Bitcoin vs Ethereum: Which one should you buy?
Bitcoin vs Ethereum, a question many users looking to invest in cryptocurrencies ask themselves on a daily basis.
Since the emergence of cryptocurrencies, there have been around 23,000 different coins, amid which Bitcoin and Ethereum are definitely the most popular and recognized ones. For beginners who want to invest in cryptos, choosing between these two best-performing digital currencies could be a little tough.
What's the key difference between Bitcoin vs Ethereum? And which one might be the right choice to buy? In this article, we'll look at these questions as well as their historical performances.
Main Difference Between Bitcoin and Ethereum
Both Bitcoin and Ethereum are popular and established cryptocurrencies, but there are significant differences in terms of design and objectives.
Bitcoin is the first and most well-known cryptocurrency, created by Satoshi Nakamoto in 2009. The primary goal of Bitcoin is to serve as a decentralized digital currency for peer-to-peer transfer, eliminating the need for traditional financial intermediaries, resisting inflation and providing users with a decentralized means of storing and exchanging value.
The Bitcoin blockchain relies on a Proof-of-Work (PoW) consensus algorithm, where the miners verify transactions by solving cryptographic calculations and receive Bitcoin as reward. However, there is a Halving mechanism encoded in the Bitcoin software, which means the total supply of Bitcoin is limited (capped at 21 million). The scarcity and consequential high price volatility of Bitcoin has attracted investors using it as a form of 'digital gold' to diversify their portfolios and traders looking to speculate on price swings.
Ethereum, on the other hand, is a more complex platform created by Vitalik Buterin in 2015. The main objective of Ethereum is to establish a programmable blockchain platform that allows developers to build decentralized applications and decentralized financial services. Currently, most of the top Decentralized Finance (DeFi) protocols, Decentralized Applications (dApps), and Non-Fungible Tokens (NFTs) run on the Ethereum blockchain, adhering to the ERC-20 compatibility standard.
In 2022, Ethereum has achieved one significant progress in aspect of innovation: switching to Proof of Stake (PoS) mechanism. This secures the validation process of blockchain transactions according to Ether holders' stake in the Ethereum Smart Contract. It requires less computing power and thus more environmentally friendly as it doesn't reach consensus by having miners race to complete the same puzzle just like PoW.
Here are some of the main differences, in order to get an answer to the Bitcoin vs Ethereum question. But, if you need a more specific answer, we mention their historical performance.
Historical Performance of Bitcoin vs Ethereum
As a crypto market leader, Bitcoin is the one on which traders and investors look for price directions. While individual tokens like Ethereum may experience fluctuations due to news or announcements affecting their underlying supply and demand, in most cases, cryptocurrency prices tend to follow the direction of BTC. That's why this metric is important to answer Bitcoin vs Ethereum.
On December 17, 2017, the price of BTC skyrocketed to nearly $20,000, triggering a frenzy of price increases in other cryptocurrencies, commonly referred to as altcoins. On January 13, 2018, ETH reached its peak at $1,432.88. This brought greater public attention to the cryptocurrency industry and piqued the interest of retail investors and traders hoping to profit from price volatility.
Subsequently, a massive sell-off resulted in the bitcoin price falling from $20,000 to around $3,000, pulling down altcoin prices and causing many observers to assert that cryptocurrencies are a scam or a bubble. The market hit its bottom during the financial asset sell-off related to the COVID-19 pandemic in March 2020.
However, cryptocurrency prices led by BTC rallied towards the end of 2020 and took off in early 2021, reaching fresh highs in April and May. The potential for returns in excess of 1,000%, the emergence of DeFi and other dApps, as well as NFTs, attracted the interest not only of retail investors, but drove up the participation of institutional investors in cryptocurrency markets. The involvement of major investing institutions has contributed to the growing acceptance of cryptocurrencies as legitimate investments.
In 2022, the prices of cryptocurrencies, including Bitcoin and Ethereum, have fallen greatly and the markets have struggled to maintain attempts to break through resistance levels.
Bitcoin or Ethereum: Which One Should You Buy?
In fact, Ethereum and Bitcoin can be regarded as two completely different products. Bitcoin has long been used as an alternative to conventional currencies like gold, often as a medium of payment for transactions and a store of value. The purpose of Ethereum is to create an application development platform based on smart contracts and decentralized technology, so that developers can build and run distributed applications. This is the main difference to answer the Bitcoin vs Ethereum question.
The decision on whether to buy Bitcoin or Ethereum depends on your personal preference and investing goals, among other factors. Generally, in terms of market price and market capitalization, Bitcoin still remains ahead of the thousands of other cryptocurrencies in the market. With its exceptional payment capabilities, the adoption of BTC is increasing in various countries and regions around the world. So if you're looking for a cryptocurrency alternative to fiat currency, and as long as you're prepared to deal with the immense volatility, Bitcoin will be a great choice. On the other hand, if you're interested in more than just cryptocurrency, Ethereum might be a good investment option for you.
At last, we sincerely recommend that you always carry out your own research and take into account the latest trends, news, technical and fundamental analyses as well as expert opinions before take any investment decisions. But hopefully your question about Bitcoin vs Ethereum has been answered.
And the most important thing is: Never invest more than you can afford to lose.
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