There are many races going on in this space, but the most exciting one currently is the race between bitcoin and ethereum.
The two have been on a chase for quite some time, with ethereum’s market cap of $27 billion now standing higher than bitcoin’s market cap just a few weeks ago.
But bitcoin has been running too, with its market cap rising to $46 billion. However, eth has risen today by some 10% while bitcoin has sort of flatlined.
That means eth’s market cap has now reached 60% of bitcoin’s, nearing its all time high of 61% around last week.
That’s probably for many reasons. Eth has smart contracts, an alliance, a very innovative ecosystem, probably the most capable developers as well as the greatest numbers, the highest level of blockchain security and the highest level of nodes, making it the most decentralized.
Then, there’s bitcoin’s troubles. Despite wide name recognition, significant network effects for being the first, and despite attracting everyone’s focus initially, bitcoin has been unable to innovate with its protocol stagnating.
Fees for a bitcoin transaction have now reached $7 at Kraken, with median fees standing around $5 while the backlog no longer clears.
It’s a disaster, many think, as the magic internet money has become slower and more expensive than last century’s payment systems.
So businesses and individuals are leaving, with eth now making some inroads on the payments side as some merchants, albeit a very small number, have begun accepting it.
The main reasons for doing so are two. Firstly, why buy eth when you can earn it and, secondly, why convert it to fiat when you can spend it directly?
Money, at the end of the day, is a means to an end rather than an end itself. Its main purpuse is to exchange it into goods. So eth holders will at some point want to spend it, whether to buy a house, car, laptop or maybe some lunch.
The only way they can do so currently is by selling it for dollars, then buying whatever good. But why sell it for dollars when you can buy the good directly?
Obviously most of them will want to hold their eth, but at some point all of them will want to spend it unless they are giving it away as inheritance. That means merchants might want to get some of that $27 billion worth of eth which is currently waiting to be spent.