Today is not a good day for bitcoin. Not only has the currency’s price fallen back several feet, but it looks like Ethereum – the second-largest cryptocurrency in the world and the primary competitor to BTC – is beginning to overtake the asset in several ways.
The Ethereum Blockchain: A New Home for BTC?
To be fair, Ethereum’s price is nowhere near that of bitcoin. In addition, the market cap is also not as strong, but bitcoin is now playing second banana to Ethereum in one major way: the amount of bitcoin wrapping that’s occurring on the Ethereum blockchain.
Up to this point in time, bitcoin could potentially be “wrapped” on the ETH blockchain through several ETH-based tokens or assets, including WBTC which has exploded in popularity since the first half of the year. As it turns out, there was more BTC wrapped onto the ETH blockchain just last month than there were new coins extracted by crypto miners.
Wrapping bitcoin on ETH presents many alleged benefits. For example, it is widely thought that doing so would potentially make bitcoin compatible with smart contracts. In addition, it could purportedly release new abilities – such as lending – to traders, while also making the currency workable on decentralized trading platforms.
Glassnode analysts wrote in a recent report:
This presents an interesting quandary for bitcoin. While it clearly has more utility after being converted onto the Ethereum blockchain, its underlying value ostensible comes from the 68 terawatt-hours of power that go into securing the bitcoin blockchain each year. How much bitcoin needs to migrate onto Ethereum before the necessity of the bitcoin blockchain itself starts coming into question? And, if this were to occur, what would back the value of bitcoin if not the massive amounts of energy that go into maintaining its existence?
Still, while things are looking extraordinarily well for Ethereum at the time of writing – thus far, the currency’s price has exploded by roughly 300 percent since the beginning of the year – it’s unfair to exclude BTC completely or count it out in some way. While the asset’s price may be floundering at press time, many analysts still feel that the asset is likely to turn itself around in the coming weeks or months.
We Can’t Count out Bitcoin Just Yet
Jon Pearlstone of Crypto Patterns fame, for example, recently commented:
Since bitcoin’s breakout above the key price level of $9,500 in late July, bitcoin has ranged between $10,500 and $12,500. While there are some bearish signs, the bulls have the edge with a bullish pattern on the weekly chart. The target is in the $15,000 range, which would be a retest of the 2019 high of $14,000. If bitcoin can break out above that resistance level with strong volume, there are longer term patterns with prices much higher, starting with a test of all-time highs around $20,000.