It’s time to settle this age-old crypto debate.
The debate between Bitcoin (BTC 3.12%) And Ethereum (ETH 1.15%) as better investing has been a hot topic in the cryptocurrency community for years. Both are popular and established cryptocurrencies, but there are key differences between them that make Bitcoin a best investment. The reason for this belief can be boiled down to three simple reasons.
![Two standoffs.](https://g.foolcdn.com/image/?url=https%3A%2F%2Fg.foolcdn.com%2Feditorial%2Fimages%2F726938%2F2-arms-wresting-strong-v-weak.jpg&op=resize&w=700)
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1. The difference in market capitalization
Market capitalization, or “market capitalization,” refers to the total value of a company or asset. In the case of cryptocurrencies, it is calculated by multiplying the total number of coins in circulation by the current market price of each coin. As of April 1, 2023, Bitcoin had a market capitalization of over $545 billion, while Ethereum's was just under $220 billion.
This essentially means that Bitcoin is currently a more established asset than Ethereum and represents a disproportionate amount of value across the entire crypto asset class. Currently, Bitcoin represents more than 45% of all cryptocurrency value.
Its higher market capitalization indicates that it enjoys greater adoption and trust among investors. Additionally, this suggests that Bitcoin is less volatile than Ethereum, as it would take more money to move its price significantly.
2. Increasing scarcity
One of the most significant differences between Bitcoin and Ethereum is their offering. Bitcoin has a hard cap of 21 million coins, meaning there will never be more than 21 million bitcoins in circulation. Currently, there are around 19.3 million in circulation, with the remaining 1.7 million remaining to be exploited. Better yet, these remaining 1.7 million bitcoins will be released at a decreasing rate over the next 117 years until the last bitcoin is mined.
Currently, the Bitcoin inflation rate is at least 1.7%. However, due to the gradual decrease in the rate of new coin creation, it is estimated that by 2056 this number will fall below 0.1%. By 2100, the Bitcoin inflation rate will be around 0.000001%. Regardless of the asset, such a low inflation rate helps ensure that prices not only hold steady but rise as demand competes for more limited supply.
Ethereum, on the other hand, does not have a hard cap. Although it has a mechanism known as burning to remove ether from circulation, there is, technically, no overall limit on the number of ether that could enter the market. Unlike Bitcoin, this means that Ethereum is subject to unknown levels of inflation, which can decrease the value of each coin over time.
3. Decentralization and security
Additionally, Bitcoin has a better track record when it comes to security and decentralization. Bitcoin's blockchain is the most secure and decentralized of all cryptocurrencies, with thousands of nodes and miners around the world helping to verify transactions and maintain the network. This makes it less vulnerable to hacking or manipulation than Ethereum, which has seen several high-profile security incidents in the past. Additionally, Bitcoin's decentralized nature means it is not subject to the same level of centralization or regulation as Ethereum, which has been criticized for being too closely tied to its founders and developers.
Additionally, Bitcoin has a more established and secure network than Ethereum. The Bitcoin network has operated securely for over a decade, and its underlying proof-of-work technology has proven reliable and resistant to attacks. Ethereum, on the other hand, has had security issues in the past, including a major hack in 2016 that resulted in the loss of ether worth millions of dollars. Although Ethereum's security has improved over time, it still lags behind Bitcoin in terms of reliability and security.
Keep it simple
While Ethereum deserves a place in your portfolio, Bitcoin offers investors a safer and more reliable option. Probably Bitcoin's biggest advantage over Ethereum is its simplicity. Bitcoin's value proposition is clear and easy to understand: it is a highly decentralized and secure digital store of value that provides reliability to its holders.
Ethereum, on the other hand, has a more complex value proposition related to its smart contract functionality and decentralized applications. While this complexity may attract some investors, it also makes Ethereum more difficult to understand and evaluate as an investment, as many of these use cases are in their early stages.
For investors who want to keep it simple and invest in cryptocurrency, look no further than the original digital asset, Bitcoin.