3 reasons to buy Ethereum, 1 to stay exclusively on Bitcoin: Bitwise CIO

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In recent comment shared on BTC). Hougan presented three compelling reasons why investors should choose ETH, while also providing a critical viewpoint in favor of remaining exclusively invested in BTC.

Ethereum vs. Bitcoin: 3 reasons to be pro-Ethereum

Hougan started by emphasizing the importance of diversifying your cryptocurrency investments. Drawing an analogy to the early days of the Internet, he pointed out how hard it is to predict which technologies or companies will dominate in the long run. “It’s very difficult to accurately predict the future,” Hougan noted, referring to investors who bet on early Internet companies such as AOL and Pets.com that failed to deliver on their initial promises despite the overall growth of the Internet.

Applying this lesson to cryptocurrencies, Hougan advised a differentiated approach to hedge against similar uncertainties. Ethereum’s current market cap is around $420 billion, which is significant, but still only about a third of Bitcoin’s $1.3 trillion market cap. Given these numbers, Hougan proposed a default starting allocation of 75% Bitcoin and 25% Ethereum for investors seeking broad market exposure.

Hougan’s second point was about the functional differences between Bitcoin and Ethereum. He described Bitcoin primarily as a “new form of money,” highlighting design choices intended to enhance its usefulness as a sound monetary system. “Every design choice made by the Bitcoin ecosystem is aimed at making Bitcoin the best form of money that has ever existed,” he said, emphasizing Bitcoin’s focused development towards optimizing its operate as a currency.

Conversely, Ethereum is characterized by its role as a core technology for creating recent applications that leverage its programmable money capabilities. This includes everything from issuing stablecoins to enabling complicated decentralized finance (DeFi) ecosystems.

“Ethereum’s primary function is to enable money programming,” Hougan explained. He argued that the continued development of the Ethereum ecosystem provides broader exposure to the potential applications of blockchain technology, which is still in its early stages.

The third argument for Ethereum was based on historical performance data. Hougan pointed out that historically, portfolios that include Ethereum and Bitcoin have shown better performance metrics, both in absolute terms and on a risk-adjusted basis, over full cryptocurrency market cycles.

“My favorite thing about this table is that the +ETH wallet provides both higher returns and a lower maximum withdrawal,” he emphasized. This historical analysis suggests that Ethereum could offer better downside protection and higher potential returns, although Hougan cautioned that “historical performance does not guarantee future returns” and noted that over shorter, more recent periods, a pure Bitcoin strategy would outperform.

Counterpoint: Why a Bitcoin-only strategy might be preferable

Addressing the other side of the coin, Hougan discussed why many investors prefer a pure Bitcoin strategy. This perspective is particularly relevant to those interested in macroeconomic issues such as fiat currency degradation and inflation.

Hougan assumed that Bitcoin’s dominant position and its community’s focus on becoming a recent form of money make it likely to continue to be a leader in the space. “It has a lot of upside, and size matters in money,” he said, supporting the idea that Bitcoin’s simplicity and its specific application as digital gold may be more attractive for certain strategic investments.

“Money is a huge market. If BTC succeeds, there is plenty of room to launch. […] In tiny, my view: If you want to make a broad bet on cryptocurrencies and public blockchains, you should own multiple crypto assets. If you want to make a specific bet on a recent form of digital money, buy Bitcoin,” Hougan concluded.

At the time of publication, ETH was trading at $3,514.06.

Ether price, 1-week chart | Source: ETHUSD on TradingView.com

Featured image created with DALL·E, chart from TradingView.com


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