The concepts of cryptocurrency and blockchain technology were born with Bitcoin in 2009. Since the launch of Bitcoin, countless projects have offered seemingly endless variations on the use cases and possibilities of these technologies. Ethereum was conceived in 2013 and launched in 2015, pioneering new utilizations of blockchain and cryptocurrency that went far beyond the scope of Bitcoin’s vision of borderless online currency. Ever since, Ethereum has consistently ranked behind only Bitcoin as the most popular cryptocurrency. Ethereum’s supporters have long been talking about the possible “flippening” that would see Ethereum replace Bitcoin at number one. Could the flippening really happen? And if so, when?
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Why Ethereum Can Do Things That Bitcoin Can’t
Canadian computer programmer Vitalik Buterin was working as a journalist for Bitcoin Magazine when he first conceived of the ideas that would form the basis for Ethereum. Buterin saw a future in which blockchain technology could be used to secure more than just money. The same technology that allowed for cryptocurrency transactions could also be used to provide immutable digital records for assets such as stocks and real estate. Core to Buterin’s ideas was the creation of automatically executed smart contracts, opening up a new world of possibility for the blockchain technology which Bitcoin pioneered.
Many of the cryptocurrency and blockchain use cases that have received mass attention in recent years have been made possible by Ethereum. Non-fungible tokens (NFTs) have been one major example of this. From digital artworks to virtual trading cards for large organizations such as the NBA, NFTs have attracted huge sums of money and hype over the past few years. In January 2021, Bloomberg reported on data from Chainalysis Inc. that showed $40 billion had been spent on Ethereum-backed NFTs in 2021 alone. A more conservative estimate from DappRadar placed NFT sales for 2021 at $20.49 billion. Either way, this represents enormous year-on-year growth for a marketplace that DappRadar estimates saw less than $95 million in sales in 2020.
Decentralized finance (DeFi) is another fast-growing market which is closely tied to Ethereum. DeFi incorporates a diverse suite of financial instruments which are issued on blockchains such as Ethereum without the need for traditional intermediaries such as banks or brokerages. In October 2021, Bloomberg reported that the total value of DeFi assets had surpassed $100 billion for the first time.
Ethereum’s dominant position in these emerging markets has caused many to believe that the flippening may be closer than many expect.
Measuring the Flippening
There are a variety of ways in which Ethereum could be said to achieve its Bitcoin flippening. BlockchainCenter.net tracks measures including the number of active addresses, transaction volumes, and Google search trends for Ethereum against Bitcoin as evidence of the extent to which the flippening is happening. But the most common definition is the exchange ratio between Ethereum and Bitcoin.
In December 2021, CoinTelegraph interviewed a range of experts to gauge opinions on the likelihood of the flippening happening. A spokesman for cryptocurrency exchange Binance’s research wing told CoinTelegraph that Ethereum’s movements against Bitcoin in late 2021 suggested a decoupling may be occurring between the two largest cryptocurrencies. Evidence for this includes Ethereum’s growth of 505% across 2021, versus growth of 105% for Bitcoin.
Ethereum’s movement against Bitcoin in 2020 and 2021 lends strong support to the flippening narrative. The value of 1 ETH surpassed 0.02 BTC in February 2020 and continued rising to above 0.03 BTC by the end of March 2020. Surging growth throughout the rest of 2020 and 2021 pushed Ethereum to a high of 0.086 BTC in December 2021.
However, this is not Ethereum’s all-time strongest position against Bitcoin. That was achieved during the last cryptocurrency bull run, when Ethereum hit a high of 0.151 BTC in July 2017 — almost double its December 2021 peak. Ethereum last saw a ratio above 0.1 BTC at the tail end of the previous bull run in January 2018. The ratio of Ethereum to Bitcoin has fallen in the months since its December 2021 peak. While many still believe the flippening to be an imminent possibility, some voices are strongly urging caution.
The Case Against the Flippening
Morgan Stanley Wealth Management issued a report in February 2022 that outlined many challenges that could potentially derail Ethereum’s upward momentum. These include high gas fees curtailing transactions on the Ethereum network, potential stricter regulation for DeFi and NFTs, and increasing competition for other blockchain networks. Morgan Stanley’s report also noted that Ethereum appears to be more centralized than Bitcoin, with the top 100 holders of Ethereum accounting for 39% of the cryptocurrency’s entire market cap, against 14% for Bitcoin.
Many competing cryptocurrency platforms have been hyped as Ethereum killers. Some of the most prominent include Cardano, which was created in 2015 by Vitalik Buterin’s Ethereum co-founder Charles Hoskinson; Binance Chain, which enjoys the backing of the world’s largest cryptocurrency exchange; and Solana, which promises transaction fees that are 60,000 times cheaper than Ethereum.
There are countless other cryptocurrencies that are seen as explicit rivals to Ethereum’s dominance in use cases such as DeFi and NFTs. Some have attracted high-profile defections from Ethereum. In 2017, DapperLabs created CryptoKitties, which was the first NFT application to achieve popularity on Ethereum. In 2020, DapperLabs created its own Flow blockchain to facilitate its hugely successful NBA Top Shot NFTs. In March 2021, NBC reported that more than $230 million had been spent on NBA Top Shot. This included $200,000 for one clip of LeBron James.
While many believe Ethereum can still flip Bitcoin for first place in the cryptocurrency space, others are equally committed to overturning Ethereum in a flippening for the number two spot.
Will the Flippening Happen?
An Ethereum Price Predictions Report issued by Finder.com in Q2 2021 drew on contributions from a global network of crypto specialists and academics to gauge opinions on Ethereum’s likely future performance. Some 93% of the respondents to Finder.com’s report said they believed Ethereum would eventually surpass Bitcoin in terms of transaction volume. Some 48% said they thought this would happen before the end of 2022, while 68% said they believe Ethereum would also topple Bitcoin in terms of market cap, and 58% thought this would happen by the end of 2025.
The Finder.com report proved eerily accurate when attempting to predict Ethereum’s short-term price trajectory. The experts surveyed gave an overall price prediction of $4,596 by the end of 2021. Ethereum actually surpassed this figure, hitting $4,812 in November 2021. Those currently holding Ethereum may therefore have good reason to be excited about the report’s predictions of Ethereum hitting $17,810 in 2025 and $71,763 in 2030. However, there are also reasons to be cautious. Ethereum fell from its November 2021 high to hit a low of $2,405 in January 2022.
There are many variables at play that could affect Ethereum’s possible flippening of Bitcoin. Ethereum may lose its dominance over other blockchain platforms. New technologies may emerge which make the currently cutting-edge applications of DeFi and NFTs obsolete. But many are fully committed to seeing the flippening become reality, and that may make the flippening a self-fulfilling narrative.
