For years, the world of cryptocurrencies has been dominated by two coins, bitcoin (BTC) and ethereum (ETH). In terms of marketcap, these two coins are the two pillars of the entire cryptocurrency world. According to some experts, this will continue to be the case for the time being.
Despite the fact that it is precisely these two cryptocurrencies that have been at the top of the pyramid for years, bitcoin and ethereum are still quite different, JPMorgan notes. The US financial giant argues that bitcoin is more of a commodity like gold, while ethereum is “the backbone of the cryptocurrency economy.”
It is for this reason that JMorgan even claims that ethereum will overtake bitcoin in the long run. According to the bank, a share in ether, the token of the Ethereum network, has a greater value in the long term than a share in bitcoin.
For the time being, the price of bitcoin is still a lot higher than ether. However, in recent weeks, ether has seen quite a bit of upward price action. Since April 1, the price of ether has risen by more than 40% and set a new price record yesterday. The price of bitcoin, on the other hand, has fallen over 7% in the same time!
JPMorgan gives a number of reasons why they believe that ether will have to overtake bitcoin in the long run. Last week, a veritable liquidity crisis occurred with regard to bitcoin. There were simply not enough bitcoins in circulation anymore and this caused major problems, especially in the derivatives market. 23% of long positions on bitcoin were liquidated. This while only 17% of the long positions on ether were liquidated.
According to JPMorgan, the resistance that ether offered to the major problems surrounding liquidity compared to bitcoin is the main reason why ether is more attractive in the long term than bitcoin.
The second reason, according to JPMorgan, is the fact that ether is not dependent on the derivatives market to the same extent as bitcoin. Because bitcoin is less liquid, relatively much is traded on the derivatives market, for example with leverage. Ether has this liquidity problem much less, therefore the dependence on the riskier derivatives market is lower.
As a final reason, JPMorgan gives that there is fundamentally more demand for ether than for bitcoin. Because a large number of Decentralized Finance (DeFi) projects use the Ethereum network, the demand for ether will always remain high.
In short, the view of the major bank JPMorgan is clear and poignant. It’s ether, not bitcoin, which can be a more profitable investment in the long run. Who knows, maybe we will see more companies in the future that buy ether instead of bitcoin. Which is now almost the order of the day.