Bitcoin is up about 120% this year, while Ethereum is “only” up 70%. But over the past 3 weeks, Ethereum has started to steal bitcoin’s thunder – beating it by about 7%. This begs the question: Ethereum vs bitcoin, which is better bang for your buck right now? So in this article, I’ve compared them based on 3 key criteria to help you decide for yourself.
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Criteria 1: Ethereum vs bitcoin price chart (ETHBTC)
The ETHBTC trading pair measures how many satoshis it would cost to buy 1 ether (ETH). So when its chart goes up, it means ether is getting more expensive in bitcoin terms – i.e. ether is gaining value vs bitcoin (BTC). And when it goes down, it means bitcoin is gaining value vs ether. Note that it has nothing to do with the US dollar value of each coin – it just means one is doing relatively better than the other.
The chart below shows ETHBTC on the 1-month time frame, as traded on Binance. Each price candle represents 1 month of price movement – meaning this chart is taking a long-term view. As you can see, the trading pair is in a giant “wedge pattern”, with the price compressing into a tighter trading range. At some point, this wedge will break, and either bitcoin or ether will drastically outperform the other. I’ve also drawn horizontal dotted lines (green and red) to show the bigger trading range since 2021. These would be my final confirmations of a breakout in either direction.
Until the wedge actually breaks, ETHBTC is still in a sideways trading range. But if we zoom in closer to the daily time, we can see that ETHBTC is currently bouncing off the lower bound of the wedge – which is also the bottom of the horizontal trading range. I’ve drawn a short-term trendline in yellow as well, which might be something to watch going into the end of this year.
Criteria 2: Upside potential before the next major pullback
The chart below compares bitcoin (in dollars, top) with ether (in dollars, bottom). Bitcoin is currently trading close to the 0.618 “golden” Fibonacci retracement level (gold line). This means that bitcoin has just about reclaimed 61.8% of its bear market losses from top to bottom. Ethereum, meanwhile, is only at the 0.5 Fibonacci level, so it’s only halfway back to its all-time high in percentage growth terms. And before you ask, this is a logarithmic chart – so it focuses on percentage moves rather than number moves. You can learn more about Fibonacci retracements here.
The next thing to compare is price volatility. When volatility is rising, and the price is going up with it, it means the move might have more upside potential.
The chart below compares the volatility of bitcoin (top) with ether (bottom) using the Bollinger Band width percentile indicator. This indicator was designed by “The_Caretaker” in Tradingview and is regularly featured on Eric Krown’s crypto YouTube channel.
The indicator measures the relative volatility of an investment – with the blue bars indicating extremely low volatility. As you can see, ether has been in the “blue bar phase” for much longer than bitcoin. In other words, ether has been relatively less volatile for longer. Typically, the lower the volatility, the bigger the price move when volatility returns.
Bitcoin is already around the 50% volatility meter (green circle), according to the indicator. But ether is only just starting to get volatile (amber circle).
Translation: ether could be about to get way more volatile than bitcoin in the coming weeks and months. And if the direction of that volatility is up, you’re likely to see ether outpace bitcoin over that time. Just keep in mind that the same would also apply to a downside move (since volatility says nothing about direction).
Criteria 3: Ethereum vs bitcoin in the current market environment
Bitcoin is finite digital gold, so it tends to do well when central banks increase the global money supply. When there’s more currency sloshing about, it allows investors to take bigger risks. So, they buy more bitcoin. This also makes bitcoin an excellent hedge against currency debasem*nt (you can read all about that in our bitcoin guide).
The chart below shows bitcoin’s growth (yellow) vs the global M2 money supply (blue). Notice how bitcoin’s past three bear markets have generally coincided with decreases (red) in global M2, and the bull markets have coincided with increases (green) in global M2. Also notice how global M2 has trended higher this year – along with bitcoin’s price.
As for Ethereum, it tends to do better when there’s more appetite for risk within the crypto market. If investors are more confident in crypto in general, they’re more likely to buy ether instead of bitcoin. That’s because ether is about a third of bitcoin’s market size, and it’s generally more volatile as a result. And if crypto prices are trending higher, volatility can be a good thing – as it could mean bigger gains.
Right now crypto prices are trending higher. And traders might start to recycle more bitcoin profits into ether.
Final verdict: Which is the better investment right now, ether or bitcoin?
Crypto investing is all about narratives. And as far as narratives go, bitcoin’s had the upper hand for most of this year. There’s the bitcoin halving in April, and the potential approval of a series of bitcoin-exchange traded funds (ETFs) sometime before that. If and when these ETFs get approved, investors could own bitcoin by simply buying ETF shares on the Nasdaq – without the hassle of having to store bitcoin themselves.
But now, BlackRock (the world’s biggest asset manager) has officially confirmed it plans to file for an Ethereum ETF as well. Imagine if the iShares Ethereum Trust traded on the Nasdaq. Remember, Ethereum has a much smaller market size than bitcoin. So, the buying pressure from Ethereum ETF speculation might have a bigger price impact.
Personally, I find Ethereum better value right now given its slower performance this year. But I’m not turning my back on bitcoin. I own both of them in my portfolio for different reasons, and I intend to keep it that way for some time.
You can read this guide to understand how Ethereum works.
About the author: Jonathan Hobbs holds the Chartered Financial Analyst ® designation. Jon once managed the investments for a boutique crypto hedge fund, and is the author of three investment books. Before that, Jon came from the traditional finance world, working at firms like Morgan Stanley, HSBC, and M&G Investments.
Check out Jon’s books on Amazon.
