The cryptocurrency ethereum is likely to see a bigger increase in market capitalisation than bitcoin by the end of this year, a market survey has found.
Consumer product and services comparison website Finder’s survey of nine blockchain industry participants on the price trend for the world’s top 12 cryptocurrencies found that ethereum will see the biggest increase in market cap, at 212 per cent, followed by bitcoin at 194 per cent, and bitcoin cash at 123 per cent.
In terms of price prediction, ethereum will however rank third, at US$2,550, by end of this year; while bitcoin and bitcoin cash are forecast to trade at US$29,533 and US$2,721 respectively, taking the top two spots.
The predictions were based on their price levels seen on February 27, which were recorded at US$873, US$10,388 and US$1,258 respectively.
The growth in ethereum’s market capitalisation – calculated by multiplying the number of coins expected to be in circulation by the average forecast of the coin’s value – is in part driven by wider applicability of its underlying blockchain network, market participants told the South China Morning Post.
The value of bitcoin fell below US$10,000 in recent trading, after the US Securities and Exchange Commission instructed online trading platforms to register with the agency as exchanges, in a move that’s seen as adding more restrictions to the unfettered movement of digital currency.
This has in turn led more investors to buy ethereum in anticipation of more future token sales – or initial coin offerings (ICO) – to be launched by tech start-ups for funding their next innovative projects as they believe ethereum is the “go-to blockchain”, they said.
SJ Oh, a trader and vice-president at Hong Kong-based cryptocurrency broker Octagon Strategy, said he saw a pickup in ethereum trading interests recently, as some investors were increasingly buying the cryptocurrency so that they could use ethereum to pay for the next ICO to be launched by start-ups.
In an ICO, start-ups sell a percentage of the cryptocurrency – which in this case many expect to be ethereum – to early supporters of their blockchain project, often in exchange for other cryptocurrencies.
However, “bitcoin still accounts for an outsized portion of our flows [today]. To put it in perspective, average daily bitcoin turnover is still more than three fold that of ethereum,” said Oh.
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Kevin Loo, co-founder and chief strategy officer of CryptAM, a Hong Kong-based digital asset manager that offers funds that invest in cryptocurrencies to clients outside the city, also agrees that ethereum has a bright future.
Bitcoin has seen considerable volatility since trading began in 2009, and some market observers attributed it to “a problem of its own success” – the network is grappling with huge transaction volume throughput that has overwhelmed the block capacity, or more commonly referred to as the bitcoin blockchain’s lack of scalability.
But Loo said ethereum, launched in 2015, also faces similar scaling issues over the medium term, at least.
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“As an example, in November 2017, the ethereum network saw a new craze for CryptoKitties, a virtual kitten game which lets players buy and breed ‘crypto-pets’. This slows the network down and highlighted one of the challenges facing older blockchains – a lack of scalability,” said Loo.
Still, many industry observers, including Loo, are optimistic that ethereum’s scalability is being addressed by both users and the development community of the ethereum blockchain.
But whether that would make ethereum prices as volatile as its grandfather bitcoin still remains a subject of debate within the industry.