Could Ethereum overtake Bitcoin as the world’s leading cryptocurrency?
ETHEREUM investors will be hoping the cryptocurrency one day overtakes Bitcoin as the world's leading one.
We asked cryptocurrency experts whether it's likely to happen - and explain what investors need to be aware of.
Ethereum was released in 2015 and is currently the second largest cryptocurrency behind Bitcoin, which launched in 2009.
The former was founded by eight people, one of which is 27-year-old cryptocurrency "celebrity" Vitalik Buterin.
As well as being used as a cryptocurrency, developers can also build applications and run smart contracts on Ethereum.
In comparison, Bitcoin is more focused as a digital store of value.
5 risks of crypto investments
BELOW we round up five risks of investing in cryptocurrencies.
- Consumer protection: Some investments advertising high returns based on cryptoassets may not be subject to regulation beyond anti-money laundering requirements.
- Price volatility: Significant price volatility in cryptoassets, combined with the inherent difficulties of valuing cryptoassets reliably, places consumers at a high risk of losses.
- Product complexity: The complexity of some products and services relating to cryptoassets can make it hard for consumers to understand the risks. There is no guarantee that cryptoassets can be converted back into cash. Converting a cryptoasset back to cash depends on demand and supply existing in the market.
- Charges and fees: Consumers should consider the impact of fees and charges on their investment which may be more than those for regulated investment products.
- Marketing materials: Firms may overstate the returns of products or understate the risks involved.
Whether you've already invested or you plan to, be aware that making money through cryptocurrencies or other investments is never guaranteed.
Cryptocurrencies are especially volatile, so their values can crash with little to no notice.
In other words, it's important to not put in more cash than you can afford to lose and to never invest in something you don't understand.
There's also no guarantee that you can convert cryptoassests back into cash, as it may depend on the demand and supply in the existing market.
How much is Bitcoin and Ethereum worth?
The value of Bitcoin is currently sitting at $39,552, down by almost 6% over the past 24 hours, according to CoinMarketCap.
Its market value is a whopping $752billion.
In comparison, the price of Ethereum is at $2,595 at the time of writing.
Its value is largely unchanged over the past 24 hours, but Ethereum has a lower market value of $303billion.
Could Ethereum overtake Bitcoin?
It's difficult to say for certain, but it's possible Ethereum one day overtakes Bitcoin as the dominant crypto, according to Goldman Sachs.
Last month, the bank said Ether "looks like the cryptocurrency with the highest real use potential as Ethereum, the platform on which it is the native digital currency, is the most popular development platform for smart contract applications", reports Business Insider.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, added to The Sun: "Bitcoin may boast the strongest brand in the crypto world but it doesn’t provide the same opportunities as a launch pad for decentralised apps."
"However, the currency is still wracked with volatility and this makes it unreliable as a store of value."
Ethereum also has "a long way to go" to overtake Bitcoin in terms of price, Simon Peters, cryptoasset analyst at eToro, said.
However, just looking at it in pure price terms may be too simpistic.
Mr Peters added: "As the number of projects on Ethereum grows and more transactions occur, the demand for Ethereum could outstrip supply which would cause an appreciation of the token price."
Recent date by Coinbase also found that trading volumes for Ethereum reached $1.4trillion in the first half of 2021 - an increase of 1,461% compared to the same period in 2020.
In comparison, $2.1trillion worth of Bitcoin was traded - a lower increase of 489%.
Mr Peters said: "It’s the first time Ethereum has beaten Bitcoin for trading volume growth in a sustained period.
"At the same point in their life cycles - six years in, Bitcoin had a market cap of around $5billion, whereas Ethereum has a current market cap of $300billion.
"So, you could argue that Ethereum is growing at a much faster pace.
"That being said, with a nearly $37,000 price difference, it still has a long way to go to catch up.”
The values of Bitcoin and Ethereum fell in May after China announced a further crackdown on cryptocurrencies.
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