The last year has seen Bitcoin and cryptocurrencies surge to record highs, again bringing this alternative investment class into the limelight. Bitcoin is now trading at a market cap of $797 billion, while the second-largest crypto, Ethereum, is valued at a market cap of $192.35 billion.
We’ll compare the two largest cryptocurrencies in the world to see which is a better buy for 2021. The crypto bull run in the last year has managed to outpace all other asset classes, and this has made Bitcoin almost impossible to ignore.
Bitcoin is the most popular cryptocurrency
Bitcoin bulls continue to remain optimistic about the crypto space over the long term. They view this asset class as a hedge against volatility and global uncertainties.
Right now, the world is grappling with the COVID-19 pandemic, a weak U.S. dollar, and high unemployment rates. Federal banks all around the world have also lowered interest rates to offset a sluggish demand environment.
A global recession coupled with the above-mentioned factors should drive the demand for Bitcoin and peer currencies at least in 2021. Bitcoin has continued to gain momentum and is trading around US$34,000 right now, which is 15% below its record high.
However, investors are now worried about a market correction that might result in an 80% fall in the prices of cryptocurrencies (looking at historical bear markets). Investment bank JPMorgan warned that if Bitcoin fails to reclaim its previous record highs, it could easily face an investor exodus.
Ethereum is up 625% since February 2020
Ethereum is Bitcoin’s top rival in the digital currency space and the former has benefitted significantly from the latter’s stall in the last month. The price of Ethereum is up 625% in the last year and 81% year to date to currently trade at US$1,327.
Now, Ethereum is focused on a network upgrade that will help it build momentum in 2021, helping the digital currency to establish itself as a legitimate rival to Bitcoin. According to top crypto traders, there is a good chance for the price of Ethereum to surge higher in the next few months.
Amsterdam-based crypto trader Michael Van Poppe recently tweeted that Ethereum is one of the best investments for the next decade. He expects the price of Ethereum to touch a low of US$900 before doubling in value by the end of 2021.
Though analysts forecast the price of Ethereum to gain pace this year, investors should note that cryptocurrencies carry significant risks. This asset class is highly volatile due to the lack of regulations and the scope for price manipulations.
Invest in ETFs to gain access to cryptos
Canadians who want to gain access to Bitcoin and Ethereum can invest in The Bitcoin Fund and The Ether Fund. Due to the lack of certainty surrounding this asset class, investors are advised to invest a small portion of their capital that can potentially generate exponential returns.
You need to be aware of the risks and opportunities before jumping into the crypto space. While the crypto market seems overheated, there are gains for investors who have a large risk appetite.
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Fool contributor Aditya Raghunath has no position in any of the stocks mentioned.