Why Ethereum Is A Better Buy Than Bitcoin

Bitcoin is drawing most of the institutional attention at the moment but its top rival looks like a better buy.

Last Updated October 21st 2021

5 Min Read

Key points

Ethereum’s use cases are more versatile
Ethereum is becoming environmentally friendly
Ethereum staking is an excellent pathway to passive income

Both Bitcoin (BTC) and Ethereum (ETH) have given investors incredible returns on investment over the last 10-years.

With institutional money now taking an interest in the crypto market than ever before, these two cryptos look set for even more gains going into the future. A Bitcoin ETF was approved in the US at the end of last year, and Ethereum is available on multiple derivatives platforms globally.

However, for someone looking to maximize on gains, Ethereum comes across as a better buy than Bitcoin. Here’s why.

Versatility

Ethereum is probably one of the most versatile cryptocurrencies out there. It is one of the most complex computing systems ever built.

Like Bitcoin, Ether can be used as a way to send value. It also has an entire ecosystem of projects built on top of it.

Ethereum is used by developers looking to build cryptocurrencies for various purposes. Thanks to the ERC-20 standard, the number of projects building has been growing for years now.

The value of Ethereum became most evident in 2017 when multi-million dollar ICOs were launching on this blockchain pretty much every day.

While the ICO bubble popped and for a few years deflated Ethereum, new use cases quickly came up.

Ethereum has since become the number one platform for DeFi and NFTs. These two are a big deal and place Ethereum on course to hit levels it has never tested before. That’s because both have the potential to transform life as we know it in a lot of ways, ranging from banking to music.

For context, DeFi is changing how things like lending are done by cutting off the middleman (banks). This is opening up the benefits of the finance world to potentially billions of people who may never benefit from legacy banking.

There are many other platforms that DeFi developers can launch their projects on, but Ethereum stands out. That’s because it is the most decentralized and by extension the most secure.

Ethereum also has a whole ecosystem of projects on it, making it the best choice for DeFi projects that need to interlink with other projects to succeed.

On the NFT front, Ethereum has emerged as the king, for the same reasons that it is dominating in DeFi. There is also a good chance that it could grow exponentially in this segment of the market going forward.

That’s because NFTs are proving to be an innovative way for creatives to maximize their earnings. This explains why art, music, and even movies are now being turned into NFTs and selling for hundreds of thousands of dollars, and in some cases, millions. In essence, as the use cases for NFTs grow, so will be demand for Ether since you need it to mint NFTs.

Such versatility in use cases is not there on Bitcoin. Bitcoin was primarily designed as decentralized money for everyday payments. However, by its design, it has not performed so well in this role.

Being a deflationary cryptocurrency, people expect it to increase in value over time. As such, there is no incentive to spend it.

Another key use case for Bitcoin that has come up in recent years is that of store-of-value. While it has pretty good prospects on this front, it is still too volatile to match more established store-of-value assets like gold.

In essence, par-to-par, Ethereum comes off as a much better bet. It has real-world use cases that are diverse and growing.

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

Ethereum Is Transforming With The Times

One of the biggest criticisms that cryptocurrencies receive is that they are polluting the planet.

There is some truth to it, considering that a cryptocurrency like Bitcoin uses more energy than most countries.

In a warming world where more people can now connect human activities and climate change, this could affect Proof-of-Work cryptocurrencies adoption long term.

Ethereum is dealing with this problem by moving from a Proof-of-Work algorithm to Proof-of-Stake. Through this shift, it will be consuming less than one percent of the total energy that it consumes today.

On its part, Bitcoin continues to use Proof-of-Work, and critical voices are becoming louder by the day. For instance, energy wastage was one of the reasons that China gave for banning Bitcoin mining a few months ago.

In other major economies, like the US, legislators have also come out strongly in criticism of Bitcoin’s carbon footprint.

Looking ahead, this plays well into Ethereum’s favour especially in terms of attracting institutional money.

That’s because, in a bid to stay in the good books of their stakeholders, regulators, and society in general, most institutions are turning to environmentally-friendly investments.

In the nascent crypto market, this could see Ethereum dominate in institutional cash inflows. That’s because aside from being environmentally friendly, Ethereum has a strong use case, and is a deflationary asset.

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Ethereum Has A Passive Income Potential

There are two ways to benefit from Bitcoin. The first one is buying and waiting for it to appreciate. The second one is to trade it. Both are good strategies. For instance, anyone who bought or mined Bitcoin in the early 2010s and never sold is now a millionaire.

Similarly, anyone who has good trading skills and has capitalized on Bitcoin’s volatility over the years has made money as well.

On its part, Ethereum allows investors to profit by both HODLing and trading and much more. For instance, one can earn a passive income from Ethereum through staking.

Since the launch of Ethereum 2.0 in December 2020, the amount of Ethereum staked has shot up exponentially. To stake Ethereum, you need to buy 32 ETH, and you can earn a passive income off it in perpetuity.

This is advantageous because the compounding effect of staking rewards adds to the benefits from the value appreciation of Ethereum. It also offsets some of the losses that come with price corrections that are characteristic of the crypto market.

Since both Bitcoin and Ethereum are equally volatile, it then follows that Ethereum is a better buy than Bitcoin for anyone who wants to preserve value. You get the best of both worlds with Ethereum.