The Flippening: When ETH Overtakes BTC
Over the next 12 months, Ethereum’s market valuation will likely surpass that of bitcoin. Or at least that’s what some analysts are arguing. This is the so-called “flippening”, but how likely is it and what does it mean for traders?
A number of high-profile experts claim the flippening is growing closer “by the day” and crypto traders look for signs that Ethereum will replace Bitcoin as the most important cryptocurrency.
Digital Gold or Digital Oil?
To produce new tokens, Bitcoin – and until recently Ethereum – uses proof-of-work mechanisms. Mining for new Bitcoin means relying on computer power, a battle-tested and safe validation procedure that unfortunately consumes large amounts of electricity and computing resources.
Ethereum, after some two years of work, has transitioned to a proof-of-stake protocol. This is much quicker and more energy efficient as a consensus technique. This change was part of the much-discussed Ethereum “Merge”, which finally took place on September 15th this year.
The company estimates that this transformation will mean a reduction in energy use of 99% for new coins. This energy efficiency and resulting environmental friendliness are big selling points.
This is just the beginning of Ethereum’s plans, however. With its smart contracts, it aims to facilitate transactions and be the backbone of De-Fi, or decentralized finance, applications. In short, it hopes to be the fuel on which new financial, payment and many other ecosystems will run; a digital oil powering the economy.
Others argue that Bitcoin is more of a digital gold. There can only be a limited supply of it, and it can be seen as a sort of digital store of value or safe haven.
Furthermore, its supporters point out that Ethereum may become more centralized over time, something that is difficult to see happening to Bitcoin, with its extreme focus on decentralization. There is also the possibility, albeit a little remote, that Bitcoin mining may become more technically efficient.
Finally, this may not even turn out to be a two-horse race. New tech can move fast, many cryptocurrencies are available and there are other consensus mechanisms. A third digital currency might eventually overcome Bitcoin and Ethereum to grab the top spot. But Ethereum is the one we’re interested in right now.
The Flippening by Any Other Metric?
The flippening refers to the moment when Ethereum overtakes Bitcoin, meaning that it has a larger market capitalization. But market capitalization is not the only metric used to measure this event. It is the most widely accepted one but there are others.
- Active addresses
- Transaction count
- Transaction volume
- Total transaction fees
- Node Count
Looking at transaction counts and transaction fees, one could argue that the flippening has already occurred.
What Does it Mean for Crypto Traders?
Firstly, with its limited supply and strong investor sentiment, Bitcoin is unlikely to disappear overnight, should the flippening happen.
It is very difficult to say what this event will mean for it and other cyptos, although there will likely be effects on volatility, which could be extreme.
This is the time to stay tuned.
Times and situations may change, but if you want to stay on top, read this article from the Boolmap blog “How to Increase Your Edge When Trading Crypto”.