The top dogs of the cryptocurrency market are undeniably Bitcoin (BTC 0.18%) and Ethereum (ETH +0.27%). There are certainly strong arguments to be made about many smaller digital currencies, especially those that excel in areas where Bitcoin and Ethereum do not at the moment.
However, with a combined market cap of more than $1.4 trillion, the two largest denominations command more than half of the total crypto-market's $2.4 billion valuation. Put another way, stack all of the market's other cryptocurrencies together and they're not as big as the Bitcoin-Ethereum combo.
With this strong history of appreciation, it's easy to see why volatility-tolerant investors of the two largest cryptocurrencies are eyeing the next big major milestones. Based on Monday morning's pricing, Bitcoin would have to appreciate by 95% to hit $100,000. Ethereum is a 144% surge away from $10,000.
Bitcoin is closer to its next-round milestone, but it doesn't mean that it will get there first. Let's size up the playing field to see which meaty milestone will likely be crossed first.
Image source: Getty Images.
In defense of Bitcoin
The knocks on Bitcoin, relative to many of the market's other denominations, are pretty well established. It's been slow to evolve its blockchain technology, leaving Bitcoin largely as a store of value beyond settling up on transactions where it's accepted. The recent taproot update hopes to change that, giving it the flexibility to make a push into decentralized finance, in general, and smart contracts, in particular -- an area where Ethereum is dominant and many smaller and nimbler denominations are making a lot of noise.
Bitcoin's biggest selling point is that it's the industry standard when it comes to crypto. A lot of non-crypto investors may not even realize that there are literally thousands and viably hundreds of alternatives to Bitcoin. A lot of forward-thinking and colorful CEOs, including Elon Musk, Jack Dorsey, and Michael Saylor, have invested substantial chunks of their company's idle cash into Bitcoin.
You don't see that kind of corporate leadership support for Ethereum. In fact, Dorsey's Block limits Square accounts interested in crypto exposure to only trading Bitcoin.
Landry's -- the multiconcept operator of restaurants, hotels, and casinos -- recently updated the loyalty-rewards club for its restaurants. Customers can now peg their award points to the price of Bitcoin. It's hard to see any major operator going this route with any other digital currency outside of Bitcoin. It has mindshare, and that matters.
In defense of Ethereum
The allure of Ethereum is clear to more seasoned crypto traders. Despite commanding roughly half the market cap, Ethereum overtook Bitcoin in trading volume on the world's largest trading exchange in the second quarter. Ethereum, with its programmable blockchain technology, is already the beating heart in more than 3,000 decentralized applications (dApps).
A big knock on both Bitcoin and Ethereum is that they're energy-depleting to mine and move around, also exposing deficiencies in the number of transactions that can be processed, as well as the related costs. Ethereum's migration from a proof-of-work model to proof of stake -- expected to be completed in the first half of next year -- will help diminish a lot of those concerns. If you think Ethereum is popular now, just imagine how it will be when it's more functional as a faster and cheaper digital tool.
Finally, the biggest reason to bet on Ethereum getting to $10,000 before Bitcoin reaches $100,000 is that it has momentum on its side. Bitcoin is up 96% over the past year, and if it duplicates that run, it would hit six figures by the end of next year. However, Ethereum has soared 501% over the past year.
Obviously, past appreciation is no indicator of how the future will play out, but the younger Ethereum is already more successful than Bitcoin in many ways outside of the market-cap game. There's no harm in buying both, and I have allocated a small part of my overall portfolio to having some skin in the Bitcoin and Ethereum games. I still ultimately believe that Ethereum will hit $10,000 before Bitcoin hits $100,000, even if it takes a couple of years to happen.
