- Bitcoin tends to be the go-to coin for many during a bull market
- Ethereum has been the most popular alt coin for many years
- There are signs that Ethereum might enjoy the next bull run more than Bitcoin
Bitcoin is the undisputed top dog when it comes to the crypto space, with Ethereum being top in its own field. However, there are signs that Ethereum could have more potential than Bitcoin during the next market cycle, and here are three important reasons why we think this way.
Deflationary Mechanism
The first reason why Ethereum could be a better play than Bitcoin in the next market cycle is to do with the fact that by the time the next cycle comes around, ETH will be a deflationary currency. This means that more ETH will be burnt than will be created, and the more the network is used the more is burned.
The EIP-1559 upgrade, implemented in August 2021, marked the first move towards this goal, but with the proof-of-stake merge not set to be completed until 2023, it still isn’t fully deflationary. However, by the time the next market cycle comes round, ETH will be a fully deflationary cryptocurrency, something that the crypto world has never experienced before, particularly with such a mainstream coin.
Proof-of-work Pressures
Another reason why Ethereum’s switch to proof-of-stake could turbo charge it for the next market cycle is the fact that it has left proof-of-work behind. To purists, this is heresy, with proof-of-work recognized as being the only truly decentralized method of securing a network. However, regulatory bodies have already tried to ban the sale of proof-of-work coins in the EU, and New York State has enacted a two-year moratorium on proof-of-work mining over environmental fears.
This moratorium will end in 2024 when a report will be published that may well set the seal on proof-of-work mining in New York full stop, an outcome that may well be echoed by other states and countries. The tide is turning against proof-of-work, something that will not affect Ethereum given its switch this year.
The Chart Looks Great
If the fundamentals are beginning to line up, what about the technicals? If we look at the ETH/BTC chart, a striking pattern emerges:
As we can see, ETH suffered worse than Bitcoin during the 2018-2020 bear market, and then outperformed it during the recent bull market. We would therefore expect that the past year would have seen ETH decline once again, but this time round it has been almost nose to nose with BTC, while other alts have been savaged in comparison.
This underlines the strength that ETH now has, a strength that is reinforced by a clear, positive trendline:
This upward momentum, stretching back almost three years, has left ETH pushing right up against a crucial area of resistance that stretches back to 2017:
Clustering under an area of resistance like this is a very bullish sign, and while we can’t expect a breakthrough during a bear market, once the next cycle starts it looks almost inevitable that ETH will flip this level of resistance and carry it to new highs against Bitcoin.
Regulators May Kill the Buzz
The only fly in the ointment for Ethereum is the change in sentiment towards it from U.S. regulators. Prior to the launch of Ethereum 2.0, the view of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) was that Ethereum wasn’t a security. However, the way that ETH is now issued has flagged it up as a potential violator of securities laws, given the weird, twisted way that the SEC and the CFTC view these things.
Exactly what impact such a ruling would have, and how the SEC would try and enforce it is far from clear, but it is something to be wary of, especially with regulators clamping down hard on projects they perceive as securities and with Ethereum being such a juicy prize.
In all other respects however, there is plenty to suggest that it may well be worth stacking ETH as well as BTC next cycle.
