Here’s a secret: I had a chance to buy Bitcoin 2013 when it was trading under $100. I even signed up for an account on a crypto exchange and funded it, but never actually bought. It’s my biggest regret. I’m sure many of you reading this share this regret too.
We’ve missed out on a generational investment opportunity, simply because it was too quirky and exotic. Now, however, Bitcoin and other cryptocurrencies such as Ethereum are becoming mainstream. Elon Musk added BTC worth billions of dollars worth to his company’s books this year, while tech companies have integrated payments on their platforms.
This week, auction house Christie’s announced it would start accepting payments in Ether at its auctions. Hedge funds and institutional investors have added exposure to these prime cryptos too. All this adoption has pushed the combined market cap of the industry over US$1.6 trillion (C$2 trillion).
In short, if you’re investing in the space now you’re far from an early adopter. Nevertheless, there’s money to be made here. Here’s a closer look at the potential upside of the top two cryptocurrencies.
Bitcoin
I wouldn’t go as far as to call Bitcoin a safe investment. But in the crypto industry, it’s probably the relatively safest option. The combined value of all Bitcoin in existence is US$985 billion. That means it accounts for 60% of the entire crypto industry’s current value.
Launched over 12 years ago, it’s also the oldest crypto, which means its underlying blockchain has stood the test of time. This track record and popularity gives BTC a natural edge. It’s probably why Elon Musk, hedge funds and investment banks have added BTC to their books, overlooking all the other options.
BTC is now considered the digital equivalent of gold. However, BTC’s market value is already 11% of the value of all the gold in the world (~US$9 trillion). That means the digital currency’s upside could be limited to tenfold from here.
Ethereum
Meanwhile, the second-most popular cryptocurrency is worth only US$220 billion. Experts suggest Ethereum is the digital equivalent of oil. In other words, it serves a practical purpose beyond “store of value.”
The Ethereum network has been used to create decentralized stock exchanges, financial instruments, betting markets and a wide variety of crypto products. This utility means Ether’s potential market opportunity could be far greater than gold’s US$9 trillion. The upside could be many times greater.
This could be one of the reasons Canadian crypto mining firms such as HIVE Blockchain Technologies (TSX:HIVE) keep the majority of their reserves in ETH. At the time of writing, HIVE had more than twice as much ETH on its book as BTC. Effectively, a bet on HIVE stock is a proxy bet on the value of the second-most popular cryptocurrency.
Canadian investors can also bet on the Ether Fund, a listed security that holds ETH. Devoting a small portion of your portfolio to this digital currency could expose you to significant upside as the market further matures.
Bottom line
Bitcoin has clearly gone mainstream, so Ethereum could have greater upside.
