Ethereum: A Better Buy Than Bitcoin?

09 Apr, 2021
Ethereum: A Better Buy Than Bitcoin?

What’s the bigger story in the crypto market today?  Bitcoin pushing $60,000?  Tom Brady’s NFT platform?

It’s Ethereum.  While it may not be grabbing all the headlines, this workhorse of a digital platform and its Ether (ETH) coin are turning heads. And guess who is paying attention?  Those market movers, the institutional investors who ignited the current Bitcoin frenzy.

Ethereum is the digital network that powers most of the Decentralized Finance (DeFi) and Non-Fungible Tokens (NFTs) in the crypto universe.  Like riding the subway, you’re got to pay to jump on the Ethereum network, and payment can only be made in Ether.

The coin, which was trading at $729 US on January 1, is up more than 180% this year, reaching an all-time high of more than $2152 last week. With a market capitalization of more than $239 Billion, ETH maintains the number two position on the crypto charts.

What makes Ether so attractive?

“Any company hoping to use the Ethereum platform for internal processes such as contract management, collateral allocation or yield optimization, or for client-facing services such as trading, lending or insurance, will need a steady supply,” CoinDesk aptly explains.

“Contracts are the connective tissue of the world – sales contracts, college acceptances, employment offers, insurance policies, medical prescriptions, NDAs, ISDA agreements, etc. Yes, Earth runs on contracts (not on Dunkin’),” said Andrew Keys, managing partner at Digital Asset Risk Management Advisors (DARMA) in his 2020 year-end predictions. “Ethereum allows contracts to go truly digital. The digitization of the contract is the digitization of the global economy, which has been valued at an estimated $270 trillion (compared to the $18 trillion market cap of gold that bitcoin stands to capture). Ethereum has the opportunity to upgrade entire economies, not just one asset class.”

While Bitcoin is increasingly seen in the financial world as a store of value or “digital gold,” Ether proves that digital currencies can offer tangible outcomes for the organizations that buy them.

And buying they are. But who?  “It’s entirely possible that big institutional investors already own Ether but haven’t made it public yet,” CoinTelegraph reports. “Tesla did just that, only announcing its Bitcoin investment roughly a month after making the move. With Grayscale continuing to grow its Ether trust and large corporations continuing to stock up on Bitcoin and Ether, it’s clear that institutional money is one of the factors behind the latest price rally.”

Crypto asset manager Grayscale recently upped its ETH holdings to more than 3.1 million, as CEO Michael Sonneshein noted growing interest among institutional investors.

Dallas Mavericks owner Mark Cuban recently revealed his digital portfolio includes a significant share of the coin as he sees the tremendous influence of the Ethereum network. Telling CNBC that he views the productive Ethereum network as more “life-like,” he thinks Ether is “the closed we have to a true currency.”

“I think the applications leveraging smart contracts on Ethereum will dwarf bitcoin,” he also remarked in a recent interview with journalist Laura Shin.

Amazon bolstered confidence in the future of the network with its recent announcement that Ethereum is now available on the Amazon Managed Blockchain via an API, which it calls a “scalable, highly available, and fully managed Ethereum service.”

The City of Miami is proving the potential of Ethereum to transform municipal operations. Mayor Francis Suarez, who is working hard to position the city as a major crypto hub, recently announced a new collaboration with Ethereum creator Vitalik Buterin that is focused on city services.

"We're trying to come up with a project that goes through the foundation and directly with Ethereum that we can do with the city," Suarez said on The Scoop Podcast. "We want the city directly involved in a way that demonstrates the applicability of the software so that we can continue to provide better services for our residents."

On the flip side of all the positive momentum for Ethereum, it should be noted the network has had its share of challenges.  Congestion and high “gas” prices have troubled the network in the past year. However, a new upgrade, which was started in December, it designed to streamline the network and reduce transaction fees.

And while, unlike Bitcoin, more Ether can be issued at any time by the network, there is currently a supply concern.

“ETH whales are accumulating the digital asset, and its supply at major exchanges is plunging,” reports Finance Magnates, noting that data shows an estimated 68% of the total supply is in the hands of whales.

This shouldn’t surprise anyone who has been following Ethereum. “In 2020, the world started to understand the intrinsic value of bitcoin as “digital gold,” Keys said. “In 2021, we will witness the same understanding of Ethereum as “digital oil.”

“Ethereum will solidify its place as the future substrate of the global digital economy by underwriting the world’s contracts” he predicted.  Which could very well be why Ethereum could be the better buy than Bitcoin.

Joyce Pavia Hanson