After two strong years for the cryptocurrency industry, where its value grew several times over, the start of 2022 hasn’t been ideal for investors. A series of headwinds that cryptocurrencies are facing have resulted in the industry selling off significantly. Even the two most popular and most dominant cryptocurrencies, Bitcoin (CRYPTO:BTC) and Ethereum (CRYPTO:ETH), have lost a tonne of value.
One of the main reasons the entire industry is selling off is due to the shift in ongoing the economic environment around the world. After two years of ultra-low interest rates and governments pumping tonnes of stimulus into the economy, the inflation we’ve seen desperately needs to be cooled down.
Central banks are ready to begin tightening monetary, raising interest rates to incentivize more saving and less borrowing or spending. Investors are aware of this, though, and have been rebalancing their portfolios ahead of time.
As investors move away from riskier assets, naturally, cryptocurrencies are some of the hardest hit. This selloff, though, has created an excellent opportunity, especially for long-term investors who are bullish on cryptocurrencies.
The economic environment won’t last forever, and, eventually, the industry will begin to rally again. Plus, even as prices are sinking, the incredible innovation from developers in the sector continues to progress.
So, while the price of cryptocurrencies like Ether and Bitcoin are cheap, now is the time to buy these high-quality cryptocurrencies. But which is the better investment, and will Bitcoin continue to outperform Ether all year?
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Why is Bitcoin outperforming Ethereum?
In recent years, Ethereum has been the better buy, outpacing Bitcoin in both 2020 and 2021. So far, year to date, though, it’s been the other way around. As of this morning, Bitcoin was trading around US$37,700, down roughly 20% year to date. Ethereum, however, was trading around US$2,600, down roughly 30% year to date.
In addition, before the selloff, Bitcoin accounted for 40% of the total market cap of cryptocurrencies, while Ethereum accounted for roughly 20%. Lately, though Bitcoin’s share of the cryptocurrency market has grown to more than 44%, meanwhile Ethereum has lost domination, making up just 19% of the total market cap now.
So, why is Bitcoin outperforming Ethereum? There are a few reasons, but it all boils down to the fact that Bitcoin looks like the less-risky asset of the two, resulting in it not seeing as much downside pressure from investors selling.
As I mentioned above, in this environment, typically, the riskiest assets are the ones falling the most in price. Due to Bitcoin’s massive size, name recognition, and spot as the most dominant cryptocurrency, it’s seen as less risky than Ethereum. In addition, Ethereum is in the middle of developing some crucial upgrades to its network that are slated to be released later this year. So, for the time being, there is still some uncertainty with an investment in Ethereum.
Time to buy the dip?
If you’re an investor who’s bullish on cryptocurrencies and willing to invest for the long run, buying at these reduced prices from just a few months ago is a significant opportunity. There is no telling exactly when the industry will rebound. However, the impact it’s facing from the investing environment won’t last forever.
If you’re wondering which is the better buy between Bitcoin and Ethereum, both can be worth an investment. The two cryptocurrencies do many different things and hardly compete with each other.
With that being said, though, if I had to choose only one, I’d buy Ethereum. Not only is it cheaper than Bitcoin after its recent underperformance, but Ethereum offers much more potential long term due to its network’s ability to run smart contracts. And when those upgrades it’s working on are released later this year, Ethereum could see a massive rally.
So, if you’re bullish on cryptocurrency and are willing to invest for the long haul, these two cryptocurrencies are certainly some of the best investments you can make today.
