In the crypto business, one and two slots in the market cap rankings have remained unchanged for what seems like an eternity. With new positive storylines emerging, investors flock to buy Ethereum. This has left many wondering if it might ultimately overtake Bitcoin in terms of market capitalization.
The market valuation of Ethereum overtaking that of Bitcoin would be an unprecedented moment in the cryptocurrency sector. In this article, we examine how Ethereum can overtake Bitcoin in 2022 and what it means for investors who buy Ethereum.
Metrics of market capitalization
The market capitalizations of Ethereum and Bitcoin are currently 51.9 percent different, according to data. They will have the same market cap when this hits 100%.
This means that Ethereum will have to virtually double its present market value in order to keep up with Bitcoin’s rising price movement. These two measures are still important since they can indicate whether or not investors buy Ethereum or if it is becoming more widely used in the cryptocurrency business.
Other indicators, like active addresses on each blockchain and aggregated trade volume on exchanges, are also catching up to Ethereum.
Widespread adoption and application
While many investors are keen to buy Ethereum, another important issue is what drives the price of any asset, as well as its usability and use-cases.
Due to its scarcity, first-mover advantage, brand awareness, and adoption as a store-of-value for both retail and institutional users, Bitcoin has remained the most valuable asset by market capitalization. Since its introduction in 2009, Bitcoin has held the top rank and hasn’t faced any meaningful competition until inverse price activity in June 2017 pushed the ratio to an all-time high of 82 percent.
The meteoric rise of NFTs and DeFi sparked a flood of investment into Ethereum, prompting some industry observers to predict that Ethereum will overtake Bitcoin by the end of 2022. Ethereum’s architecture and industry adoption have helped it establish itself as the top blockchain, and its imminent transition to a proof-to-stake network is fuelling even more conjecture about its capabilities and encouraging more investors to buy Ethereum.
With both assets in the spotlight more than ever, the amount of acceptance either asset receives from outside markets could now be the deciding factor in ‘The Flipping.’ The announcement of partnerships, investments, and ‘mainstream’ adoption of the asset through payments or other means has influenced market behaviour in both assets in the past.
The future cryptocurrency
NFTs, Decentralized Autonomous Organizations (DAOs), Decentralized Finance (DeFi), and the metaverse have all gained traction in 2021. All of these cryptocurrency applications prefer Ethereum to Bitcoin, and Ethereum is expected to gain traction in 2022 as well.
In the previous few months, one virtual world, Decentraland, has grown its user population tenfold, reaching 300,000 monthly active users. Many popular virtual world cryptocurrencies, such as Decentraland’s MANA and Sandbox’s SAND, are based on the Ethereum blockchain, demonstrating how Ethereum has already established itself as a metaverse foundational platform. It’s critical for the blockchain’s next version.
Versatility
The original promise of Bitcoin was that it would be a digital money that was independent of any central government or other agency. While Bitcoin has grown in popularity as an investment, it has taken longer to acquire traction as an alternative currency. Approximately 15,000 establishments across the world already accept Bitcoin. That may seem like a lot, but it’s only approximately 1 in 10,000 of the world’s hundreds of millions of businesses.
Although Ethereum is not as extensively recognized by real-world businesses as Bitcoin, it is the market leader in the areas where cryptocurrencies are gaining traction, such as the metaverse, NFTs, and other real-world applications that propel investors to buy Ethereum.
A higher number of developers
Developer interest is typically a leading predictor of where technology is headed in the tech sector. In the long term, the technology or platform with the most developers wins, because attracting developers leads to a virtuous cycle of attracting more, which leads to greater platform advancements. It’s a huge network effect that creates a large economic moat.
When it comes to developers working on its platform, Ethereum is the leader in crypto. As of the third quarter of 2020, Ethereum has approximately 2,300 developers on average, compared to less than 400 for Bitcoin, with more than 300 new developers joining Ethereum each month.
Ethereum will be far more nimble and better able to adapt to new use cases than Bitcoin because it has a much larger development base. Its engineers are now working on the Eth2 upgrade, which will make Ethereum more resilient, safe, and scalable, allowing it to support thousands of transactions per second.
