The Ethereum (CRYPTO: ETH) price is up nearly 9% since this time yesterday and more than 15% over the past week.
Ethereum is currently trading for US$4,174 (AU$5,564). That gives the world’s number 2 crypto a market cap of some US$492 billion, according to data from CoinMarketCap.
The recent run of gains also sees the token closing in on its all-time highs of US$4,362, set on 12 May this year.
With Bitcoin (CRYPTO: BTC) having just smashed through its own previous record to reach new all-time highs this morning (details here), investors may be wondering whether Ether will be the next major token to break into new highs.
How Ethereum stacks up to Bitcoin
To gain an insight into the different investment thesis driving the resurgent Bitcoin and Ethereum rallies, The Motley Fool turned to Darren Abrams, co-founder and managing director of digital currency provider Aus Merchant Investments.
Abrams told us that, “Bitcoin is to gold, what Ether is to equities. Both have unique pros and cons and both have a place in the larger digital asset ecosystem.”
Bitcoin and gold are both forms of ‘hard’ money and the central investment thesis for both assets are that they are an effective hedge against inflation… Unlike the supply off fiat currencies… the supply of both Bitcoin and gold are finite… It’s also censorship resistant, as it’s maintained by an international, decentralised network of computers, all of which have a copy of that same distributed ledger.
A core difference between Bitcoin and Ethereum, Abrams added, is that, “Bitcoin has limited utility outside of savings and peer-to-peer remittance.”
On the other hand, “Ethereum and its native token Ether are far more than a form of digital money. Ethereum’s ability to facilitate smart contracts is a paradigm shift from Bitcoin.”
Ethereum is a platform, upon which a multitude of decentralised applications are built. These decentralised applications or ‘dapps’ as they are often referred to, are part of a revolution in the computing space known as web 3.0… While Bitcoin is central to the Web 3.0 movement, it’s use case is limited. Ether, and other smart contract blockchains have an almost infinite number of use cases.
Dapps built on Ethereum, Abrams explained, “allow users to: borrow, lend, swap, utilise derivatives, and earn yield on their digital assets in a permissionless manner”.
Atop that, “Ethereum by holding the Ether token, affords investors indirect exposure to all dapps built on its blockchain.”
First mover advantages
Abrams told The Motley Fool he believes, “Both digital assets will be a useful hedge against inflation and therefore an effective store of value. However, Bitcoin’s first mover advantage and simple value proposition means that it will continue to dominate the attention of investors seeking a hedge against inflation.”
As for Ethereum, he said, “While Bitcoin has the first mover advantage in the inflation hedge use-case, Ether has the first mover advantage in the smart contract ecosystem.”
However, Abrams added this note of caution for the Ethereum outlook:
While Ether’s first mover advantage should not be overlooked, Ether has more direct competitors than Bitcoin. Post the 2017 ICO [initial coin offering] craze, there have been very few blockchains trying to rival Bitcoin’s dominance as a mode of peer-to-peer value transmission and none have succeeded. Conversely, there are new smart contract platforms that have different value propositions to Ethereum, which are unique to the relevant blockchain’s technology stack.
How has the Ethereum price been performing?
One year ago, Ethereum was trading at US$413. At the current Ether price of US$4,177, that represents a gain of 911%.
That’s more than double the 400% price gain posted by Bitcoin over the past 12 months.
Will that trend continue over the next months or will Ethereum return to lows of US$1,785 posted on 20 July, or even lower?
Only time will tell.