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Who's The King? Bitcoin Vs. Ethereum

BTC vs. ETH: Let the Numbers Decide, Monetary Policy & Fixed Supply, Portfolio Recommendations, The Adoption of Bitcoin vs. the Internet

February 02, 2021

The Coin Times: Bitcoin, Ethereum, DeFi, Blockchain, Web 3.0, and the future of moneyPublished Tuesdays and Thursdays on Substack and TelegramTuesday, February 2, 2021 | Issue 7 | 560 Subscribers

Who’s The King: Bitcoin vs. Ethereum - Let the Numbers Decide

Who’s The King? Bitcoin vs. Ethereum… The Analysis

  • If you can understand this issue, and invest appropriately, you are likely to do very well this decade with your investments…

  • Friends were asking me which core blockchain tech is most likely to appreciate most in value over the next 10 years between Bitcoin and Ethereum. I decided to create the above quantitative analysis and let the numbers speak for themselves.

  • The above chart shows how across 23 key metrics, Ethereum wins on 18 of them, including very important ones like speed, # of owners, usage, developers, return, and dApps. Read every the below and you’ll understand even more...

Here’s my written analysis…

  • What’s happening with ETH 2.0 over the next 24-36 months is very important to grok.

    • In summary, Ethereum (the distributed world computer that enables anyone to use distributed ledger blockchain tech to add trust into a system) is getting upgraded to a much faster technology (using sharding)

    • Ethereum is also fixing its monetary policy through Ethereum Improvement Protocol (EIP) 1559 such that by 2023 the annual supply of Ethereum will go up by about 0.6% per year (vs. 1.8% per year for Bitcoin).

    • Imagine a world in which we rebuilt the entire banking system and financial system on top of Ethereum to be transparent, equitable, and trustable. Oh wait, this is what is actually happening. Pretty cool for those who see it early!

  • So far, Bitcoin has served as a “store of value” while Ethereum has served as the “blockchain platform upon which everything else is built.”

    • Bitcoin has ossified, older blockchain technology that is harder to upgrade.

    • Ethereum is newer and more innovative and allows much more to be done on its blockchain (it is Turing complete and enables smart contracts).

  • If EIP 1559 and ETH 2.0 go forward as planned (both are in motion), by 2023 the annual supply increase of Ethereum will be lower than the annual supply increase of Bitcoin, making Ethereum the more deflationary blockchain (which is very good for holders of ETH)

  • Bitcoin maximalists argue that “because Bitcoin has a fixed max supply of 21 million coins, it will appreciate in value more than Ethereum.”

    • However the annual supply of Bitcoin is increasing at 1.8%, while the ETH 2.0 annual supply increase will be substantially less than that (around 0.6%, or potentially lower depending on how EIP-1559 is finally implemented to burn transaction fees).

    • If the Ethereum community actually does succeed in achieving a lower supply increase than Bitcoin (and a higher Stock to Flow ratio), I expect Ethereum to edge out Bitcoin in market cap this decade.

  • Ethereum already wins on technology, developers, speed, apps, and investment return. If you add in winning on scarcity too, well, it’s going to be a very interesting decade.

  • It’s becoming clearer and clearer that with ETH 2.0, Ethereum will not only be many times more useful for powering the apps of the new decentralized global finance system and new decentralized internet, Ethereum will become an even better store of value than Bitcoin itself (all hail the “OG”).

    • ETH 2.0 was officially initiated on December 1, 2020 and it is in the beginning of a ~24 month upgrade process as ETH 1.0 converts into the much faster ETH 2.0 which will enable 100,000+ transactions per second instead of 15.

  • Per cryptographic expert Justin Drake, Bitcoin’s cryptographic algorithm (SHA-256) is not quantum-computer resistant. -- to address this, BTC itself will need to be ported over to a easily upgraded blockchain (like Ethereum) within 20-30 years. By 2050 the BTC asset will likely survive, but the Bitcoin blockchain likely won’t.

  • I’m extremely bullish on Ethereum (ETH) and Polkadot (DOT) right now.

  • Right now the Bitcoin market cap is worth 49x annualized miner revenue (Jan ‘21 x 12), while Ethereum market cap is just 15.33x annualized miner revenue (Jan ‘21 x 12), making Ethereum look like a better investment from a likely 10 year return standpoint.

  • Polkadot (DOT) is an early stage Ethereum competitor created by Gavin Wood, the former CTO of Ethereum.

Tuesday News Summary

  • It’s been quite a year the last six days. The Reddit hordes discovered Bitcoin (+8.8% in last 7 days) and are now discovering Ethereum (+7.7% the last 7 days) as the real assets of value

    • They also discovered the joke cryptocurrency DOGE which has no meaningful value, no limit on the amount that can be produced, no development activity, and is highly susceptible to pump and dump schemes.

  • Elon Musk, Ray Dalio, and Mark Cuban have all come out as Bitcoin fans in the last week

  • Elon Musk liked the below DeFi ecosystem image on Twitter on January 29:

  • And the DeFi tokens that operate within the new Binance Smart Chain Ecosystem have done very well this week as well, including CAKE, BAKE, and BURGER (gotta love the theme)

    • CAKE rise last 7D: +130%

    • BAKE rise last 7D: +348%

    • BURGER rise last 7D: 94%

Chart Of The Day: It’s Just Like 1997… But Better...Yes, Bitcoin Is Being Adopted Even Faster Than the Internet

Key Report: Electric Capital’s Blockchain Developer Deck

Innovation is everything in a new technology that is revolutionizing the world. Here’s the free 128 slide Blockchain Developer Report from Electric Capital. If you want to see which Blockchain projects are growing and which aren’t (as part of your fundamental research into the field as you decide what to invest in), take a look.

Best Podcast Summary

  • Justin Drake is a researcher at the Ethereum Foundation and is leading the charge of the application of cryptography to Ethereum.

  • Justin walks the listeners through the user story of a user making a transaction on Uniswap, and discusses how cryptographic tricks can make the entire user process more secure and more trustless.

  • We finish with a discussion about the long term fate of the Bitcoin blockchain, and its collision course with quantum computing, which threatens to break some of the crucial features that makes Bitcoin, Bitcoin.

  • Justin provides a roadmap for the decoupling of BTC the asset from Bitcoin the blockchain, using a cryptographic two-way bridge between Bitcoin and an alternative new host blockchain, presumably Ethereum, and how BTC can upload itself to a new blockchain, and be rid of the baggage and liability of the Bitcoin blockchain.

My Crypto Portfolio Recommendations (Updated from Last Week)

Here are my big picture recommendations for anyone getting started in crypto investing (please do you own research, not investment advice).

  1. Never invest an amount you can’t afford to lose.

  2. Be careful investing on borrowed money (margin). We don’t recommend it until you’re a professional.

  1. Best bet is to buy and hold for the long term (10-15 years) and not attempt to time the market. If you are going to attempt to time the market, be very familiar with the Stock to Flow model and the timing of BTC halvings.

  2. We recommend Coinbase for those investing small amounts (<$10K) and the lower fee Coinbase Pro, Gemini, Binance, or Kraken for those investing larger amounts ($10k+).

    1. Certain tokens don’t yet trade on Coinbase. Binance has most of them.

    2. Track market caps here.

    3. You can see which blockchain tech is getting the most transactions fees here.

  3. For maximum long-term capital preservation, we recommend keeping 33% of your holding in BTC, 33% in ETH (“The Blue Chips”), and around 33% in up-and-coming blockchain tokens (<$100B market cap). For the alternative asset exposure, here’s what we like (the 10 we like the most are bolded):

    1. We like these blockchain techs: DOT, ADA, ATOM, SOL, HBAR

    2. We like these DEX Exchanges: UNI, SUSHI, 1INCH, BURGER

    3. We like these DeFi protocols: AAVE, CAKE, BAKE, COMP, SNX, YEARN, CRV, BAL, REN

    4. We like these Oracles: LINK, BAND

    5. We like these Web 3 Tools: THETA, GRT, FIL

    6. We like these Insurance Tools: WNXM

    7. We like these Payment Platforms: EGLD, XLM, CELO, XRP (still big in Japan)

The People We’re Following Closely on Twitter

If You’re Just Getting Started With Crypto, Start Here

The Coin Times: Tracking the most important blockchain stories of the 2020s including a decentralized internet and the creation of a new open global monetary system that works for everyone. As always, published for informational purposes only. Just my opinions. Not intended as financial advice. Please do your own research. Published 2-3x per week. Published by Ryan Allis.

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