In the previous post, the market cap of Ether was compared to that of the top 10 cryptocurrencies (excluding Doge) for each of Bitcoin's halving cycles. Additionally, a simple logarithmic model was established to estimate how much market cap growth Ether could expect within the current halving cycle. The same was done for Bitcoin in the post before the previous one. This post analyzes Bitcoin and Ether together.
While most reputable cryptocurrencies are performing well in the market, the cryptocurrency asset/technology space has become rife with rivalries. The ____ maximalists approach to investing is very focused and has the potential to yield significant gains, however, risk levels are also increased. (A saying about eggs and baskets comes to mind.) While a portfolio of a single token is very extreme, a portfolio of 100's of cryptocurrencies is equally extreme. On one hand, all gains are concentrated on a single cryptocurrencies, whereas on the other basically every single position in the 100's of cryptocurrencies have to be winners. I have personally taken a more passive approach to trading cryptocurrencies and typically only hold 10 or so at a time. I am definitely missing out on overnight 10-100x gains but my goal is to balance maximizing gains with reducing risk.
Both Bitcoin and Ether seem to be currencies that will have a place in the cryptocurrency market in the future. While I have some concerns about the long-term sustainability of cryptocurrencies using Proof-of-Work consensus algorithms, it would seem that Bitcoin is here to stay as both a liquid asset and a store of value. While the on-going issue relating to gas fees is restricting access to a lot of decentralized financial products and applications, ether's value and future potential is (in my opinion) significant.
This post is going to look at how the market cap of Bitcoin and Ether compare to each other (as well as the combined market cap of the top 10 cryptocurrencies) for each of Bitcoin's halving cycles. A simple linear model will be presented to assess to discuss potential relative dominance trends.
Method:
The method employed for this analysis is equivalent to that used in the previous post, the only significant difference is that both Bitcoin and Ether are assessed together relative to the market cap of the top 10 cryptocurrencies. The results for the market cap growth are shown in the figures below.
To assess the market cap dominance of Bitcoin over Ether, the market cap of Ether was divided by the sum of the market caps of both cryptocurrencies. The results for this market cap dominance analysis are shown in the figures below; read on for a guide on how to interpret the results.
The maximum market cap dominance value was extracted within each halving cycle and that data was used to create a simple linear dominance model. The resulting figure is also shown below.
Results:
Figure 1 - Market cap growth of Bitcoin, Ether, and the top 10 Cryptocurrencies after Bitcoin's first halving event:
Figure 2 - Market cap growth of Bitcoin, Ether, and the top 10 Cryptocurrencies after Bitcoin's second halving event:
Figure 3 - Market cap growth of Bitcoin, Ether, and the top 10 Cryptocurrencies after Bitcoin's third halving event:
Figures 1-3 combine the data shown in the previous two posts analyzing Bitcoin's Market Cap and Ether's Market Cap. Both of the previous posts and Figures 1-3 show that both cryptocurrencies have experienced significant growth throughout the past few Bitcoin halving cycles. In terms of market cap, Ether has always lagged behind Bitcoin. However, in terms of market cap growth, Ether has dominated Bitcoin (as well as an equally-weighted index of the top 10 cryptocurrencies) over the past two Bitcoin halving cycles. It is likely that both of these cryptocurrencies will continue to grow in the long term.
Figure 4 - Market cap dominance of Ether vs. Bitcoin after Bitcoin's first halving event:
Figure 5 - Market cap dominance of Ether vs. Bitcoin after Bitcoin's second halving event:
Figure 6 - Market cap dominance of Ether vs. Bitcoin after Bitcoin's third halving event:
Figures 4-6 show how Ether's market cap compares against that of Bitcoin. After Bitcoin's first halving event (and Ether's creation), the market cap of Ether (relative to the summed market cap of Bitcoin and Ether) has stayed between close to 0% and 20%, meaning that Bitcoin's dominance (relative to the summed market cap of Bitcoin and Ether) has stayed between 80% and close to 100%. The total value of the Bitcoin market is therefore significantly higher than that of Ether in time before Bitcoin's second halving event.
Figure 5 shows that while Ether mostly stayed below 20% in market cap dominance, there were two instances where dominance peaked at around 40%. This is a significant increase in relative market cap relative to Bitcoin and also relative to historical performance.
Figure 6 adds a new element to the story: while Figure 4 and 5 are more jagged, Figure 6 is a lot smoother indicating that both the market caps of Bitcoin and Ether are larger and that there is more market cap (and probably price) stability. Figure 6 also shows that Ether's market cap dominance has stayed around or below 20% for majority of the current halving cycle, but has reached a peak of a little over 20% in the past few days. So what could this mean for Ether and for Bitcoin?
Figure 7 - Maximum Ether market cap dominance model:
The linear fit of Ether's maximum market cap dominance for each of Bitcoin's halving cycles is shown in Figure 7. This figure indicates that Ether's dominance within this halving cycle is between the two prior maxima; the lowest historical performance has been exceeded, but the maximum historical performance has not. This does not mean that Ether's market cap dominance will continue to increase to 40% or higher, but it might be something to keep an eye on.
The linear fit itself indicates that there might still be some room for Ether's market cap dominance to grow within the current Bitcoin halving cycle, from the current level near 20% up to a potential future level of 32.7%. (Again, almost anything could happen however this is something that I will be keeping my eye on).
Conclusion:
While a lot of the cryptocurrency community pits their favorite currency against the rest, the cryptocurrency space is not a zero-sum-game. Some currencies outperform others, but knowing what currencies and when to invest to achieve optimal profits is between very difficult and impossible. Bitcoin and Ether account for the majority of the cryptocurrency market cap, and in the long term have both yielded significant gains. A portfolio holding both can help achieve gains and reduce risk, while providing access to some Bitcoin-Ether trading opportunities that could increase an investor's holdings in both cryptocurrencies in the long term.
Let me know in a comment below if there are specific analyses that you'd like to see. If you appreciate the post, please leave a like/comment/tip below. Additionally, if you want to support this work, feel free to donate to any of the following addresses:
BTC: bc1qkux20yl9u0ky9jsutanclf5yt0spjhlrf0sh78ETH: 0xB74499C370359ecf11dB2EE9B0B602625Af953C3
DOT: 15kVFuW6Mu5a6ezGoSgc4XtVqqLon9F6ugFjK2SdbG4UCSSD
XTZ: tz1gxDiDBMVpuTreH4RaYiRzHq4Ds8AqsNxA
ATOM: cosmos157557w2rcw697lct3c7p8payqawc0ywa8vmhlt
BAT: 0xB74499C370359ecf11dB2EE9B0B602625Af953C3
Disclaimer: This post should not be construed as investment advice. Any reference to an investment's past or potential performance is not, and should not be construed as, a recommendation or as a guarantee of any specific outcome or profit.
