Let’s look at what it means to invest in Bitcoin or Ethereum. Investing in cryptocurrency is typically associated with moving value from one asset class to another, with a view of generating a return on investment (ROI) over an expected time.
If your goal is only to make more money, then you are looking to pick the project that you think will go up in value the most. If the demand outgrows the supply of people willing to sell over a given time, then you can expect your investment to be profitable. When deciding between Bitcoin or Ethereum, you need to look at their different aspects of supply and use cases (demand). Let’s begin by looking at the supply side:
|Bitcoin (BTC)||Ethereum (ETH)|
|Circulating Supply||17.3 Million BTC||102 Million ETH|
|Max Supply||21 Million BTC||Unknown|
|Supply Inflation rate per year (Current Rate 2018)||3.8% (Inflation rate halves every 4 year with next one in 2020)||12.8% (future inflation rate not clear)|
As you can see in the above table, there are some unknowns with the Ethereum maximum supply and inflation rate. This is because the central development team and other network participants have not yet decided. On the other hand, the supply side of Bitcoin is crystal clear.
Choosing Bitcoin or Ethereum
Let’s start with Bitcoin.
The base Bitcoin platform has a very simple use case – send Bitcoins between participants in a very secure, reliable and censorship-resistant way. The secure part comes from a robust blockchain of mining hardware (around $1.3 Billion value) and nodes (10,000 publicly reachable).
The reliable aspect comes from the fact that the network has been running smoothly at 99% since the time of its inception. The censorship resistance comes from the fact that if you broadcast a transaction with a sufficiently high fee attached, it is near enough impossible to stop the transaction being accepted by the network. These characteristics give it a great ‘store of value’ use case as a platform.
Ethereum, on the other hand, was focused on being a smart contracts platform. It also has mining hardware, nodes, reliability and censorship resistance but nowhere near as much as the Bitcoin network. Ethereum is built to be a smart contract platform with many projects and decentralised applications (dApps) being run on the network.
The dApp and smart contract use case is growing each day with more and more contracts being created and users transacting volume through this network. You can monitor this for yourself with websites like stateofthedapps.com.
The bottom line
In summary, it’s hard to pick what the better investment would be between Bitcoin or Ethereum if you are only doing it to make more money. There are unknowns about the supply of Ethereum, the platforms have very different use cases and the demand for each of them (Store of Value vs Smart Contract Platform) is changing each day.
Both assets have shown to be extremely volatile in price over the last few years and, for that reason, both should be considered as being in the high-risk investment category.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.