Could Ethereum Have A Larger Market Than Bitcoin？

【TR; DR】

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Much speculation has occurred throughout the history of the cryptocurrency market whether Bitcoin will ever be superseded by another currency. As the likes of Ethereum and BNB have gouged their way into the top five， Bitcoin has regularly been challenged by the significant growth witnessed by either - particularly Ethereum.

Across several years， Ethereum has grown to become one of the most prolific projects within the cryptocurrency marketspace， soaring to an unprecedented all time high of $4,891.70 in November of 2021， as the remainder of the market bullishly explored new price discovery zones. Layer One technology pioneered by Ethereum has witnessed rapid development as new blockchain technology emerges into public consciousness， whether it be NFTs or the budding ecosystem of prolific projects， Ethereum has often carried the torch.

Yet Ethereum has often fallen short of competing with the most powerful cryptocurrency， whether this be in terms of global adoption and prevalence, or global market cap - yet an analyst from the banking giant Morgan Stanley has hypothesised that Ethereum may eventually amass a larger market than Bitcoin.


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How Could This Happen?

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When it comes to cryptocurrency， typically those who are not well versed with the marketplace have a tendency to refer to investing in any cryptocurrency as ‘investing in Bitcoin’ solely. Whether this be due to an increased level of exposure or the price highs witnessed by Bitcoin， it is undeniable the significant global reach of this asset. Whilst this has remained commonplace for several years， a recent report seen by Barron’s， Morgan Stanley analyst Denny Galindo argued that Ethereum has now grown in prevalence， to the point in which it is distinguishable enough from other cryptocurrency assets， including Bitcoin， to those not well versed in the crypto world.

With Galindo reporting that Ethereum has now developed itself into an entirely separate asset class from Bitcoin， he also remarked upon the way in which Ethereum has now developed synonymy with a more diversified range of economic activity than Bitcoin. Bitcoin is typically associated with the insurgence of cryptocurrency， yet Ethereum has now evolved to accommodate a repertoire of economic capabilities， including DApps and NFTs - which has established the growing global prominence of the asset.

However， this has raised questions in regards to whether Ethereum could ultimately out perform Bitcoin - to which Galindo states is highly plausible.

As the number of use cases of Ethereum accelerates， Galindo remarks upon the growing dominance of Ethereum within the blockchain technology space and how this could ultimately carve out a place for Ethereum in a majority of personal and institutional portfolios. In support of his former statement， Galindo itemises the cases for and against Ethereum’s role within a majority of asset portfolios， emphasising how Ethereum’s ‘big market for DApps, has more potential utility, and therefore a potentially bigger market, than Bitcoin’.

Whilst Ethereum is diversifying the capability of blockchain technology， Galindo also reported that Ethereum’s steady integration with traditional financial markets may set it apart further from Bitcoin， particularly as Ethereum’s correlation with the stock market is nearly double that of Bitcoin.

With a 0.70 correlation between Bitcoin and Ethereum since December 2018， Ethereum has since gone on to develop a correlation with the S&P 500 at 0.26， whilst Bitcoin only retains a 0.14 correlation with the S&P 500. Galindo remarked that ‘if these correlations hold, replacing some Bitcoin exposure with Ether might actually make a portfolio more correlated to equities’.

Despite his report into Ethereum’s growing utility and potential overtaking of Bitcoin by market size， Galindo did not provide an answer as to whether Ethereum should be purchased. However， he conclusively stated that ‘crypto is here to stay’.

How is Ethereum Currently Performing?

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In light of the current bear market， Ethereum has bled red alongside many other cryptocurrencies， travelling down a trajectory littered with red candlesticks， landing it to a current valuation of $2,629.95. However， despite its current downwards spiral， Ethereum saw its current all time high in November of 2021， where it touched $4,891.70 and appeared to be clawing its way to $5,000 following a bullish run that saw it trundle over immense green mountains and continue soaring. However， as December loomed closer， Ethereum began to falter， slipping downwards into a spiral that has since led it to lose 46.11% of its all-time high value.

As the bear market continues， little certainty remains about when the next bull run or horizontal price movement will occur. Yet， as Ethereum’s highly anticipated ’Ethereum 2.0‘ update looms closer， this monumental upgrade could redefine the course of Ethereum’s activity.

With the intention of changing the Ethereum infrastructure to a proof-of-stake system， this significant upgrade has been on the roadmap since the asset’s inception and is set to unlock a new consensus mechanism， as well as introducing sharding as a scaling solution. In turn， the current Ethereum chain will act as a Beacon Chain and serve a primary function as a settlement layer for smart contract interactions on other chains.

However， amidst the growing anticipation for the update， Ethereum founder， Vitalik Buterin， unveiled the delay of the ’Arrow Glacier‘ update to June 2022 - yet to soothe the blow， Buterin also emphasised that these ’optimistic rollups‘ and ’Zk-rollups‘ that will play a vital role in shaping the future of the network.

Whilst it is not yet certain when Ethereum 2.0 will be integrated into the Ethereum network， it can be ascertained that this can drastically reshape the future of Ethereum as a whole and could potentially remap the trajectory of the cryptocurrency market - with Ethereum as a worthy contender to Bitcoin.



Author：Matthew W-D, Gate.io Researcher
*This article represents only the views of the researcher and does not constitute any investment suggestions.
*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all other cases, legal action will be taken due to copyright infringement.

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