As a busy year 2024 has had its ups and downs including regulations, developments,
changes and new possibilities connected with two most prominent
cryptocurrencies—Bitcoin and Ethereum. Let's see the latest development of these
coins starting with Bitcoin.
Halving event in April 2024
One of the most anticipated events in the Bitcoin ecosystem was the halving event
on April 2024. Bitcoin successfully went through its fourth halving and reduced the
block rewards for miners from 6.25 BTC to 3.125 BTC, cutting the rate of new Bitcoin
entering circulation by half. Historically, Bitcoin halvings have driven price surges due
to the reduced supply, as seen in 2020 when the asset surged from $9,000 to over
$64,000 a year later. Investors were optimistic that the 2024 halving will trigger a similar price increase contributing to Bitcoin’s already strong rise.
Institutional Interest and Spot ETF Approvals
In May 2024, the SEC gave the green light to cryptocurrency spot Exchange Traded
Funds (ETFs) allowing institutional investors to invest in Bitcoin and other currencies
through regulated markets. This was a major breakthrough as it brought more
legitimacy to the asset as well as more inflows. There has been substantial institutional push by significant asset managers such as BlackRock thanks to which, the price of bitcoin has remained strong.
Favourable U.S. Crypto Policy
Of course, another catalysing factor for Bitcoin's performance is the positive turn in
crypto regulations in the United States. Upon repealing certain restrictive accounting rules (such as SAB 121) and introducing more crypto-friendly frameworks in May, it became clear that the climate for regulating digital assets had shifted considerably. In addition, political support (ex. D. Trump) for cryptocurrencies, it made things easier for Bitcoin and pushed forward the digital currency's stellar performance.
Bitcoin’s Market Dominance
In 2024, Bitcoin has demonstrated strong growth, driven by its halving event,
increased institutional adoption, and favourable regulatory shifts. Year-to-date,
Bitcoin has surged over 50%, with a one-year gain of 138.78%. Its role as a hedge
and a digital store of value continues to attract institutional investors, contributing
to its dominant market position, particularly as it outpaces Ethereum following the
latter’s Merge.
Ethereum's Underperformance: Technological Advances overshadowed by Market Challenges
While Bitcoin has flourished, Ethereum’s performance in 2024 has been less
impressive. Despite a series of significant upgrades and positive developments,
Ethereum has struggled to match Bitcoin’s growth, posting a modest 16% year-to-
date gain.
Technological Breakthroughs: Scaling and Efficiency
This year Ethereum has largely engaged in addressing scalability and improving user
experience. The Dencun upgrade in March increased the operational capacity of the
network considerably, thus reinforcing Ethereum’s appeal as the most competent
platform for dApps and smart contracts. Layer 2 solutions for example Arbitrum
and Polygon have also transformed in activity as they have increased the activity by
four times since the beginning of the year. These solutions tackle the problem of
scalability of the Ethereum network by allowing off-chain transaction processing
while keeping the security of the Ethereum main net.
Several important upgrades that will come, such as Danksharding and Single-Slot
Finality, are anticipated to lower transaction costs and provide enhanced
performance on the network. All these prospects suggest the future expansion of
Ethereum, especially on the parameters such as Decentralized Finance (DeFi) and
NFTs growth, which however, have not been visible as impactful numbers in the
general market of 2024.
Ethereum Spot ETFs and Regulatory Clarity
Like Bitcoin, Ethereum benefitted from the approval of spot ETFs in the U.S.,
providing institutional investors easier access to the asset. Furthermore, the SEC’s
closure of its investigation into Ethereum 2.0 in June 2024 removed a major
regulatory uncertainty for the network. These developments were expected to spark
stronger price performance, but Ethereum has only seen an 11% rise this year,
falling short of market expectations.
Potential: Ethereum vs Bitcoin
While Bitcoin continues to benefit from its halving cycle and disinflationary model,
Ethereum’s strength lies in its technological versatility, particularly with Layer 2
solutions like Arbitrum and Polygon that address its scalability issues. In the long run,
Ethereum’s ability to evolve technologically through upgrades like Danksharding and
Layer 2 integration positions it for broader use cases beyond a store of value, unlike
Bitcoin, which primarily functions as digital gold.
Conclusion
Bitcoin's current market performance reflects the benefits of its halving cycle and its increasing scarcity, while Ethereum, despite recent supply concerns, is setting the
foundation for long-term growth with technological improvements. Both coins are
evolving in different directions, and while Bitcoin is gaining more in the short term,
Ethereum's ongoing developments may boost its competitiveness over time,
particularly in sectors like decentralized finance (DeFi) and NFTs.
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