Ethereum Could Deliver Better Returns Than Bitcoin

Bitcoin has had a spectacular run over the past year. However, its smaller rival Ether has delivered better absolute returns.

stocks rising

Image source: Getty Images

Bitcoin has clearly gone mainstream over the past year. At the time of writing each token is worth roughly $67,500. The combined market value of all BTC in the world is about $1.3 trillion. If Bitcoin were a national currency, it would be the third largest in the world right now. 

However, the second-most popular cryptocurrency – Ethereum – barely gets mentioned. Mainstream media doesn’t cover it much, tech giants haven’t been adding it to their reserves and governments aren’t looking into it. That presents an attractive opportunity for early investors. Here are two reasons why I own more Ether than BTC and why I believe the smaller rival will outperform over the long run. 


Value is driven by utility. In other words, the more useful an asset, the more it should be worth. Bitcoin seems to be proving its utility as a non-correlated asset. Its value has been trading independent of the rest of the economy and capital market for much of the past year. It’s starting to look like “digital gold.”

However, the Ethereum network has grander ambitions. It’s trying to be a global decentralized layer of computing. Put simply, it’s “digital oil.” Over the past few years, developers have created interesting applications such as betting markets, decentralized financial (DeFi) applications, programmable money and NFTs on the network. 

As the applications expand, the network could attract more developers, creating a virtuous cycle of value creation. The total market size of decentralized finance and technology could be larger than gold. 

Law of large numbers

Another reason ETH could outperform BTC is the law of large numbers. When an asset becomes too large, its returns slow down simply because of scale. If the Bitcoin market adds another $100 billion in value, it barely moves the needle. However, if the Ethereum network attracts the same amount its market value could surge 33%. 

If you look back at relative returns over the past year, this factor is clearly at play. Bitcoin’s value has surged 560% over the past 12 months, while Ether’s value is up 1,073% over the same period. 

For investors, the return-on-investment is all that matters. 

How to buy Ether

If you’re convinced the smaller digital asset with more utility is likely to outperform, you can now bet on it directly. Three Ether exchange-traded funds (ETFs) went live last week. The Purpose Ether ETF, the CI Galaxy Ethereum ETF, and the Evolve Ether ETF are the first of their kind anywhere in the world. 

These instruments allow Canadians to bet on regulated assets that track the market performance of Ether. They also qualify for tax-shielded accounts such as the Tax-Free Savings Account (TFSA). In other words, you can add a digital asset with multi-bagger potential and protect your gains from the taxman. 

Bottom line

Bitcoin has had a spectacular run over the past year. However, its smaller rival, Ether, has delivered better absolute returns. That’s because it’s working off a smaller base (lower valuation) and seems to have more utility. 

If you’re looking to bet on Ether, there are now multiple major ETFs that can give you easy access.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Vishesh Raisinghani has no position in any of the stocks mentioned.

More on Investing

food restaurants

If I Could Only Buy 1 TSX Stock for the Next 10 Years, This Would Be It

Here's why Restaurant Brands (TSX:QSR) remains my top pick on the TSX for long-term investors seeking excellent total returns.

Read more »

data analyze research
Bank Stocks

The 1 Canadian Bank Stock I’m Watching This Week

Bank of Montreal (TSX:BMO) stock is starting to look dirt-cheap after its post-earnings fumble.

Read more »


The Best Stock to Invest $1,000 in Right Now

Cineplex has emerged from the pandemic riddled with debt but also with a stronger underlying business and stock that grossly…

Read more »

Golden crown on a red velvet background
Dividend Stocks

3 Top Dividend Stocks to Start a Growing Passive Income Stream

Start a growing passive income stream with shares like Canadian Utilities that boast five decades of dividend growth.

Read more »

Stocks for Beginners

3 Growth Stocks Wall Street Might be Sleeping On, But I’m Not

These growth stocks have more than doubled in the last year, yet there could certainly be more growth on the…

Read more »

diamonds, hidden gems

2 Undervalued Gems to Watch in March 2024

Value stocks such as Air Canada and Exchange Income trade at a compelling discount to consensus price target estimates.

Read more »

TFSA and coins
Dividend Stocks

TFSA Investors: Where to Put $7,000 in 2024

These top TSX dividend stocks now offer yields near 8%.

Read more »

Coworkers standing near a wall
Energy Stocks

3 Things About Enbridge Stock Every Smart Investor Knows

Enbridge stock (TSX:ENB) continues to be one of the best dividend stocks out there, but with a payout ratio of…

Read more »