It’s no surprise that investors have turned to cryptocurrencies over the last few years. Digital currencies are quite profitable assets to add to a portfolio when you’re looking for ways to balance and diversify it. Bitcoin and Ethereum are the most popular choices among crypto investors because they’re the assets with the largest market capitalization in the sector. People buy Bitcoin p2p because it was the first digital currency introduced to the market. However, Ethereum has gained the public’s interest because it has more utility cases and fits more portfolios and investment strategies.
Both Bitcoin and Ethereum have their supporters, and the debate between them as a more profitable investment has been a hot topic in the sector since their launch. BTC and ETH are established digital currencies and could greatly add to any portfolio. To find the answer to the question of which one of them is a better investment, you should continue to read this article.
What is Bitcoin?
Everyone knows that Bitcoin is the de facto leader of the crypto market, and no other digital currency comes close to it. Bitcoin’s market capitalization exceeded $559 billion, while Ethereum’s is around $227 billion.
What is Ethereum?
Ethereum is the main competitor of Bitcoin and has often been named as the alternative that will one day dethrone the king of crypto. Ethereum is the leader of decentralized finance and introduced on the market the innovative concept of smart contracts that power safe financial transactions.
Also read: 5 Best Ethereum Wallets For 2023
Critical differences between Bitcoin and Ethereum
We mentioned earlier the term market capitalization, but it’s the moment to explain what it implies, in case you have just got in contact with the market. The market cap refers to the total value of a digital currency and is calculated by multiplying the total number of coins available by the present price of one coin. Therefore, you’ll notice that the market cap of Bitcoin and Ethereum fluctuates even from one day to another because the crypto market is highly volatile.
The current market caps of the two cryptocurrencies show that Bitcoin is more established than Ethereum and has a higher value than any of the other crypto assets. At present, Bitcoin accounts for more than 45% of the overall market capitalization, which makes the market quite disproportionate.
Bitcoin’s market capitalization makes it a more desirable asset among investors. In addition, it’s also less volatile than Ethereum due to its market cap, so only a major event or market move would influence its value significantly.
Another important difference between the two leading digital currencies is their supply. Bitcoin’s White Paper announced that only 21 million coins will be minted, so there will always be a limited amount in circulation. For Bitcoin to slow down the speed at which new coins are minted, it goes through halving events every four years, which allows it to manage the process of producing new coins. The last bitcoin will be mined in 117 years. Presently, Bitcoin’s inflation rate is 1.7%, and it will reach 0.1% by 2056. Crypto experts believe that it will drop to 0.000001% in 2100. Regardless of the nature of the asset, such a low rate enables it to maintain a high price because the demand is always high for commodities with limited supplies.
Ethereum has no limited supply. While the blockchain integrates a mechanism that burns coins to remove ether from circulation and manage the amount available, it technically has no limited number of coins. Therefore, Ethereum is subjected to higher inflation levels, which could negatively affect its value in time.
Decentralization and security
People want to invest in secure assets, so they’ll always keep this feature in view when reviewing commodities. Bitcoin is well known for its increased decentralization and security. Experts have labeled it the most decentralized and secure digital currency due to the thousands of worldwide miners and nodes that maintain the network active and verify transactions. Bitcoin cannot be manipulated or hacked by malicious parties. Unfortunately, Ethereum has experienced some incidents over the years, even if it’s also built on the blockchain, meaning that it’s also decentralized. However, it has another level of regulation and decentralization, and it’s more tied to its developers and founders.
Bitcoin is also older than Ethereum, so its network has been functioning for a longer period. Investors tend to add Bitcoin first to their portfolio and then purchase some Ethereum to diversify it.
Also read: Chain Broker: The Best Analytics for Cryptocurrency Investing
Bitcoin was created as a form of alternative money that can be exchanged at any time online. It has also become a store of value and digital asset, so investors can save it in their wallets and trade it when the market conditions are favorable. Due to its scarcity, it has often been named digital gold.
Ethereum has been developed to provide solutions to the limitations Bitcoin presented. Therefore, it’s quite different at its core from Bitcoin because it has introduced the concept of smart contracts, leading to the rise of decentralized finance and the Metaverse. The smart contracts add a set of conditions to asset transactions, so the parties will get a hold of the assets they want only if they meet those particular requirements.
Bitcoin functions broadly as digital money, while Ethereum is a complex network built on the blockchain that has numerous utility cases and continues to expand them.
Bitcoin and Ethereum have been created with the help of blockchain technology. Still, Ethereum’s network is more robust and advanced due to the numerous upgrades the ecosystem went through over the years. Ethereum’s developers and programmers are constantly working on upgrades to transform the network into an eco-friendly, affordable, and fast blockchain. The latest updates boosted Ethereum’s transaction speed, security, and accessibility.
Which one to pick?
Both cryptocurrencies deserve a spot in your investment portfolio, as it’s important to diversify it with assets from diverse categories. Besides the two cryptocurrencies, you should also look for other digital tokens with unique utility cases.