Merger: Can Ether Ever Overtake Bitcoin?

Many elements (price, dominance…) reveal the growth of aether’s power. From there to catch up with bitcoin? BFM Crypto sums up.

In the cryptocurrency ecosystem, some users only believe in one cryptocurrency. They are “maximalists” and there are as many of them as there are cryptocurrencies. These people believe that their cryptocurrency will only get stronger over the next few months and years. Despite the collapse of the cryptocurrency over the past few months, those who hold Ethereum are full of hope.

In the current context of a short-term recovery in cryptocurrencies, Ether is coming back stronger than Bitcoin. According to data from Coinmarketcap, the price of bitcoin is up 3.8% over the past week, trading around $24,090 Thursday night around 10:40 pm. For its part, Ethereum has gained over 11% in a week, trading at over $1,770. This progress can be explained in different ways, as the very functioning of the Ethereum blockchain, which provides access to many applications (NFT, DeFi, games, etc.). The Merge event (see our article here to understand all about this event), which is when the Ethereum blockchain moves from proof-of-work to proof-of-stake, scheduled for September 19th. .

“Catching up on Ethereum’s historical trend towards Bitcoin in the long term is possible”

Do these good numbers mean that ether could one day overtake the queen of cryptocurrencies, bitcoin?

“What seems clear is that ether is rising as a percentage of price more than bitcoin in a bull run. Timeframe is possible. But we are also seeing that bitcoin remains a store of value, which means that in a bear market, people are more take refuge in bitcoin, not ether, it will take many quick moves before we see ether catch up with bitcoin,” explains Laurent Pinho, Analyst at Zonebourse, BFM Crypto.

Despite these numbers, the price of Ether has remained volatile since its inception in 2015. Below $1 in its launch year, the cryptocurrency experienced its first peak in June 2016, trading at $15 before falling again. Its implementation on various trading floors and cryptocurrency exchanges allows Ethereum to gain momentum, which at the end of 2017 amounted to $800. Ethereum 2.0, which allowed the cryptocurrency to gain popularity before hitting $4,870 in November 2021. Since that peak, Ether has lost over 64% of its value due to two recent bear markets.

For its part, bitcoin has also had a meteoric rise from its inception in 2009 until today. Just two years after its inception, the cryptocurrency began to be exchanged for a few dollars before it skyrocketed to $1,000 in 2014. cryptocurrencies (ICOs). Since 2019, institutional investors are starting to enter the market, which also contributes to the growth of the cryptocurrency price, which reached a maximum level of $69,000 in November 2021. Together with Ethereum, Bitcoin has lost over 65% of its value since its historical peak.

Ethereum dominance rises, bitcoin dominance falls

Another factor also needs to be considered in order to understand the trajectory of these cryptocurrencies. We have to look at their “dominance”, i.e. their weight in relation to the total market capitalization of cryptocurrencies, which today stands at $1,056 billion. As of today, Bitcoin is the first cryptocurrency by capitalization, with $440 billion on the counter, while Ethereum is in second place, with a capitalization of $199 billion.

However, according to a chart published by the Ultra Safe Money account, Bitcoin dominance has been on a downward trend for over 10 years, while Ethereum dominance has been on an upward trajectory for 7 years.

According to Tradingview data, Bitcoin dominance fell from 95% in March 2017 to 58% in August 2017 and then fluctuated in subsequent years. Bitcoin dominance has declined since the last cryptocurrency crash in June, dropping from 48% to 42% within a month. For its part, Ethereum dominance has increased from 7% in December 2019 to almost 20% this month, up 2 points in a month.

“Bitcoin has lost its dominance to other cryptocurrencies, including ether, which today accounts for almost 20% of the market capitalization. Many players hope that ethereum will become the blockchain on which all applications will be created,” emphasizes Laurent Pinho.

However, it is difficult to predict that ether will overtake bitcoin in terms of the latter’s dominance.

“If we look at the historical data, Ethereum is gaining more space in the market and Bitcoin is losing it, but so far no indicator can say that Ether will overtake Bitcoin,” he adds.

Merger: what impact on the airwaves?

Moreover, the rarity of a cryptocurrency is also its strength. This is one of the factors explaining the popularity of bitcoin, which is limited to 21 million units – more than 19 million are already in circulation today. For its part, there is no limit to the amount of Ether in circulation — there are currently 120 million Ether in circulation — but that may change.

At the moment, ether is an inflationary cryptocurrency, that is, it is created in unlimited quantities. But in the future, it may become deflationary, which means that it may face symbolic destruction rather than creation. Specifically, when a miner on the Ethereum blockchain validates a block, they receive ether. But after the EIP-1559 update of the Ethereum blockchain in 2021, up to 75% of the fees paid to miners are destroyed by “burning” the ether, which can lead to some periods of ether deflation.

If The Merge event, which aims to reduce the so-called “gas” transaction fees (in Ether), is successful, will it allow Ether to become more deflationary and therefore rarer?

“After the merger, the goal is for user fees to be lower. But if the current disruption is related to transaction fees and should decrease with the merger, then we don’t yet know how Ethereum will be destroyed. are not immune to new updates on this topic,” emphasizes Laurent Pignot.

Moreover, how could this affect the price of The Merge Ether? At this stage, many investors are already aware of this future transition and already own this cryptocurrency.

“Since many investors have already entered Ethereum, we do not expect Ethereum price to be disclosed. On the other hand, in the bleakest scenario, if the merger goes badly, investors will leave this market, assuming that the ether will crack and not work as expected in the following weeks,” notes Laurent Pinho.

Among the goals of The Merge is also an increase in the number of Ether transactions per second. Ethereum boss Vitalik Buterin recently stated at the Ethereum Community Conference (EthCC) that he expects the Ethereum blockchain to reach 100,000 transactions per second, up from just over 15 currently. The point that should have an impact on the cryptocurrency rate.

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