According to CoinShares digital asset fund flows weekly report, Ethereum achieved its highest market share last week. It peaked at nearly 27% of all investment products with institutions adding more than 63% of inflows into Ether products. This represents $46.8 million of the total. The report also noted that May is the first month in which investment volume from institutional investors into Ether has outpaced that of Bitcoin. It then begs the question, why are investors dumping bitcoin for Ether?
Ether (ETH), the native cryptocurrency of the Ethereum network, is arguably the second most popular digital token after bitcoin (BTC). In terms of market capitalization, Ether comes second with a total market capitalization of $278,684,525,124. In terms of market dominance, Ether also comes second with a market dominance of 18%. Ether and Bitcoin are very similar when looking at the general properties of the coins. For instance, they are both digital currencies traded via online exchanges and stored in various types of cryptocurrency wallets. They are both decentralized tokens which means that they are not issued or regulated by a central bank or other authority and they both make use of the distributed ledger technology known as the blockchain.
With all the similarities mentioned, the major difference between the top 2 cryptocurrencies lies in their use cases. Bitcoin has been regarded as a store of value because of its limited supply. Bitcoin has a maximum supply of 21 million units and investors see it as “Digital Gold,” but besides the functionality of facilitating cross-border payments, there isn’t much use case for Bitcoin. In fact, there are many cryptocurrencies that facilitate cross-border payments more efficiently and effectively than Bitcoin.
Ethereum’s network, on the other hand, opens up possibilities beyond cross-border payments. Ethereum enables the deployment of smart contracts and decentralized applications (DApps) to be built and run without any downtime, fraud, control or interference from a third party. Ethereum comes complete with its programming language which runs on a blockchain, enabling developers to build and run distributed applications. The native cryptocurrency Ether is used mainly for two purposes; it is traded as a digital currency on exchanges in the same fashion as other cryptocurrencies and it is used on the Ethereum network to run applications.
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Because of the endless possibilities that go beyond anonymous cross-border payments, investors are starting to realize that Ethereum is worth holding on to for the longer term.
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Other differences that make Ethereum more valuable than Bitcoin
While bitcoin was created as an alternative to national currencies and thus aspires to be a medium of exchange and a store of value, Ethereum was intended as a platform to facilitate immutable, programmatic contracts, and applications via its currency. With the current clampdown on Bitcoin by regulators all over the world, it becomes very difficult to see Bitcoin as an alternative to national currencies. Although El Salvador, home to 6.5 million people, just passed Bitcoin as a legal tender making the small Latin American country the first nation to do so, it is quite unlikely that other countries would follow suit.
Ethereum is switching from a Proof of Work (PoW) to a Proof of Stake (PoS) consensus mechanism which is more environmentally friendly. The recent actions of Tesla boss, Elon Musk who stopped Bitcoin as a means of payment for Tesla cars because of environmental concerns, has made Bitcoin less appealing to institutional investors. This because the PoW consumes a lot of energy and the type of energy consumed is not renewable which is harmful to the environment.
Lastly, in terms of transaction processing speed, Ethereum beats Bitcoin. An Ethereum based transaction is confirmed within seconds of its execution while a Bitcoin-based transaction takes minutes to confirm.
It should come as no surprise that investors are finally seeing the light when it comes to actual use cases of cryptocurrencies. As with companies, an investor would invest in one that is performing well with room for growth. This is what is happening with Bitcoin which is now regarded as the King of meme coins by many analysts.
Bitcoin is trading at $37,150, up 4% for the day while Ethereum is down 0.63%, trading $2,400 for the day, as of the time of writing this report.