Ethereum and Bitcoin: enemies and friends

The classic overview of Ethereum represents a more complex market scenario compared to that of Bitcoin, the narrative related to this project has changed over time from a distributed computer to a protocol for decentralized finance, passing through a platform for distributed applications. Somewhere in between, there was the euphoria of the ICO fundraising phenomenon with the relevant tokenization in the form of utilities or securities.  

In all this, a more focused ambition like that of digital gold associated to Bitcoin, contextualizes the existential difficulties of Ethereum with the first function of “store of value” as the only lighthouse in the stormy sea of this technological revolution. 

The strongly speculative market, as it loses confidence in the sector due to the bearish cycle, resorts to the certainty of a clear message: this form of money is better than the previous one and has a future, this is the strong message that comes out outside, that’s why BTC dominates the bear market.

It is the numbers, however, that describe the trends of the blockchain in practical terms which, thanks to their characteristics, are public.

Observation of the activities

The average dollar value of transactions at this stage of the market denotes a low propensity of ETH to be a means of moving money around in the payment world. Its blockchain has not yet generated a mature ecosystem to accommodate this function. This is typical of Bitcoin, Bitcoin Cash and Litecoin, which have communities and applications oriented in that direction.

As for the number of addresses active every day, the project stands out better by maintaining its position on the second step of the podium followed surprisingly by Dash, a project with a very active community, but less rewarded from a speculative point of view in recent years.

The volumes of the exchange compared to the price seem to lose a correlation that seemed to follow the two lines in parallel until December 2018. Since then, despite rising volumes, price pressure has pushed ETH down.

However, this correlation was maintained for BTC, where a fluctuation in volumes was followed by a very similar trend in price. 

Here we do not see such a sharp divergence.

Growth in developments remains constant when measured in its upward and downward extremes due to the amount of code appearing into repositories in a non-linear way, but here too there is lack of correlation.

The correlation in BTC’s developments remains much sharper, following the trend and showing a more lively recovery, while keeping a clearer relationship to the metrics associated with development activities.

In the last two years, there has been a social activity rewarding a clear dominance in favour of BTC, while the trend for ETH shines its own light only during brief moments of joy in the midst of constant lateral activity.

Looking at this last chart, it can be verified that the use of the Ethereum blockchain is double that of Bitcoin in terms of number of transactions.

The exploitation of the infrastructure for the transfer of tokens of various nature results in an evident supremacy.

Market cycles

The natural spontaneity of the bull and bear market cycles in such a small sector is not yet able to effectively weigh the value of a blockchain, which is why market reactions are often coordinated on several apparently very different assets.

The promise made by Bitcoin is simpler and more effective in moments of confusion, it remains to be seen whether a renewed spirit of trust, coupled with a maturation of the Ethereum ecosystem does not shift the narrative once again, increasing its attractiveness compared to its rival.

New challenges

The scalability of ETH is now a postponed problem thanks to Istanbul which has momentarily increased the speed of the blockchain. 

It seems that decentralized finance is the new killer application for Ethereum, conveying its usefulness and profitability to the outside world is only limited by its security and ease of use.

Bitcoin has a great placement advantage, outsiders talk about it first and only afterwards, when it happens, about what comes next. However, it remains technologically slower and more rigid, partly due to the need to remain resilient. Will we ever have answers to the problem of scalability? Will we ever see Lightning Network stable and functioning?

The entry barriers and frictions caused by the difficulties of use could determine the great challenge that awaits us in the next market cycle.

Who will be able to solve the onboarding problems in the practical and daily use of these tools will prevail.

• Utility;
• Profitability;
• Security;
• Ease of use.

Here are the great challenges that await developers. Competition is healthy especially when the strength of the projects lies in their diversity.