereum have been burned and taken out of circulation in the last three months. And this upgrade is said to make way for the much anticipated Ethereum 2.0 upgrade (we'll talk about that momentarily). But the critical distinction here is that the Ethereum network is meant to lay the foundation from which other decentralized applications can be built on top of. This is similar to how the internet allows you to read the content published on this website right now.
So in terms of its price, whether or not analysts believe it could hit $10,500, and whether or not "The Flippening" has any actual merit, we should discuss its relation to Bitcoin. It's all going to make a lot of sense very soon if you don't understand (probably because you're new to the crypto market).
BITCOIN FUTURE:
At this point, regardless of whether you're a new crypto trader or not, Bitcoin needs absolutely no introduction as the largest cryptocurrency by market cap and volume. I guess that was kind of an introduction.
Anyways, even though most people actually thought of Bitcoin as a new type of digital currency, it eventually evolved into a global store of value. It has since paved the way for a new asset class potentially being used as a hedge against inflation and international turmoil.
Globally-renowned companies like Tesla, PayPal, Square, MicroStrategy, and various businesses have begun placing a portion of their cash reserves in Bitcoin. Even an entire country like El Salvador began using it throughout their economy.
Despite the rapid volatility, more and more people are using it to diversify their portfolio, and as it gains momentum, more people are beginning to take it very seriously. Even the CEO of Apple Inc, Tim Cook, recently said, 'he owns cryptocurrency, and he's been interested in it for a while. American Billionaire – Mark Cuban also recommends investors maintain a small allocation to Bitcoin, or as he said that Bitcoin will be 'the safe haven of crypto' with one' huge advantage.'
And if you want something shocking, JP Morgan, who previously called Bitcoin' worthless', is now predicting a long-term of $146k. It's also no surprise that millennials and Gen Z own more cryptocurrency than any other past generation, with many even ditching traditional finance in favor of Bitcoin.
Over time, Bitcoin has solidified its dominance as the foundation of the entire cryptocurrency market. Ultimately, people invest in crypto to protect their money with the expectation that more adoption is going to follow.
ETH VS. BTC
Now, this leads us to the question of questions – will Ethereum momentum continue growing to the point where eventually, it outpaces Bitcoin and flips its position as the largest cryptocurrency on the market.
Well, in terms of past performance, Ethereum is impressive. For example, there's a website called costavg.com that calculates the return on cryptocurrency investments over time. If you had invested $6,000 in Bitcoin in 2017, you would have $75,000 now, with an ROI of 1151.70%.
However, had you made that same investment into Ethereum during that same time frame, your $6,000 investment would have turned into $227,000, with an ROI of 3696.17%.
Not to mention that, from 2017 up to November 2021, Ethereum has generated higher returns than Bitcoin, with no signs of slowing down.
Of course, all this is obviously only known in hindsight, then it would have been impossible to predict this type of return five years ago. But throughout that time, Ethereum has outperformed Bitcoin's overall return by almost triple.
Meaning, some people believe that if this continues to the same degree, Ethereum could catch up to the market cap of Bitcoin within about three years. Of course, such statements rely on quite a few ambitious assumptions and only calculate that the current rate of return to continue in equal proportion, without any other changes along the way, which is unlikely to happen exactly as described.
To make that clear, note that nothing grows consistently in a linear fashion, and to expect this (which will always be the case), literally the epitome of using napkin math to predict the future returns using past performance, which isn't necessarily the most reliable.
But still, Ethereum's performance is much higher than everyone initially expected, and given the deflationary changes within the 'London hard fork,' Ethereum's price could continue to rise.
"FundStrat Global" even predicted a $10,500 price target, given its potential to be able to process transactions in one day, much like "Mastercard" or "Visa."
The long-awaited Ethereum 2.0 upgrade also promises further efficiency, scalability, and quicker transaction speed. Although it's still unclear when that will happen since they've been talking about it for years.
FINAL THOUGHTS:
Bitcoin and Ethereum are fundamentally different and should not be seen as competitors. Bitcoin will most likely remain as the mainstream 'Goliath' that's probably isn't going anywhere.
Ethereum, on the other hand, is a much more practical and functional use case, well beyond just a currency. Also, as the entire DeFi space grows and develops, I would not be surprised if another technology begins to take away some of Ethereum's market share.
So with that said, I wouldn't necessarily YOLO everything into Ethereum to bet on 'The Flippening' happening. Personally, that amount is currently 8% and may be as high as 10% if I'm willing to take on a little bit more risk and split evenly between Bitcoin and Ethereum.
But also, ultimately, anything can happen. And even though I find this an incredibly topic to research and write on, at best, everything is a random guess, and make sure you do your own due research for more information. Make sure you check out our other blog posts for more details on the crypto market and trending entertainment headlines. Thanks for reading!