Ethereum Vs. Bitcoin: Is ETH a Better Investment than BTC?

Bitcoin and Ethereum are the two biggest cryptocurrencies. But is ETH a better investment?

Last Updated May 10th 2023

14 Min Read

Ethereum and Bitcoin May Already Be in Your Portfolio. But Which one Has the Better Investment Going Forward?

Cryptocurrency investing is a high risk investment, so before you invest in Bitcoin or Ethereum, make sure you're willing to tolerate the high level of risk.

While crypto assets in general are not a safe investment, Bitcoin may has less risk than Ethereum because it has more demand and has a long track record. However, Ethereum may have more potential growth over the long time.

Ethereum vs Bitcoin: Which Is the Better Buy?

Is Ethereum better than Bitcoin? Ethereum has better technology and provides more uses than Bitcoin, however, Bitcoin has a lower supply and more liquid than ETH. Crypto investing is high risk, so before you invest in Bitcoin or Ethereum, make sure you're willing to tolerate the high level of risk.

Ethereum and Bitcoin, two of the best cryptocurrencies, have been mainstays of many investors’ portfolios. Even the lay investor knows about them, which is why they’re perhaps the two Cryptocurrencies our trading community friends and students most frequently ask us about.

Specifically, what they ask are: What is the main difference between Ethereum and Bitcoin? Is Ethereum a better investment than Bitcoin? Which is the best investment going forward? With that in mind, we thought it might be useful to break it down with Ethereum vs. Bitcoin tale of the tape.

There are more than 11,000 cryptocurrencies in circulation, with a total market cap of $1.16 trillion. But despite the huge range of choice for investors, two coins dominate the market: Bitcoin and Ethereum.

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Ethereum vs Bitcoin: Critical Differences Between The Two

With $544 billion market cap, Bitcoin is the biggest crypto on the block. Ethereum is in second place. But with a market cap of $226 billion, it won't be stealing the top spot any time soon.

Early-stage investors in Bitcoin and Ethereum made huge profits and both coins are still popular choices for first-time speculators. But now that the initial gold rush is over, knowing what your investing in is more important than ever.

So is Ethereum a better investment than Bitcoin? Is it too late to invest in Bitcoin? Should you invest in Bitcoin and Ethereum at the same time?

And, perhaps most importantly, what is the difference between Bitcoin and Ethereum?

Find it out in our detailed Ethereum vs Bitcoin comparison guide.

What is Bitcoin?

Bitcoin is a decentralised digital currency that can be sent between users without a third-party intermediary. Bitcoin is not an application or technology. It is, quite literally, money in digital form. The very first transaction occurred in 2010 when a computer developer called Laszlo Hanyecz bought two Papa John pizzas for 10,000 Bitcoins. At the current valuation, those 10,000 Bitcoins are worth around $550 milllion!

Bitcoin was created in 2008 by a person (or group of persons) using the pseudonym Satoshi Nakamoto. Satoshi wanted to create a 'trustless' currency that was 100% independent. In a sense, Bitcoin was an attempt to democratise money, and it's no coincidence that the first coin came out in 2009, just a year after the credit crunch.

what is bitcoin

The 2008 financial crisis led to accusations that the banks had severely mismanaged people's money, committed widespread fraud, and were then protected by governments. People felt disillusioned; many still do. Bitcoin offers an alternative form of finance that cannot be controlled or manipulated by a central power.

Unlike fiat currencies such as the pound or dollar, Bitcoin is not issued by a central bank. Instead, they're created and released as a reward for a process called mining. Miners are the people who process the transactions on the blockchain, creating a permanent and 100% secure record of every Bitcoin transaction.

Think about miners as administrators or a decentralised authority that helps enforce the credibility of the Bitcoin network. Put simply, Bitcoin's blockchain network is a system that ensures one coin always equals another coin, no matter where it's sent or how many times.

Read More: Bitcoin Price Predictions

Miners receive Bitcoin at a fixed, yet declining rate. This is because the Bitcoin algorithm was pre-programmed to limit the supply of coins to 21 million. Around 19.4 million Bitcoins have been mined in the last ten years. But because mining becomes increasingly difficult after every new coin, experts think it will take another 120 years to dig up the remaining 2.4 million.

Should you invest in Bitcoin?

What is Ethereum?

Ethereum is more than just digital money. It's also an open-source blockchain for conducting transactions, referred to as decentralised digital applications (dapps) or smart contracts.

Smart contracts are 100% secure, require no third-party intermediary, and can codify, decentralise, and trade just about anything. All of this requires power and energy. So to cover the cost, the Ethereum network creates tokens called Ether; this is the fuel that powers smart contracts. Ether is also the cryptocurrency that you can buy, sell, or trade.

what is ethereum

A smart contract could be as simple as selling a second-hand bicycle or setting up a fundraising initiative without going through a crowdfunding site. Alternatively, smart contacts could facilitate complex financial agreements, including credit approvals, property purchases, insurance premiums, and much more. In other words, "smart contracts" could automate extremely complex transactions in a way that is fast, secure, and completely transparent. Agreements that now take days and week to finalise could happen in a matter of minutes, or maybe even instantaneously.

And this is only the tip of the iceberg. Ethereum's secure blockchain technology could make online voting a real possibility, ushering in a new age of democratic engagement and representation. It could also revolutionise the healthcare and legal industries, logistics, telecommunications, streaming services, education, social media, and e-commerce.

Ethereum's biggest fans think this blockchain technology will form the basis of an entirely new internet, or what experts are calling Web 3.0. In theory, the new web would be completely decentralised, giving users a chance to take back control of their information and create an organic online identity.

This user-centric approach would incentivise the creation of networks where people and companies develop products and services that benefit everyone. It would also put an end to some of the more problematic big-tech practices we see today, including data mining, censoring particular political views, and manipulating user experience to create more addictive platforms. To look at this another way, web 2.0 treats users as consumers or units; Web 3.0 would enable users to be individuals.

As you can see, much of Ethereum's value comes from its future applications. But will all this potential turn into a reality? Well, many people certainly think so. Ethereum has received public backing from some major players in the financial and tech spheres.

The Enterprise Ethereum Alliance (EEA) is a global community of more than 140 blockchain leaders, adopters, innovators, developers, and businesses from around the globe. Some of its most prestigious members include investment giant JP Morgan, Santander Bank, and British Petroleum (BP), as well as tech-giants Microsoft and Intel. The EEA helps promote the benefits of blockchain technology. It’s also working on building business-ready versions of the Ethereum software.

Should you invest in Ethereum?

Ethereum vs Bitcoin: What Is the Difference Between Both?

While Ethereum and Bitcoin share many similarities, they were designed for entirely different purposes. And understanding how (and why) they differ is something you'll need to know before you can make a sound investment choice.

ethereum vs bitcoin

So here's a breakdown of the main difference between Bitcoin and Ethereum and what they mean for you as an investor.

Supply

Ethereum is unlimited. The supply is continuous, although it will slow down as more coins are produced. Bitcoins are limited to 21 million. Over time, this finite supply will increase demand, pushing up the value of each coin.

Use

Bitcoin is digital money that can be exchanged at any time. It's also a digital asset with a store of value. That means it can be saved, retrieved, and traded at a later date. This is why many investors see Bitcoin as digital gold.

Ethereum is different. Its currency, Ether, is linked to smart contracts, and can only be traded after a set of predetermined conditions have been met.

For example, a Bitcoin transaction would look something like this: person X sends 10 BTC (Bitcoins) to person Y.

A smart contract could be written in this way: send 10 ETH (Ether) to person Y from person X if X’s balance is 10 ETH or more and the date is 01/01/2021.

Broadly speaking, Bitcoin is money, whereas Ether is a fuel that powers the Ethereum network. In fact, it's often referred to as gas.

Speed

Ethereum can verify transactions (or blocks) within 20 seconds. It takes Bitcoin around 10 minutes to process each block.

Reputation

Bitcoin is over 14 years old. It's the one cryptocurrency that most people have heard about. Bitcoin has an established reputation and is now accepted by major retailers, including Microsoft, Starbucks, and BMW. So if (or more likely when) crypto goes mainstream, Bitcoin has a strong chance of becoming the currency of choice.

Price

At the time of writing, Bitcoin is trading at around $28,000 per coin. Ethereum is above the $1,800 mark. So for first-time investors with a more limited bankroll, Ethereum is probably more attractive option.

Technology

The Bitcoin and Ethereum blockchains are always being updated. But experts tend to agree that the Ethereum technology is more advanced and robust. It's faster and the transaction fees are cheaper than Bitcoin's. Moreover, programmers are currently working on a major upgrade, known as Ethereum 2.0.

The new platform will simplify Ethereum's blockchain, increase user security and transaction speed, and reduce barriers to entry, making the network accessible to anyone with a standard laptop. There's no official release as of yet. But advanced testing is already underway, and programmers are optimistic that the platform will be fully operational by the end of 2020.

Adam Cochran is a crypto analyst and former marketing director of Dogecoin. He thinks a fully functional 2.0 platform will create a huge bull run on Ethereum. According to Cochran, this could send Etheruem's price 'to the moon.' So if you're thinking about taking a punt on Ethereum, now might be a good time.

Is Ethereum A Better Investment Than Bitcoin?

At the moment, it's hard to say if Ethereum is a better investment than Bitcoin. Both have very different purposes. Whether one is better than the other largely depends on what you're looking for, as well as a range of other personal factors. These include the size of your bankroll, whether you're excited about short or long-term gains, and your aversion to risk.

Bitcoin is still the most dominant asset in the crypto space, and by quite a distance. It's well established and was designed to gain value over time. Bitcoin might not promise big returns in the immediate future, but it's the kind of investment that you'd still want in your portfolio in 10 or maybe 20 years.

is ethereum a better Investment than bitcoin

For many investors, Ethereum's real value is not tied to its scarcity or its current applications. Instead, Ethereum's present (and future) value is intrinsically linked to its potential to revolutionise the digital space and the way we do business. Ethereum smart contracts could change everything from mortgage transfers to the way we create and consume online content. Moreover, the most exciting future applications of Ethereum will probably be the ones that we haven't even though of yet.

Investors who put their money into Ethereum do so in the hope that the technology will reach its full potential. And there are many indications that it could happen. As well as big-time backers like Microsoft and JP Morgan, many other investors are impressed by Ethereum’s technology.

When it comes right down to it, the ultimate debate between Bitcoin and Ethereum as investments comes down to an investor's risk profile. Both are promised to perform well over the long time. Bitcoin is the more mainstream and stable of the two.

Gil Penchina is an American business manager and angel investor. He's helped more than 100 tech start-ups get off the ground, including PayPal and LinkedIn. Here's what he has to say about the Ethereum platform: "It's clear to me now that Ethereum is the new currency of the Internet. It's way ahead of where Paypal was in its day, and it's much more exciting to its customers than Paypal ever was."

Tale of the Tape: Ethereum Vs. Bitcoin

Launch Year: Ethereum 2015, Bitcoin 2009

Available Coins: Ethereum 115M, Bitcoin 18.6M

52- Week Growth: Ethereum 450%, Bitcoin 140%

2-Years Growth: Ethereum 2850%, Bitcoin 70%

3-Years Growth: Ethereum 1950%, Bitcoin 140%

5-Years Growth: Ethereum 1103%, Bitcoin 6880%

Bitcoin vs Ethereum: a Genuine Power Struggle?

An issue that is increasingly coming to the fore - not just for cryptocurrency but for commerce in general - is that of sustainability. Leading voices from the world of business have recently drawn attention to the fact that the Bitcoin network consumes power at the same rate as a small country.

In fact, Cambridge’s Centre for Alternative Finances estimates that a single Bitcoin transaction has the same carbon footprint as 680,000 Visa transactions or 51,210 hours worth of YouTube surfing, according to the site. Ethereum is no shrinking violet in this department, but its power consumption is still significantly smaller than that of Bitcoin.

The power consumption relates to the way each cryptocurrency is mined - with computer systems requiring huge amounts of power to be successful at unlocking their rewards.

The environmental concerns should not be dismissed by anyone looking to invest in Ethereum or Bitcoin either. As more and more countries legislate to reduce carbon emissions, this could well prove a key battleground for the crypto market and, if that turns out to be the case, then Bitcoin could already be on the back foot.

One of Ethereum’s major upgrades includes a shift to the proof of stake mechanism. This protocol sees validators on the network put up a stake as collateral. A bigger stake effectively means a validator gets proportionately more chances to solve the block equations required to verify transactions and unlock the ETH reward.

The shift to Proof of Stake is predicted to cut Ethereum’s energy consumption dramatically, as founder Vitalik Buterin states: “The PoW part is the one that’s consuming these huge amounts of electricity. The blockchain transactions themselves are not super computationally intensive.”

This shift will give Ethereum an advantage when it comes to environmental credentials, which could in turn see it being a far more viable network as the world moves towards lower carbon emissions.

Bitcoin vs Ethereum: What The Experts Say

There is no shortage of Bitcoin supporters in the world of business and finance. Of course, this year, the biggest news has been Elon Musk’s firm Tesla acquiring $1.5 billion worth of BTC as part of its long-term investment strategy. However, Morgan Creek Digital’s Anthon Pompliano is also confident in Bitcoin, predicting that it will reach $100,000 by the end of 2023 and even going as far as to say that BTC could eventually hit $1 million per token - though he stopped short of giving a timeframe on this.

Similarly, Galaxy Digital investment guru Mike Novogratz is also bullish on BTC, also predicting it to hit the $100k mark before the year 2023 is out.

So what about Ethereum? Suffice to say the altcoin doesn’t quite have the high-profile backing that Bitcoin has, but there are still plenty of voices of support out there. Managing partner at Blocktown Capital, James Todaro, is overwhelmingly bullish on ETH, believing it will reach a staggering $9,000 before the end of 2023.

Mr Todaro’s prediction was echoed by Simon Dedic, the Co-founder of Blockyre, who also believes Ethereum has the potential to reach $9000. However, he did not speculate when this price point might be reached.

Read Also:

Bitcoin Price Prediction

Ethereum Price Prediction

Should I Invest In Ethereum Or Bitcoin?

If you still can't decide between investing in Ethereum or Bitcoin, then you don't have to!

As you've probably figured out, Ethereum was never intended to replace Bitcoin. So rather than seeing Bitcoin and Ethereum as direct competitors, it's worth thinking about these technologies as complementary platforms with the potential to underpin very different aspects of a digitised financial economy. In other words, the future of crypto is not a winner takes all game; Bitcoin and Ethereum can both 'win.'

Splitting your funds between different assets is called diversification. Diversification is a common practice for all types of investors, including billion-dollar hedge fund managers. It's a way of minimising risks, creating more opportunities for return, and safeguarding your assets from adverse market cycles.

How you diversify your portfolio is up to you. One option is to split the funds 50/50. But if you're more excited by Bitcoin, you could go for a 70/30 split or vice versa if you think the future belongs to Ethereum.

Looking into the future, it is quite natural to wonder, could Ethereum’s market capitalization eventually catch up with Bitcoin or even beat it? Let’s look at these top two crypto giants in-depth to figure it out.

Bitcoin's Advantages Over Ethereum

Bitcoin holds several advantages over Ethereum that give it a higher value. Firstly, Bitcoin is a more popular option when it comes to being used as a payment method. It is readily available in many countries globally, and many merchants are conversant with it; hence people who are only venturing into cryptocurrencies opt for Bitcoin.

Bitcoin is also readily available on exchange platforms. Even the newest exchanges list Bitcoin as one of the supported cryptocurrencies. However, Ethereum has also grown in popularity, and it can be traded on the majority of the crypto exchanges. Bitcoin is also readily bought because it carries a lesser risk than Ethereum, which has existed for longer.

Bitcoin holds the upper hand over Ethereum when it comes to endorsement by governments. For example, El Salvador, a Central American country, recently adopted Bitcoin as a legal tender. Iran has also adopted Bitcoin as a medium of exchange to help aid its economy as it grapples with inflation caused by US sanctions. Venezuela and Argentina have also leaned towards Bitcoin and other cryptocurrencies to help their respective economies.

Bitcoin as a better alternative to fiat currency is the major area where it holds an upper hand over Ethereum. If Ethereum can tap into this, it could gain a major competitive edge that could help it become the primary cryptocurrency by 2030.

Ethereum Still Has Lots Of Growth Potential

The advantages of Bitcoin over Ethereum are overshadowed when other factors are analyzed. Ethereum's popularity and ranking in the crypto charts have grown significantly in only six years to become the largest altcoin and a formidable opponent to Bitcoin.

While Bitcoin has been in the crypto sector for a long time, Ethereum has shaped the future of blockchain. Bitcoin ventured into the sector to become an alternative to fiat money in being used as a medium of exchange. However, Ethereum came with a new concept, where it came to offer a better alternative to traditional banking systems. This made it possible for developers to leverage blockchain technology to offer a better, cheaper and more customer-friendly approach to banking.

The Ethereum blockchain has evolved to become a major hub for decentralized finance. This is the major selling point for Ether. Decentralized finance platforms offer services such as lending and borrowing in a decentralized manner that does not include intermediaries. Decentralized finance has boomed in recent years, and Ethereum has been a major contributor to this growth.

Ethereum is pretty much at the center of DeFi. The top 100 DeFi platforms are based on the Ethereum blockchain, and the number keeps growing. This is quite evident in the amount of money locked up in DeFi.

When DeFi became a thing back in 2017, less than $100k was locked up in DeFi platforms. At the peak of the recent crypto rally, this amount stood at $89 billion. Despite this exclusive growth, DeFi is still in its infancy. There is a lot of room for DeFi growth that will play a role in Ethereum’s long-term value appreciation.

One of the key factors that will fuel this growth is that Ethereum is halfway through in solving its scalability issues. Ethereum is in the process of a transition from a Proof-of-Work network to Proof-of-Stake. It is expected that after the transition is complete, Ethereum will be in a position to handle more transactions faster and more cost-effectively. By default, this will drive up the number of DeFi projects building on the platform.

Then there is the fact that the number of applications for DeFi is pretty much limitless. Besides, disrupting traditional finance, DeFi could have a huge role to play in the gaming industry.

A research carried out in 2018 indicated that 82% of game developers and 62% of gamers were interested in digital assets that could be exchanged in the gaming ecosystem. This is a huge market for Ethereum, and a number of such games are coming up on the Ethereum blockchain. Axie Infinity is a decentralized game where tokens with real-world value are the key drivers to the game’s economy. As such games keep coming up, the value of the Ethereum blockchain will grow as well.

For context on how big of a deal this is, there are more than 2 billion gamers in the world today. Not only are they many, but they also spend quite a huge amount of money annually. Data indicates that gamers spend over $159 billion a year, and by 2025, this amount is expected to be upwards of $256 billion a year. If decentralized gaming takes root, a lot of this money could flow into the Ethereum ecosystem. That’s a big deal to the long-term value growth of Ethereum.

Another aspect of DeFi that is set to drive up the value of Ethereum is decentralized exchanges. DEXs are a key component of the DeFi economy, and Ethereum has a huge chunk of this market too. Uniswap, the number one decentralized exchange runs on the Ethereum blockchain, and its growth has been exceptional.

As more people move to DEXs due to the security they offer, the entire Ethereum ecosystem will record exponential growth. For context on how interest in DEXs is growing, internet searches for the Decentralized Exchange keywords have risen by over 4000% since 2016.

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

But Could Ethereum Become As Big As Bitcoin?

Bitcoin has returned an insane ROI since it was launched. For the last ten years, it has returned an average of 200% compound annual growth rate. If it continues with this trend, conservative estimates indicate that one Bitcoin could be worth over $1 million by the year 2030.

The value appreciation of Bitcoin in the next 10 years will be driven by two factors, namely: adoption and scarcity.

In terms of adoption, Bitcoin will most likely stay ahead of the pack for many years to come. That’s because it has the first-mover advantage. So far, most people getting into crypto-only know about Bitcoin. It is also getting adopted by countries as legal tender, with El Salvador leading the way on this front.

Is Ethereum Better than Bitcoin

As for scarcity, there are only 21 million Bitcoins that can ever be mined. The difficulty of bringing new ones into existence is also increasing continually. With Bitcoin’s ever-rising adoption chasing a limited number of coins, this will greatly impact its long-term value growth.

At $1 million dollars a coin, Bitcoin would have a market capitalization of between $18 trillion to $19 trillion when using a total supply of anywhere between 18 and 19 million. This is attainable for crypto that just recently came close to hitting $100k.

Applying the same metrics to Ethereum, if Ethereum were to hit a market capitalization of $19 trillion, it would have to be trading at about $116k per coin. This does not sound so realistic. Most projections place Ethereum at about $15k to $20k by the year 2030. This would give it a market capitalization of about $2.3 trillion. It’s an achievable target but far off from Bitcoin’s potential market cap.

Bitcoin and Ethereum In 2030

2030 is still a long way to go, and new developments could occur in both Bitcoin and Ethereum networks. First of all, Bitcoin continues to gain major adoption from different institutional players. This adoption is expected to increase over the years, with many speculating that BTC's prices will go to higher levels.

On the other hand, Ethereum is also gaining major adoption from DeFi platforms. The regular updates on the network have attracted many developers to the network, who believe that the network will become the next big blockchain. Ethereum's focus on the future of blockchain technology is one of its strongest selling points, which could fuel a rally that will outperform Bitcoin.

The crypto sector is also highly volatile and uncertain, and there is no telling whether Bitcoin and Ethereum will become the leading blockchains a decade from now. There is still the possibility that a new blockchain network will be launched that will outperform the two by gaining more adoption and becoming prominence in the DeFi sector.

Going Beyond The Market Caps

Ethereum is more likely to be worth less than Bitcoin in 10 years. However, this does not, in any way, make it an inferior investment. Ethereum could outpace Bitcoin in gains in the short-term, as the number of Dapps building on it keep growing.

The last 6 years have shown that Ethereum’s ERC-20 standard gives it a lot of potential in the decentralized economy. This gives it as much leverage as Bitcoin gets from its scarcity. Its adoption will only get better in the next 10 years.

Ethereum vs. Bitcoin Conclusion

Ethereum has many benefits over Bitcoin. It's more versatile, has better technology, and has far more real-world applications.

Compared to Bitcoin, Ether is also relatively cheap, making it much more accessible to investors with a smaller bankroll At the current valuations, you could buy around 30 Ethereum for the price of a single Bitcoin. And given the technology's potential and impressive list of backers, investing in Ethereum now is a chance to buy low and sell high in the future.

But Bitcoin is here to stay. And although it (probably) won't revolutionise the digital space in the same way as Ethereum could, Bitcoin's established 'brand' and increasing scarcity makes it an appealing proposition for more cautious investors with an eye on the long-term.

In the end, the final decision comes down to you. What kind of investor do you want to be? Which technology excites you more? And which is currently the most undervalued?

Figure out the answer to that question, you’ll definitely know if Ethereum is a better investment than Bitcoin!

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