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Bitcoin’s Pain Is Ether’s Gain As Crypto Upheaval Presents Opportunity

The one real, universal truth of cryptocurrencies has been volatility — whipsawing prices that move up and down, several percentage points in mere minutes.

But drill down a bit, and some stark differences in business models emerge. To that end, one might debate whether bitcoin will reign, not just as a favorite of speculators on exchanges, but as a consumer favorite when it comes to making payments — or whether an alternative may step forward and de-throne the reining heavyweight of the space.

If market capitalizations are a form of shorthand for enthusiasm that holders of a stock or commodity have for their future prospects, and equities are claims on a company’s future earnings, in crypto-land, speculators tend to grab onto digital offerings, bidding up prices because they think that other folks will bid up the prices sooner rather than later, resulting in outsized gains.

At this writing, the market cap of bitcoin is about $718 billion, as estimated by, followed by Ether, at $283 billion. Since the beginning of the year, Ether is up more than 200 percent year to date. By way of contrast, bitcoin is up about 30 percent. In general terms, enthusiasts in crypto seem to be relatively more “enthusiastic” about Ether than bitcoin.

There are some fundamental differences between the two. Bitcoin’s fortunes have waxed and waned on the promise and the peril of its adoption as payment mechanism.

You’ll recall that in recent months, Tesla (through Elon Musk) said that it would accept the crypto as payment for its electric vehicles; then, more recently, it said that it wouldn’t, in part due to the environmental concerns of actually “mining” the crypto.

It’s important to note that bitcoin and Ether (and by extension Ethereum) are two fundamentally different plays on different functions. Both are plays on decentralization: direct transactions and interactions that do not need central banks or traditional financial system intermediaries (like correspondent banks).

Similarities And Differences 

But that is where the similarities end. Bitcoin is essentially a play on price, with some nascent inroads into use as a store of value, and into commerce. As noted in this space, Musk tweeted his support for cryptocurrencies, stating, “The true battle is between fiat & crypto. On balance, I support the latter.”

But there are indications that there will continue to be significant headwinds in bringing crypto into the mainstream, both here in the U.S. and abroad. A joint statement from China Internet Finance Association, China Banking Association and China Payment and Clearing Association said: “Financial institutions, payment institutions and other member units must earnestly strengthen their social responsibilities. They must not use virtual currency to price products and services, underwrite insurance businesses related to virtual currencies or include virtual currencies in the scope of insurance liability, and must not directly or indirectly provide customers with other services.”

Chinese officials have singled bitcoin out in particular, with efforts, in the words of one official to combat mining and trading of bitcoin. Here in the U.S., the Treasury Department said on Thursday (May 20) that it will require crypto-related business transactions above $10,000 to be reported to the IRS. As stated by the department as part of a broad, general report on tax compliance, the Treasury wrote that “cryptocurrency already poses a significant detection problem by facilitating illegal activity broadly, including tax evasion.”

Might the hamstringing of bitcoin that seems to be gathering steam open the doors for Ether to gain ground — not just in higher prices, but wider acceptance within a variety of use case?

Broadly speaking, Ether is the crypto that runs on Ethereum, a platform that is in fact a programmable blockchain (Ether is the coin that is being bought and sold). Via the Ethereum site, the platform lets users send crypto; it also lets applications be developed and deployed (per the site: “that everyone can use and no one can take down). Ethereum is programmable, according to the site, so it can be used for assets and smart contracts — and even bitcoin.

Twitter feeds relaying Goldman Sachs commentary on Ethereum cite the Wall Street powerhouse as saying that Ether (the crypto) beats bitcoin as a store of value, and state that the Ethereum ecosystem gives developers a new way to create new apps and new use cases.

In other words, the play on bitcoin vs. Ether/Ethereum comes down to whether a crypto will thrive (the former) vs. a platform that also can be used with/for that very same crypto (the latter). The volatility continues, of course, and the ultimate verdict may not be rendered anytime soon.

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