The days when Bitcoin was the only option for investors looking to get rich in the crypto market are now a thing of the past.
Ethereum, the world’s second-largest digital currency, has just continued to set new records as interest in so-called alt-coins continues to surge. Even Dogecoin, the coin derived from a joke, now has a nearly $ 90 billion market value.
In total, CoinGecko is tracking more than 7,000 different digital currencies.
However, for the majority of people, the 2 biggest coins still get the most attention. Both Bitcoin and Ethereum had a great start to 2021: Bitcoin price nearly doubled, Ether also more than quadrupled, compared with the 11% increase in the S&P 500 index.
So what do you need to know before deciding whether to invest in Bitcoin or Ether?
What to expect when investing in Ethereum?
Ether is the most popular token used in blockchain in the world – Ethereum is also a payment currency in transactions of exclusive digital art (NFT) is feverish in time. recently.
“Ether is a blockchain platform that functions like the Apple store or Android app store,” said Pat LaVecchia, chief executive officer of Oasis Pro Markets, a U.S. digital securities trading platform. “Bitcoin is a commodity like gold, or a store of value.”
Unlike Bitcoin, which has many features (eg supply) that have been fixed since inception, the Ethereum platform is still evolving with updates that promise to help improve the system. It is even possible that regulations change and cause the supply to drop – which will drive the price of Ether up.
“Investors often look at Ethereum as a growth-type investment, making a bet on the continued development of the decentralized ecosystem built on Ethereum,” Phil Bonello, director of research at Grayscale Investments, which oversees trusts that serve vehicles for both cryptocurrencies, said. They “sometimes consider Ether as a way to get index exposure to all the development occurring on Ethereum.”
About Bitcoin case
Although Bitcoin’s leading position has weakened somewhat recently – Bitcoin currently accounts for about 46% of the total crypto market cap, compared with almost 70% at the start of the year. However, it remains the largest digital currency in the world with a market value of more than $ 1 trillion, compared with Ethereum’s $ 380 billion.
And Bitcoin is still the choice of big businesses. Tesla and MicroStrategy buy Bitcoin, not Ether. When Paul Tudor Jones or Ray Dalio talk about cryptocurrencies, they just talk about Bitcoin.
Bitcoin’s lead is also reflected in the volatility itself. Cornerstone Macro analysts have studied how Bitcoin and Ether prices played during a plunge. When the Bloomberg Galaxy Crypto Index falls 20%, the downside risk for Ether is greater than for Bitcoin and vice versa.
If you want to invest in both?
Anyone who wants to enter the crypto market needs to get used to the huge volatility of prices, even for the biggest currencies. In addition, this market has countless other risks: the exchange is hacked, suddenly the authorities tighten the management, making the market wobble …
Most “mainstream” financial advisors do not encourage clients to put more than 5% of their portfolio in crypto. They also warn customers to be prepared for loss.
However, for those who still want to venture into this market, old advice like diversifying your portfolios and hedging is still true./.