December 6, 2023

Bitcoin has become the hottest commodity in block space crypto.

Bitcoin has once again captured more than half of the entire crypto market, outperforming Ether by almost twice as much so far in 2023. Now, the long-predicted “flipping” of Ether onto Bitcoin is even further in the future.

The market currently values ​​Bitcoin three times more than Ethereum. Bitcoin’s market cap, at $727 billion, is projected to grow to $400 billion in 2023 – a figure larger than MasterCard’s entire stock valuation and almost twice that of Netflix.

Ethereum’s valuation has increased by $100 billion, from $145 billion in January to approximately $245 billion today.

Some predict that Ethereum’s market cap will one day overtake Bitcoin’s, despite it starting half the decade with a lead.

Things were looking good coming out of the bear market of 2019 and heading into the explosive bull cycle of 2021. DeFi summer and the NFT craze increased interest in Ethereum, causing fees for some operations to exceed $250 at times.

  • At the end of 2019 (at the bottom of the bear market) Bitcoin was worth 925% more than Ethereum – $130 billion to $14 billion.
  • By the end of 2021 (peak bull market), this figure had dropped to less than 200%.
  • Bitcoin price is 300% higher than Ethereum today.

Bitcoin rally widens the gap

The issue of flipping has recently been affected by a different flip: the Bitcoin network is now charging higher fees than Ethereum for the first time since December 2020.

Over the past four days, Bitcoin users have paid miners nearly $40 million to process their transactions.

Meanwhile, Ethereum users paid out just under $27 million worth of Ether (most of those fees have gone out, leaving Ethereum’s total supply slightly lower).

Layer-2 Ethereum networks Arbitrum and Optimism haven’t closed that gap as they each generate less than $200,000 in fees per day right now.

fee-flipping (run away-penning, This is strange when you consider the sheer amount of use cases supported by Ethereum. Decentralized exchanges, DAOs, memecoins, NFTs, stablecoins, DeFi, and GameFi all run on Ethereum.

Read more: Ethereum’s Justin Drake not worried despite Ether’s mid-year slump in price: Q&A

Bitcoin, on the other hand, had mostly a single application for the longest time – Bitcoin transactions. But there had been little growth in the rate of on-chain transactions since 2015 until recently. Perhaps due to its “digital gold” narrative and the growing ubiquity of alternative cryptocurrencies.

Over the past five years, Ethereum users have paid $17 billion in fees, Bitcoin users have paid only $2.9 billion.

That all changed with Ordinals – a protocol for imprinting individual units of Bitcoin (BTC) with unique data to create digital collectibles, first launched in January.

Music, text, art, video, and even code for browser-based DOOM clones have since been minted into Bitcoin, resulting in an on-chain collectibles market worth thousands of BTC. Bitcoin users trade Ordinals in the same way as Ethereum or Solana users trade NFTs.

Today, about a third to half of Bitcoin transactions involve ordinals, increasing demand for the blockspace as well as transaction fees. At times today, a “medium priority” transaction goes for around $11, while on Ethereum it goes for around $2.30 (higher priority generally means faster processing), though those prices have since decreased.

Tron comes in third overall in terms of monthly fees, mostly thanks to the stablecoin Tether

So is charging higher fees on Bitcoin than Ethereum good for Bitcoin? Probably not.

Some Bitcoin insiders worry that the network is not properly equipped to handle ordinals. And Its core use case, the potential inflow of interest in BTC payments.

The Cryptocurrency phenomenon in December 2017 – during which an NFT game became so popular that it spectacularly shut down Ethereum – revealed for the first time that Ethereum might not yet serve as a “world computer.”

Then, NFT mint costs soared to $250 several times during the 2021 bull market – a reminder of how essential it was to port activity to smaller chains, including rollups. Nevertheless, memecoins and low-quality token projects pushed fees above $20 earlier this year, significantly reducing Ethereum’s usefulness for non-critical tasks.

The NFT craze of 2021 made the Ethereum block space the hottest commodity in crypto. Also useful while tanking.

Ordinals could have a similar impact on Bitcoin, especially if demand persists and a bull market really hits.

At that point, it would seem reasonable to value Bitcoin and Ethereum more equally. It may just take one more run.

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