Last week, prices of Bitcoin and Ethereum continued to exhibit weakness as the market cap of the two leading digital assets fell by more than 10%. While Ethereum endured more losses, its active addresses witnessed a surge, increasing by 9.2%. On the other side, Bitcoin active addresses dropped by 8.5%.
Moreover, on June 27, Ethereum held about 200,000 more daily active addresses than Bitcoin. Historically, this was the third time Ethereum managed to surpass Bitcoin in terms of active addresses since 2017 — the other two times also occurred this year on June 5th and 6th.
A quick glance reveals that Ethereum has partially caught up with Bitcoin. Could this be an indication of the mythical “Flippening” taking place?
Bitcoin: Payment System, and Store of Value
Bitcoin was initially intended to be an open-source, decentralized, and secure payment system, facilitating access to the global economy. Arguably, Bitcoin has been slightly successful in achieving this goal. A look at El Salvador explains how.
Statistics show that 70% of El Salvador’s residents are unbanked, meaning they lack access to a basic bank account. On the flip side, 50.5% of the country’s population have access to the internet while almost 100% have a smartphone in their pocket. With El Salvador’s recent move to accept Bitcoin as legal tender, the unbanked population of the country will dramatically reduce.
However, there are certain problems with Bitcoin as a payment system. For one, the number of Bitcoin transactions per day is limited to 205616, which greatly fails to meet the needs of traders all around the world. Further, at times, Bitcoin transaction fees can also become a major problem.
Nevertheless, Bitcoin makes a better case as a store of value, or as it’s more frequently referred to, digital gold. Bitcoin has a finite supply, it has a decentralized network with excellent security, it can be used to hold and transfer value, it is easily portable, and many other virtues of a good store of value.
Furthermore, the behavior of Bitcoin holders further reflects that they view this asset as more of a store of value than a currency:
Ethereum: An Entire Ecosystem
Ethereum is an ecosystem that enables everyone to build Dapps, smart contracts, and even cryptocurrencies on top of its blockchain. Apart from being a cryptocurrency, Ethereum is a technological environment. Some even think of Ethereum as the fashionable web 3.0, the third generation of internet services.
This year, Ethereum outperformed Bitcoin by a big percentage. Among all reasons, the surge in DeFi projects and DeFi adoption certainly had the most impact. And considering that DeFi still has huge potential for growth, it would be fair to expect Ethereum to grow and prosper alongside it.
What Ethereum’s Address Activity vs. Bitcoin Means
Ethereum was created 4 years after Bitcoin, yet it has been growing unbelievably. In recent years, Ethereum’s astonishing outperformance of Bitcoin got people to think about the possibility of a “Flippening” — an event where Ethereum outshines Bitcoin and becomes the superior blockchain.
This type of thinking naturally leads to comparing these two leading assets in more than just price. However, any such comparison is largely unfair, as described thoroughly above, these two networks serve very different purposes.
The fact that the number of Ethereum active addresses surpassed that of Bitcoin is nothing out of the norm. Bitcoin is mostly viewed as a store of value, so traders don’t need to be active for their Bitcoin to appreciate. On the other hand, Ethereum is aggressively used in almost all DeFi protocols, with traders regularly using it as they take part in various projects.
Do you think Ethereum will eventually surpass Bitcoin in terms of market capitalization? If yes, when do you think it will happen? Let us know in the comments below.
About the author
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird’s US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firms specializing in sensing, protection and control solutions.