The crypto market is generally known for being extremely volatile with crypto assets experiencing huge price swings within very short periods. Bitcoin, which is the largest cryptocurrency by market capitalization, controls the majority share of this market followed by Ethereum which is considered the leading altcoin.
However, while Bitcoin is the most valued cryptocurrency, the Ethereum blockchain has proved to offer more blockchain solutions that cut across a wide range of industries thus making its native token, the Ether (ETH), less susceptible to market forces. Additionally, ETH is also the single most used cryptocurrency in decentralized finance which came about as a result of Ethereum’s smart contract technology. This makes Ethereum a darling among crypto investors making it necessary to learn some basic Ethereum trading tips, especially when venturing into decentralized finance
Although Ethereum normally appears to follow Bitcoin’s market swings, ETH adds more value and losses less compared to Bitcoin after the swings. For instance, in November 2021, Bitcoin set a new all-time high above $69,000 and today, about five months down the line, it has lost about $30,000 in value since it is now trading at about $39,000. In the same period, Ethereum dropped from trading above $4,700 to its current price of $2,951 losing only about $1,700 in value.
Favorable Ethereum prospects
Ethereum is the most preferred blockchain network for launching decentralized finance applications. As a result, the majority of the tokens created for DeFi applications are Ethereum-based (ERC-20) tokens and they can be stored in Ethereum wallets. Also, ETH is widely accepted in most of the DeFi applications that are developed on Ethereum.
ETH holders can also block their tokens in DeFi smart contracts for different purposes, which reduce the circulation of ETH coins thus naturally creating an effect achieved in Bitcoin only through halving.
Although Ethereum currently doesn’t seem to be a big threat to Bitcoin especially since they both use the proof-of-work consensus (PoW) mechanism and Bitcoin seems to control the majority of the crypto market share, Ethereum will sure show its true worth once it completes its Ethereum 2.0 upgrade, which is also called the “Merge,” switching from Proof-of-work to proof-of-stake.
Currently, Ethereum processes transactions faster than Bitcoin though at a higher ‘gas fee’. With the Ethereum 2.0, the network will process transactions faster and at a lower cost since the work required to validate transactions will not be as much as when using the PoW mechanism.
The majority of investors believe that the PoW is the greatest impediment to ETH price and they believe that once the upgrade takes place, institutional investors will put in more money in Ethereum; something that will certainly propel the price of ETH higher. Everyone remembers the case of Bitcoin whose bullish trajectory in 2021 was largely pegged on a sudden widespread adoption by institutions and companies including the likes of Tesla, Square, and Microstrategy.
Bitcoin is today’s largest cryptocurrency by market cap and also the most widely used across the globe. It’s accepted as a mode of payment in many parts of the world and people can even use Bitcoin ATMs to withdraw and deposit BTC. However, it has been met with scrutiny since its volatility is a challenge for the local population, especially in countries like El-Salvador that have made Bitcoin a legal tender.
On the other hand, ETH is rarely used as a mode of payment but rather as a utility token, especially within the DeFi and non-fungible token industries, which have taken the crypto world by storm. The majority of NFT marketplaces accept ETH as a mode of payment since they use Ethereum-based smart contracts.
Generally, the above-mentioned features make Ethereum grow and become dynamic while Bitcoin seems to be static and fixed to only being used as a mode of payment or storage of value. The value of ETH comes from the use cases of Ethereum blockchain which keeps on growing every time.