Is Ethereum a long-term investment, or should you stick to Bitcoin? Investors that look at the year-to-date charts must be asking themselves this question because both year-to-date and year-on-year, Ethereum has outperformed Bitcoin significantly. This article will review whether you should invest in Bitcoin or Ethereum and if these assets are promising long-term investments at all.
Is Bitcoin a long-term investment?
Bitcoin initially started with a price of $0.0008. On April 14, 2021, it recorded an all-time high of $64,863. Thus, Bitcoin has been the best-performing asset in the last decade by a huge margin.
The question is whether Bitcoin can maintain this meteoric rise and perform at least comparably well in the future. The Bitcoin stock-to-flow pricing model looks at the outstanding supply of Bitcoin in relation to circulating supply and compares this to similar assets like gold. It predicts Bitcoin will eventually hit a price of $1 million. However, Bitcoin has been famously volatile, which is still hindering its mass adoption.
Is Ethereum a long-term investment?
Ethereum launched for $0.66 and hit an all-time high of over $4,000 in May 2021. Thus, it hasn’t performed quite as well as Bitcoin, but it has still put any comparable asset to shame with its performance. However, looking at Ethereum’s annualised returns, it’s clear this performance doesn’t come without huge drawdowns. After a 9,000% return in 2017, it had a -82% return in 2018 and a -8% return in 2019, before a 464% explosion in 2020. Like Bitcoin, Ethereum is a long-term investment because its price swings can be quite brutal.
Should you invest in Bitcoin or Ethereum?
Since past performance doesn’t equal future performance, many people ask themselves if Ethereum is a better future investment than Bitcoin. Several reasons indicate it may be. Ethereum’s strong fundamentals and its wider use case compared to Bitcoin are examples of that. Ethereum aims to be the infrastructural layer for web 3.0, which will replace intermediaries with peer-to-peer structures and smart contracts.
Moreover, Ethereum has been chipping away at a working scaling solution, something that Bitcoin has failed to accomplish in its decade-long history. If Bitcoin cannot scale and Ethereum can scale, that will drive a lot of value to Ethereum besides its web 3.0 use cases. For now, both Bitcoin and Ethereum are being mined.
Bitcoin mining could also lead to Bitcoin being the target of environmental policies. Bitcoin’s carbon footprint is a thorn in the flesh of several governments, and comprehensive environmental regulation could hammer the price of Bitcoin. If Ethereum managed to switch away from mining, this would de-couple their prices. On the other hand, Bitcoin does have a significant trust advantage and is the biggest community in the crypto space.
Conclusion
There’s no straightforward answer if you ought to invest in Bitcoin or Ethereum. Both coins look likely to rise in price, although not without more volatility. Whether it is Bitcoin or it is Ethereum, a long-term investment should be treated as such. Don’t let short-term fluctuations distract or affect you emotionally. Almost all crypto investors that hold their assets for several years are in profit.
