Ethereum v Bitcoin
Bitcoin has so far led the march in crypto, dominating the space in terms of market value, brand and popularity. Ethereum was launched in 2015. It allows users to create decentralized apps on top of the Ethereum platform. Ethereum hosts approximately 2800 such apps, and the total value locked in decentralized finance contracts amounts to $63 billion. Decentralized finance, or DeFi, extends blockchain use to financial services – savings, lending and insurance. In the future, use could extend further from non-financial services to execution of smart contracts.
The Next Iteration
Ethereum is set to undergo radical upgrades to address its scalability and sustainability. Energy usage is set to drop to that of a small town from current consumption levels, which are more on par with a country or province. That said, Ethereum 2.0 has been promised before but has yet to appear.
Bitcoin v Ethereum
Ronit spoke to Emilio on the same day that cryptocurrencies crashed across the board (May 19), with prices of Bitcoin and Ethereum declining intraday as much as 31% and 44%, respectively.
It was a reminder that cryptocurrencies, such as Bitcoin, remain highly volatile – as seen in Figure 1.
Figure 1: Volatility of Bitcoin versus Gold versus Fiat Currency
Note: We define volatility as the standard deviation of daily returns for the preceding 30 days.
Source: DataStream, Citi Research
Bitcoin volatility continues to be approximately ten times higher than major exchange rates. Data from Chainalysis suggests that the main sellers in this most recent crypto-crash were retail investors rather than institutions. Despite the price volatility, crypto supporters argue that the long-term thesis remains intact.
For more information on this subject, please see Global Diversified Banks - Global Financial Insights: Ethereum 101.
Citi Global Insights (CGI) is Citi’s premier non-independent thought leadership curation. It is not investment research; however, it may contain thematic content previously expressed in an Independent Research report. For the full CGI disclosure, click here.