The only way to know if Ethereum can outperform Bitcoin in 2020 or 2021 is to ask — is Ethereum a good investment? Because a good investment is more than just the price of something versus something else.
A good investment requires a number of boxes to be checked. Let’s see how many of these boxes Ethereum can check off.
Ethereum’s Price — Is it Accurate?
The price of an investment should reflect its value. If the price is lower than it’s value then an investor will typically say the asset is ‘undervalued’ and should be purchased (since the price is likely to rise and meet the asset’s value). Conversely, if the price is far higher than the underlying value of an asset, an investor will say the asset is ‘overvalued’ and should be sold (since the price should fall to the asset’s true value).
Unfortunately, Ethereum is a fairly new coin and company — having come into existence in 2015. A truly accurate representation of its value cannot be given with the same strength as, say, a representation of Apple or Microsoft.
The best way to gauge Ethereum’s price to value is simply by keeping up with solid bitcoin and crypto news sites and reading what they publish about developments to Ethereum.
One current development to keep abreast of is Ethereum 2.0, which claims:
“Eth2 is a long-planned upgrade to the Ethereum network, giving it the scalability and security it needs to serve all of humanity. The first stage of Eth2, called Phase 0, is planned to launch in 2020.
Eth2 will reduce energy consumption, allow the network to process more transactions, and increase security. Technically speaking, Ethereum will become a proof-of-stake blockchain and introduce shard chains. This is a huge change to how Ethereum works and it should bring equally huge benefits.”
It could be argued that Ethereum’s price has not factored in this upgrade just yet. Many investors may be sitting on the sidelines waiting to see if the promises made will hold up or not.
If Ethereum 2.0 can meet and exceed the promises it makes then it could easily outperform Bitcoin in 2020 and 2021.
This is partly because the major upgrades and changes to Bitcoin (such as the 2020 halving) have already occurred and are therefore more or less priced in.
Ethereum has not upgraded yet. If it’s a big letdown than it will underperform Bitcoin, but if it’s a big step up — especially staking Ethereum for profit — then the value of Ethereum will rise and so should its price.
Ethereum’s Performance — How Will it Affect Price?
The other factor to consider when wondering if Ethereum is a good investment is whether or not it delivers on the value it promises to deliver.
In Ethereum’s case, it promises to deliver smart contract dApp’s that give people the ability to use blockchain technology in the digital realm.
Obviously, Ethereum can already host smart contracts and has been doing so for years. But then the question of scale comes into play.
Can Ethereum scale?
In other words, can Ethereum host these smart contracts and dApps for a rapidly growing user base? After all, the more people who use a service, the more valuable that service becomes.
Currently Ethereum lags behind some of its rival cryptocurrencies in terms of scalability.
This would mean that those other cryptocurrencies are better investments than Ethereum and might outperform Ethereum and even Bitcoin.
Bitcoin might even outperform Ethereum in terms of money transfers as more people use Bitcoin’s Lightning Network.
However, again we see Ethereum 2.0 on the horizon. The promise is that of a far more scalable Ethereum. And Ethereum already has far more momentum and brain power as far as developers and their dApps. Once ETH 2.0 kicks in — we could see a significant increase in new developers and more powerful dApps, this in turn would bring in more users, which in turn would increase the value of Ethereum and propel its price to outperform Bitcoin in the next few years.
As you can see, a great deal of price and value speculation rests on the promise of Ethereum upgrading to its second major version.
Therefore it’s time to do more research and always keep updated on the progress. Then you can judge if Ethereum is overvalued or undervalued when compared to Bitcoin — and if you should buy or sell.