Could Ethereum Be Bigger Than Bitcoin?

Ethereum seems to be outperforming the Purpose Bitcoin ETF (TSX:BTCC). It has more room to run.

| More on:
Big Bitcoin logo.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Ethereum is on an unprecedented run. Since the start of 2021, the price of each Ether is up 250%. Over the past 12 months, it’s up 1,234%. Effectively, this cryptocurrency has outperformed its larger rival Bitcoin in terms of total return. Investors are now considering whether a pivot from Bitcoin to Ethereum is justified. 

If you’re looking to gain some exposure to this still nascent sector, here’s what you need to know. 

Bitcoin’s adoption and size

After 12 long years, Bitcoin is finally starting to look like a mainstream asset class. Over the past year, several major tech companies and financial institutions have adopted the cryptocurrency. Some, like Elon Musk, have added significant exposure. While payment platforms have integrated the technology to make it more accessible. 

Effectively, Bitcoin is now looking like a digital store of value – a form of e-gold. However, recent traction has already made the asset a serious competitor to traditional gold. Bitcoin’s market capitalization – the combined value of all BTC – is US$1.03 trillion or C$1.27 trillion. 

Gold, meanwhile, has a market value of roughly US$10 trillion or C$12.3 trillion. That means BTC’s upside is capped at 1,000% or tenfold from its current value. That’s the best-case scenario. It may never reach that value, if some investors or central banks don’t fully adopt BTC instead of gold. 

Ethereum, however, has a much smaller market capitalization with a bigger market to address. 

Ethereum’s utility

Unlike Bitcoin, Ethereum is designed to be more than just a store of value. It serves as the base layer for a number of decentralized applications, including lending, borrowing, selling non-fungible tokens (NFTs), prediction markets and income sharing. There’s no way to estimate just how big this market is, but it seems likely to be much larger than “digital gold” or “store of value.”

The market size of bonds, for instance, is US$128.3 trillion — not to mention the fact that collectibles, decentralized applications and betting markets add even more potential value. The Ethereum network effectively has much more room to run. 

The network faces issues, for sure. Fees are too high, adoption isn’t as high and scalability is an issue. However, upcoming updates to the network should limit supply, lower fees, and make it much more scalable. 

How to invest

Fortunately for Canadian investors, there are plenty of exchange-traded funds for both cryptocurrencies. The CI Galaxy Ethereum ETF (TSX:ETHX) and the Purpose Bitcoin ETF (TSX:BTCC) seem like perfectly reasonable options. 

If you believe Ethereum has more potential, the Ether ETF should probably be a bigger part of your crypto portfolio. However, that doesn’t mean BTC is obsolete and that you shouldn’t have access to both. 

Bottom line

Ethereum has performed better than Bitcoin over the past year. This year, the smaller digital asset has gone parabolic. It still has more room to run, which is why it deserves a closer look. 

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

funds, money, nest egg
Dividend Stocks

TFSA Passive Income: 2 Great Canadian Dividend Stocks for Retirees to Buy Now

Retirees seeking reliable passive income can now buy top TSX dividend stocks at cheap prices.

Read more »

man window buildings
Stocks for Beginners

Foolish Beginners: 1 Stock Pick to Buy Now for a $6,000 TFSA

Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM) stock looks cheap as shares regain their footing.

Read more »

data analyze research
Dividend Stocks

Earn Monthly Passive Income: 2 Hot Dividend Stocks in Canada to Buy Now and Hold Forever

These two hot dividend stocks could help you to earn stable monthly passive income in Canada.

Read more »

Human Hand Placing A Coin On Increasing Coin Stacks In Front Of House
Dividend Stocks

Be a Landlord: Top 2 REITs (With Monthly Dividends) I’d Buy and Forget

You can be a landlord and earn monthly dividends for the rest of your life. All you need is the…

Read more »

Target. Stand out from the crowd

3 Canadian Stocks to Buy That Beat Their Earnings Expectations This Week

If you're looking for top Canadian stocks to buy, here are three impressive companies that continue to perform well in…

Read more »

A stock price graph showing declines
Energy Stocks

2 Cheap Canadian Stocks That Likely Won’t Be on Sale For Much Longer

These two Canadian stocks are close to returning to all-time highs. Don’t miss your chance to take advantage of these…

Read more »

A worker gives a business presentation.
Dividend Stocks

Got $5,000? 3 Stocks to Hold for the Next 20 Years

New investors don’t need tens of thousands to start a portfolio. Here are three stocks to hold for the next…

Read more »

canadian energy oil
Energy Stocks

3 Rising Energy Stocks to Buy as Oil Hits 6-Month Low

Three rising energy stocks are strong buys today as their upward momentum is likely to continue due to the tight…

Read more »