Contemplating Abandoning Bitcoin for Ethereum in 2025: Worthy Consideration?
Contemplating Abandoning Bitcoin for Ethereum in 2025: Worthy Consideration?
Over the past month and a half, Bitcoin (BTC 1.47%) has been making headlines. In just a few weeks, the world's largest cryptocurrency saw a surge of almost 50%, eventually breaking through the $100,000 mark to set a new all-time high near $107,000. This outstanding performance has rightfully given Bitcoin the limelight. On the other hand, Ethereum (ETH 4.05%), the second-largest cryptocurrency, has mostly taken a backseat.
Indeed, Ethereum's struggles have largely characterized its 2024. At one point in October, Ethereum's year-to-date gains were a modest 5%, significantly lower than the explosive growth seen in Bitcoin and other cryptocurrencies. However, recent developments suggest that the tide might be turning. For investors, this situation presents an exciting opportunity to reevaluate Ethereum. Here are three reasons 2025 could be Ethereum's time to shine, and why it might be a better choice than Bitcoin.
1. Altcoin season might be just around the corner
One of the most thrilling aspects of the crypto market is the phenomenon known as altcoin season. This period is characterized by alternative cryptocurrencies, or altcoins, outperforming Bitcoin as profits from Bitcoin are redeployed into the broader crypto market. Unfortunately, this hasn't yet materialized in the current cycle.
Bitcoin's dominance, a metric measuring Bitcoin's share of the total cryptocurrency market, has been steadily rising for over two years. This trend suggests that Bitcoin has disproportionately attracted value, leaving altcoins like Ethereum struggling to keep up.
However, recent data shows a significant reversal in Bitcoin's dominance. Although it hasn't fully materialized yet, a shift of this magnitude has not occurred in over a year and could hint at the beginning of an altcoin rally. Ethereum, as the most popular altcoin, stands to gain significantly.
2. Increasing interest in Ethereum ETFs
Another reason Ethereum could outperform in 2025 is the growing interest in Ethereum-based exchange-traded funds (ETFs). Launched in mid-2024, these financial instruments allow both institutional and retail investors to gain exposure to Ethereum through traditional stock market channels. While Bitcoin ETFs launched earlier and attracted considerable attention, Ethereum ETFs have struggled to garner similar levels of interest.
However, this trend is beginning to change. In early December, Ethereum ETFs saw their highest trading volumes since launch, even briefly surpassing the volumes of their Bitcoin counterparts – an impressive feat considering Ethereum's slower start. This surge in activity reflects increasing institutional interest in Ethereum as investors explore opportunities in the broader crypto market beyond Bitcoin.
Should this trend continue to gain momentum, it could drive substantial buying pressure on Ethereum as the crypto bull market matures and investors seek higher returns outside of Bitcoin.
3. Ethereum appears undervalued compared to its potential
The final reason to consider Ethereum is not based on any specific data points or developments but rather on some simple calculations.
While many cryptocurrencies are trading near or at all-time highs, Ethereum remains roughly 25% below its 2021 peak of $4,800. This disparity presents a compelling opportunity for investors, particularly given Ethereum's central role in the crypto ecosystem. In my opinion, Ethereum has at least a 25% upside from its current level.
However, given its foundational role in the crypto world and the historical trend of cryptocurrencies notching new all-time highs during bull markets, Ethereum could have even more upside.
The reason is that Ethereum serves as the backbone of decentralized finance (DeFi), hosting over 55% of all the value in the sector. DeFi enables users to engage in financial activities like lending, borrowing, and trading without intermediaries, and has the potential to disrupt traditional finance.
Moreover, Ethereum's Layer 2 solutions have become increasingly popular. They're handling millions of daily transactions, further strengthening Ethereum's position. While some argue that Layer 2 adoption might have contributed to Ethereum's underperformance in price, these solutions ultimately enhance the network's usability and adoption.
Last but not least, Ethereum is also integral to bridging traditional finance with decentralized finance. Major financial institutions, such as BlackRock and UBS, are leveraging Ethereum's blockchain to tokenize traditional assets like money market funds. Tokenization is widely regarded as the future of financial markets, and Ethereum is emerging as the preferred platform for global financial giants.
The case for Ethereum over Bitcoin today
While Bitcoin's $100,000 milestone appears to have more room to grow, its increasing price also increases its risk profile. Ethereum, on the other hand, presents an attractive alternative with a more appealing risk-reward balance at its current price.
Historically, Ethereum has lagged behind Bitcoin during the early stages of bull markets, only to stage significant rallies during altcoin seasons. Ethereum underperformed Bitcoin in the last cycle, but once altcoin season arrived, it surged over 600% in just five months. Ethereum might be poised for a similar breakout in 2025 if history repeats itself.
For investors seeking diversification or an undervalued blue-chip cryptocurrency to capitalize on the bull market, Ethereum emerges as a strong contender. As capital flows into new areas of the crypto market, Ethereum could evolve from just a complement to Bitcoin to a leader in its own right.
- With the potential for an altcoin season approaching, investors might want to consider diversifying their portfolio by investing in Ethereum, as its performance during such periods often outperforms Bitcoin.
- The increasing interest in Ethereum-based exchange-traded funds (ETFs) among institutional and retail investors signifies a growing recognition of Ethereum's value and potential, which could lead to significant buying pressure and price increases in the future.