Ethereum’s rate of growth has slowed considerably compared to Bitcoin’s in recent months, to the point where Ethereum would now require a 40% swing just to match BTC’s ascendancy.
ETH Falling Behind BTC
Bitcoin has gained 2.5% on its value over the last month, while Ethereum has lost 17.5%. Looking at the numbers for the last quarter Bitcoin is down 25%, whereas Ethereum fell 45% in the same time period.
Taking quarterly performance as a starting point, in order for Ethereum to catch up with Bitcoin’s rate of growth it would require a 20% growth spurt for Ethereum – and a comparable loss or lengthy stagnation by Bitcoin.
So what’s behind Ethereum’s lagging performance of late?
Ethereum ASIC Miners
When Bitmain released their first dedicated Ethereum mining rigs back at the start of the second quarter, it marked the arrival of a storm that had been predicted for quite some time.
ASIC miners, or application-specific integrated circuit computers, are designed specifically to mine for cryptocurrency, and are many orders of magnitude more efficient than the typical PC.
Having more efficient hardware isn’t problematic in itself, but if large enough mining pools eventually congregate all the processing power in one place it would render Ethereum’s desire for decentralization null and void.
Vitalik Buterin has been ringing the alarm about Bitmain for a while now, and so far all we have to go by is the assurance by Bitmain that they exercise discretion with the distribution of their machines.
Buterin and his team will be rolling out updates like Casper in the coming months, which is designed to move Ethereum away from Proof-of-Work (PoW), and thus, away from miners altogether.
Until then, the uncertainty surrounding Ethereum’s long term decentralization, coupled with the uncertainty from the delayed Casper deployment, may have contributed to its price lag in recent months.
Dominance of Bitcoin
As the cryptocurrency market boomed around the start of the year, Bitcoin seemed like the rising tide that floated all boats.
Yet Bitcoin’s position as the first port of call is a double-edged sword. In a bull market, the gains trickle down. In a bear market they’re distributed a lot less, and any new investor coming into the market in such uncertain times is likely to go with the coin that they’ve heard of – Bitcoin.
More knowledgeable investors, and financial institutions also have good reasons to go with Bitcoin at the current moment, as BTC’s worldwide processing power is close to 400,000 times that of Ethereum’s.
For institutional investors, that translates as 400,000 times more security, since any hack would have to bring down the entire Bitcoin network – a process made more difficult with so many targets to attack.
Ultimately, Bitcoin still benefits from its age – in terms of both ‘brand’ recognition and foundational setup.
Ethereum isn’t the only game in town when it comes to launching ICO and dApps anymore. The headlines will go to the likes of EOS, who recently recorded the largest ICO in history, but other platforms have made just as much, or more, headway in challenging Ethereum at its own game.
Ontology’s launch on the NEO platform is perhaps the most laudable example we’ve seen of an altcoin other than Ethereum successfully handling a token launch. But even the Bitcoin blockchain is being opened up to token issuances and dApps with the prevalence of the Omni Layer – the protocol upon which Tether (USDT) is hosted.
Ultimately, Ethereum is still the king of the dApps and ICO’s, and has retained its number two spot in market cap rankings for some time. But change is on the horizon, for good or bad.