Why Ethereum Will Beat Bitcoin in 2023
The cryptocurrency market is facing a rude awakening as the shocking collapse of FTX, one of the largest exchanges in the world, shines a light on how risky, complex and unreliable the industry is. Bitcoin (CRYPTO: BTC) and Ethereum (ETH 6.56%) have seen their prices drop about 10% (at the time of writing) since the November 9 announcement that Binance was pulling out of the deal to buy FTX. Critics are doing a victory lap, celebrating the demise of crypto as we know it.
The top two cryptocurrencies, but aren’t going anywhere anytime soon, and they could both bounce back nicely next year, despite the general industry’s current turmoil. But will Ethereum give a better return than Bitcoin in 2023? Let’s take a closer look.
Updates for Ethereum
Compared to Bitcoin, Ethereum has some important characteristics that could allow the price of ETH, which is currently around $1,205, to rise next year. The most obvious is the network’s recent upgrade, called The mergerwhich transitioned Ethereum from an energy-intensive proof-of-work system to an environmentally friendly proof-of-stake mechanism.
While the merger does not immediately improve Ethereum’s transaction throughput or fees, it paves the way for Vitalik Buterin and his team to introduce sharding in 2023. Sharding will allow Ethereum to scale better and increase capacity. It can spread data volumes over the network and reduce congestion.
Ethereum is already a hotbed for the proliferation of decentralized applications (DApps), including decentralized financial protocols and non-fungible token marketplaces. But the potential implementation of sharding should spur an expanding ecosystem of interesting projects that will attract more users and developers. According to State of the DApps, there are currently just under 3,000 DApps running on the Ethereum blockchain. This number is sure to go up when shard chains are added.
And speaking of developers, it’s worth pointing out that no other cryptocurrency has as many developers working with it as Ethereum — not even Bitcoin. Findings from a survey conducted by venture capital firm Electric Capital showed that as of December 2021, Ethereum had over 4,000 open source developers helping to advance the network. Granted, this data is somewhat dated, but I think the same key theme applies today.
All this activity points to catalysts that can increase Ethereum’s price as we look towards 2023.
It’s anyone’s guess
It’s safe to say that 2022 has been a historically bad year for digital assets. Bitcoin and Ethereum are down 65% and 68% respectively this year, showing how volatile and unpredictable this asset class is. However, they have both produced incredible returns since their respective launches, and this is what investors should focus on.
Likewise, I really think it’s anyone’s guess whether Ethereum can outperform Bitcoin in 2023. Investors should definitely not buy into the asset class with a 12-month time horizon, as anything can happen in the short term, such as we’ve experienced in 2022. And with many financial experts predicting, and companies preparing for, a potential recession in the not-so-distant future, 2023 could be another down year for the industry.
Therefore, it is absolutely essential that anyone investing in the crypto space adopts a decade-long mindset. And continuing to focus on things that matter, like new upgrades, more users and regulatory clarity, is extremely important.
Ethereum may or may not surpass Bitcoin in 2023, but that doesn’t mean investors shouldn’t look into buying the world’s second most valuable cryptocurrency before the new year.
Neil Patel has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.