Bitcoin (BTC) and Ether (ETH), the original currency part of Ethereum, the Ethereum blockchain technology, have become two of the most well-known coins in the crypto world.
With a market value of $440 billion, BTC still, despite its 50% decline up to July 27, trades for approximately $23,000, with an average daily trading volume in the hundreds of millions of dollars.
ETH, however, the contrary has a market capitalization of around $200 billion. It’s traded at more than $1,600 with a typical daily trading volume of tens of billions of dollars.
What Is Bitcoin?
Investors may imagine Bitcoin “either in the sense of a place to store of value, like gold or as a currency that is not sovereign that you can use to pay,” says Matt Hougan.
He is the chief investment officer for cryptocurrency ETF and index fund provider Bitwise Asset Management. He says, “when you purchase Bitcoin, you are purchasing a financial investment,” he says.
In the sense that Bitcoin is mostly an alternative method of acquiring money, as per Thomas Perfumo, crypto exchange Kraken’s chief of strategy and business operations.
Its value comes from “an extremely measured approach to decentralization and security using mining that is proof-of-work,” Perfumo says.
What Is Ethereum?
Ethereum, on the other hand, “aims to be an ‘uniform world computer’ that allows the creation of decentralized apps and other types of utility,” according to Perfumo. Simply put, Ethereum is like iOS or Android, which platform developers use to create applications, according to Merav Ozair, a blockchain specialist and professor of fintech at Rutgers Business School.
As Di Bartolomeo explains, this implies that in real life, Ethereum doesn’t “try to be nothing more than money.” Instead, according to him, it’s seeking to be the world’s first cloud-based computer.
Developers can make many things using this Ethereum platform, such as creating autonomous contracts that execute themselves, Defi-related protocols, or even stabilized coins, non-fungible tokens, or NFTs.
Ethereum performed well in the last bull market cycle because many of the things built on the platform exploded in the form of NFTs, DeFi, and stablecoins, says Hougan.
Ethereum could grow into an operating system with no centralization that anyone familiar with the protocol could build upon, Ozair adds.
Why is the Cost of Ethereum Not More Expensive Than the Price of Bitcoin?
The primary reason for the greater Bitcoin price is that Bitcoin is one of the initial cryptocurrencies invented. The public has come to recognize Bitcoin as a legitimate currency, which has been proven extremely well for Bitcoin as it has grown in popularity.
This is evident from the massive increase in Bitcoin price in 2017, with its value soaring above its $19,000 threshold in December.
However, this isn’t to say that other cryptocurrencies didn’t gain. Ethereum also saw a major rise, but not nearly as big as Bitcoin. Although it has a superior network and more features, its price and market capitalization aren’t as high as Bitcoin’s.
Bitcoin has the highest volume of trading, which means that more people trade Bitcoin over Ethereum. The difference in price is due to Bitcoin’s massive network effect, as well as the weakness of Ethereum.
Furthermore, Ethereum’s performance was adversely affected due to its DAO hack at the end of last year. Funds of $53 million were stolen. The attack led to investors from corporate companies losing faith in the Ethereum network, and, as a result, Ethereum isn’t in a position to rebound.
Ethereum hasn’t been able to hit the $900 threshold since the end of December last year, when it soared to $1,300, according to the Worldcoinindex.
Does the situation change soon?
The cryptocurrency market was very volatile in the past, and it was only recently that the pace of change began to slow. Regarding the next few years, there’s plenty of uncertainty, but Ethereum developers are highly confident regarding their network and the cryptocurrency.
Ethereum remains to have lots of potentials, especially due to its strong backing by developers. The network can provide many applications due to the smart contract and because its system is deemed superior to the one used by Bitcoin.
This community of cryptocurrency enthusiasts has been working to increase the use of digital currencies for everyday transactions and payments. Many people see cryptocurrency as a way to earn money trading them, which is one reason for the extreme volatility in the market for crypto.
However, blockchain developers and firms are striving to make it easier for merchants and retailers to accept cryptocurrency payments to get greater benefits from cryptocurrencies.
If this is the case, it will likely work favorably for Ethereum because its transaction costs are much less than Bitcoin transaction costs. As of now, there have been some advancements. For instance, Agnes Water, a town in Australia, recently declared that it was the very first city to take cryptocurrency payments.
Factors Affecting the Price of Ethereum:
1: Mining profit
The cost of Ethereum is determined not just by speculations. However, it is also influenced by mining profitability. At the current price, the earnings made from mining Ethereum using a mid-to-high-end graphics card are around 80 dollars per month (a 700 percent increase on electricity costs to mine).
If the cost of Ethereum is $300 to $400, the profit margin is significantly higher, which gives miners an excellent incentive to buy at higher prices. Understanding Liquidity and Market Liquidity.
The complexity of mining is changing with increasing numbers of miners entering the new trend. In addition, people are listening to discussions about NVIDIA suggesting ideas of GPUs specifically designed for cryptocurrency mining and cryptocurrency, which is why everyone is buying mid-priced GPUs to mine Ethereum.
The greater the number of people doing this, the greater the current mining profitability is greatly reduced. Mining companies are more likely not to offer their assets quickly, delaying selling until prices rise again.
As of now, the Hash Rate is approximately three times the amount it was at the midpoint of May this year; however, the price was about $120 and approximately 10 times higher than it was in January 2017, when the price was about $10.
Therefore, the “true” value of ETH is likely between $100-$300. That’s what’s currently happening in the markets that we see in the market.
This hash speed is rising at the rate of 1000 GH/s per day, which is unlikely to grow significantly in the near term when more people can obtain graphics cards. At a current rate of 60000 Gh/s, which is an approximate increase in the difficulty of mining. This appears to occur at around 1-2 % per day.
Ultimately, it becomes a struggle between the pressure to sell to miners and the influx of capital. It is likely to be a lot of miners who are holding onto the coins that they mine in the hope of seeing them increase in value. This makes the task of analyzing this situation particularly difficult.
2: Regulation
Another thing to consider is that there have been harsh government policies taken by the governments of China and, in recent times, South Korea. The cumulative impact of the regulators has resulted in a decrease in investment. Those who had invested would have left the moment they could.
China is one of the countries that has been the primary reason behind the fall of markets in the past. For instance, after the People’s Bank of China banned payment firms from working with bitcoin exchanges in 2013, markets immediately saw a drop in their fortunes.
While there were some market shakes in September, during the time that China prohibited initial coin offerings (ICOs), as well as made plans to close cryptocurrency exchanges within China, the market for cryptocurrency trading has seen a significant increase in diversification. Because of this, markets have recovered at a more rapid pace.
3: Exchanges
The increasing popularity of cryptocurrency has caused a strain on the current way in which the market is operating. In the beginning, some exchanges stopped accepting new customers.
Bitfinex, for instance, temporarily halted accounts registrations in December, a plan that was put in place to safeguard the support, trading, and verification experience of their current, long-term customers.
Since then, new accounts have been established, and this move seems to be only temporary. In addition, a huge number of users on Kraken, a crypto exchange based in the United States Kraken, were irritated by the software update that was supposed to take just two hours, almost two days, which halted trade on Kraken for an exact duration.
Although most people understand that the system is new and, therefore, could be susceptible to challenges when the market infrastructures appear to be eroding, many become concerned.
