The bitcoin price’s mammoth 2021 bull run catapulted its market capitalization to over $1.2 trillion last year. It’s since crashed back to a mere $400 billion. Meanwhile, ethereum’s own huge price rally saw it climb to over $500 billion before dropping to just over $200 billion.
Now, some traders and investors are predicting the ethereum price will surge following its long-awaited, radical upgrade—potentially making ethereum more valuable than bitcoin for the first time, an event known as “the flippening.”
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“Investor interest in ethereum has remained resilient as it nears the merge, its once-in-a-lifetime event that will see the whole network migrate onto proof-of-stake,” Gabriel Selby, lead research analyst at cryptocurrency index provider CF Benchmarks, said via Twitter. “Some have suggested it could be the catalyst for ethereum to overtake bitcoin as the world’s largest coin by market capitalization.”
This week, ethereum is expected to complete its transition from the energy-intensive proof-of-work consensus mechanism used by bitcoin to the more power-efficient proof-of-stake, removing ethereum’s reliance on miners and handing control to those that “stake” their ether on the network. The switch is expected to reduce ethereum’s carbon emissions by 99%, according to the Ethereum Foundation.
Bitcoin’s dominance, a measure of its value compared to other cryptocurrencies, has in recent weeks dipped under 40%, down from a peak of almost 50% earlier this year, according to data from CoinMarketCap. Ethereum has seen its share of the market climb to over 20%, up from lows of under 15%.
“Since the start of the year, the market cap ratio between bitcoin and ethereum has converged to its narrowest differential since May 2021. If the current trend persists, ethereum could reach the top of the league tables by the end of 2023, or sooner,” Selby said.
While bitcoin has developed a reputation as digital gold due to its immutability and resistance to both change and censorship, ethereum is designed to be used as the foundation of a decentralized, blockchain-based internet—an idea that’s become known as web3.
“With the proliferation of financial products that have enabled a much broader range of investors to express their price view in the crypto markets—such as the recently launched ethereum options contract by CME—the mechanisms are very much in place for ethereum’s market cap to overtake bitcoin, should there be buy-in from a sufficient number of investors,” Selby added.
Earlier this year, ethereum cofounder and the project’s spiritual leader Vitalik Buterin revealed his plans for ethereum following the “merge” upgrade—with the “surge” next in a series of improvements designed to make the network more secure and decentralized, followed by the verge, purge and splurge upgrades.
“We believe that ethereum has great utility and once the purge phase of pruning the code starts in 2023 it will be a very good blockchain with even greater adoption,” Martin Hiesboeck, head of blockchain and crypto research at crypto trading platform Uphold, said via email, adding: “The [ethereum] price could well skyrocket.”
Over the last year, ethereum has seen a demand boom due to the soaring popularity of non-fungible tokens (NFTs), digital art and media that’s tokenized on the ethereum blockchain.
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“Ethereum has already surpassed bitcoin in terms of the number of transactions executed,” Daniel Kostecki, a senior financial analyst at the investment company Conotoxia. “However, it is still far behind bitcoin in the volume of transactions on the blockchain or trading on exchanges.”
Kostecki warned it will be “hard to overtake a coin that was first in the world and whose issuance is limited.” Though others are more confident the flippening will eventually happen.
“The merge will help global sentiment towards crypto and [the blockchain-based third iteration of the internet] web3 because the second biggest blockchain is becoming greener,” Max Kordek, chief executive of decentralized applications platform Lisk, said in emailed comments. “This is also a necessary step for ethereum to flip bitcoin, which I foresee happening in the next major bull run.”