The Bitcoin blockspace looks set to be the hottest commodity in crypto.
Bitcoin once again occupies more than half of the entire crypto market, having surpassed ether by almost double so far in 2023. Now, the much-prophesied “flip” of ether over bitcoin is even further into the future.
Currently, the market values Bitcoin three times more than Ethereum. Bitcoin’s market capitalization of $727 billion has increased by $400 billion in 2023, greater than Mastercard’s entire stock valuation and roughly double Netflix’s.
Ethereum’s valuation has grown by $100 billion, going from less than $145 billion in January to nearly $245 billion today.
Some anticipate that Ethereum’s market capitalization will one day eclipse that of Bitcoin, despite the latter’s half-decade advantage.
Things were looking good coming out of the 2019 bear market and entering the explosive bull cycle of 2021. The summer of DeFi and NFT mania increased interest in Ethereum, sometimes pushing fees on certain stocks beyond $250 .
- Bitcoin was valued 925% more than Ethereum (between $130 billion and $14 billion) at the end of 2019 (bottom of the bear market).
- That figure had dropped to less than 200% by the end of 2021 (peak of the bull market).
- Bitcoin is worth 300% more than Ethereum today.
Bitcoin rally has widened the gap
The flippening case has recently been hit by a different twist: the Bitcoin network now collects more fees than Ethereum for the first time since December 2020.
In the last four days, Bitcoin users have paid miners around $40 million to have their transactions processed.
Meanwhile, Ethereum users shelled out less than $27 million worth of ether (most of those fees have been burned, slightly reducing Ethereum’s overall supply).
Layer 2 Ethereum networks Arbitrum and Optimism have not closed that gap, as each generates less than $200,000 in fees per day at the moment.
The change of rates (flee-entrance?) It’s awkward considering the large number of use cases supported by Ethereum. Decentralized exchanges, DAOs, memecoins, NFTs, stablecoins, DeFi, and GameFi run on top of Ethereum.
Read more: Ethereum’s Justin Drake Not Worried Despite Ether Price’s Lackluster Year: Q&A
Bitcoin, on the other hand, for a long time mainly had one application: bitcoin transactions. But until recently the rate of on-chain transactions had sustained very little growth since 2015. Perhaps due to its “digital gold” narrative and the growing ubiquity of alternative cryptocurrencies.
Over the past five years, Ethereum users have paid $17 billion in fees, Bitcoin users just $2.9 billion.
That all changed with Ordinals, a protocol for enrolling individual units of bitcoin (BTC) with unique data to create digital collectibles, first launched in January.
Since then, music, text, art, video, and even code for browser-based DOOM clones have been inscribed in Bitcoin, giving rise to an on-chain collectibles market worth thousands of BTC. Bitcoin users trade Ordinals like Ethereum or Solana users would with NFTs.
Today, between one-third and one-half of Bitcoin transactions contain ordinals, increasing demand for block space and transaction fees. Today, “medium priority” transactions cost around $11 compared to around $2.30 for the same on Ethereum (higher priority generally means faster processing), although those prices have since dropped.
Tron Ranks Third Overall in Monthly Fees, Mainly Thanks to Tether Stablecoin
So is Bitcoin generating more fees than Ethereum good for Bitcoin? Maybe not.
Some Bitcoin experts worry that the network is not adequately equipped to handle Ordinals and possible inflows of interest in its original use case, BTC payments.
The CryptoKitties incident in December 2017, during which an NFT game became so popular that it spectacularly clogged Ethereum, showed for the first time that Ethereum probably couldn’t support serving as the “World’s Computer” yet.
Then, in the 2021 bull market, NFT mint costs soared to $250 at times, a reminder of how necessary it was to move activity to smaller chains, including hoards. Still, memecoins and low-quality token projects raised fees beyond $20 earlier this year, dramatically reducing Ethereum’s usefulness for non-critical tasks.
The NFT craze of 2021 made the Ethereum blockchain the hottest commodity in crypto. Even as its usefulness is ruined.
Ordinals may end up having the same effect on Bitcoin, especially if demand holds up and the bull market really hits.
At that point, it would seem reasonable to value Bitcoin and Ethereum more similarly. Running again may be necessary.
