The future approval of Canadian cryptocurrency ETFs could make it repeat the history of its rival. The expectation and speculation about this has already had an effect: last Wednesday Ethereum doubled its value, reaching US$4,000 after three years.
The crypto world has been experiencing a good time. With Bitcoin surpassing all-time highs in recent weeks, Ethereum, the second largest digital currency, could repeat the success of the leading crypto.
Of course, its fate depends on the SEC (Securities and Exchange Commission) of the United States giving the green light to the Ethereum spot ETFs sought by giants such as BlackRock, VanEck and Fidelity Investments, among others. Although at the beginning of this week, specialists reduced their estimates about the probabilities of this happening, there is already speculation in the market and the competition between both cryptocurrencies is presented as a complex and multifaceted issue.
In recent days, Bitcoin finally surpassed its 2021 all-time high levels, reaching the $72,850 mark before experiencing a slight pullback. While the Canadian cryptocurrency of Russian descent went from having a value of around US$2,400 in 2023 to US$4,000 last Wednesday, a figure that had not been recorded for three years. Although Bitcoin and Ethereum are the most prominent and established cryptocurrencies on the market, they have different purposes and characteristics.
“Bitcoin is often considered a digital store of value, similar to gold, while Ethereum is known for its smart contract functionality and its ability to support decentralized applications (DApps) and ERC-20 tokens,” explains Denise Cinelli.
Both cryptocurrencies, Cinelli continues, compete in three aspects: market value, adoption and use, and technology and development.
“However, Ethereum adoption is growing rapidly, especially with the rise of decentralized finance (DeFi) and non-fungible tokens (NFT),” highlights the COO of CryptoMKT.
Ethereum in Bitcoin's shadow?
“Ethereum, the second-largest cryptocurrency by market capitalization, has historically been in Bitcoin's shadow for several reasons,” said CryptoMKT COO.
Cinelli details that Bitcoin was the first cryptocurrency to be created and launched on the market, which gives it a first mover advantage (FMA) position, which implies that it has had more time to establish itself, accumulate investors and gain recognition compared to Ethereum, which came to the market a few years later, in 2015.
Furthermore, as it is widely known as the first, it makes it the first option for those who are interested in investing or using cryptocurrencies. The familiarity and trust it has gained over the years has contributed to its dominance in the market.
“This perception has led to Bitcoin being seen as a safer and more stable investment, especially in times of market volatility,” adds Denise Cinellli.
“Bitcoin has a limited supply of 21 million units, contributing to its perceived scarcity and potential value as a store of value. In contrast, Ethereum does not have a fixed limit on its supply, which could affect the perception of its long-term value,” he details.
But Ethereum's technical complexity may be less understandable to the general public compared to Bitcoin, which is primarily presented as a form of digital money.
“Despite these differences, Ethereum has gained its own following and has proven to be a significant force in the world of cryptocurrency and blockchain technology , especially with the growth of projects built on its network and interest in DeFi (decentralized finance). and NFTs,” says Cinelli.
Now, the chances of Ethereum spot ETFs being approved in May may be weaker than Bitcoin was a few months ago, mainly due to the sharp drop in approval estimates “and the lack of change requests.” in the projects sent to the SEC.”
According to the specialist, the regulation of cryptocurrencies and ETFs is constantly changing. Ethereum, although the second largest cryptocurrency, may face different regulatory scrutiny due to its lower market maturity. Likewise, previous rejections of Bitcoin ETFs may influence Ethereum ETF decisions. And finally, the technical complexity of Ethereum presents challenges for regulators in terms of security and investor protection in an ETF.
“ If the SEC does not approve ETFs for Ethereum, in addition to the likelihood that the price could undergo a correction, there could be several implications and triggers in the cryptocurrency market and the financial industry in general,” said Denise Cinelli. “The approval of the Ethereum ETF has been seen as an important step towards institutional adoption of the cryptocurrency. If the SEC does not approve ETFs, this could slow down the institutional adoption process, as some institutional investors may prefer to wait until there is greater regulatory clarity before entering the cryptocurrency market.”
Could Ethereum become bigger than Bitcoin?
Some analysts argue that Ethereum could overtake Bitcoin in the future due to its additional functionality and its potential to be used in a wide range of applications beyond simply being a digital currency.
In addition, Ethereum made a successful major update called Ethereum 2.0, meaning that instead of running a proof-of-work algorithm, a mechanism used in the blockchain to validate and secure transactions - the original method implemented by Bitcoin - the update involves the change to a proof-of-stake algorithm, thus allowing participants in the network (validators) to deposit and lock an amount of their cryptocurrency as a guarantee of their honesty and commitment to the security of the network. This adjusts various aspects of a network such as scalability, security and accessibility.
However, it is important to consider that the cryptocurrency market is extremely volatile and it is difficult to accurately predict how circumstances will develop.
“Both cryptocurrencies have their own unique communities and use cases, so they could coexist and thrive independently,” concludes Denise Cinelli.
