After Bitcoin (BTC 0.97%) After Bitcoin's price rose more than 150% in the last year, investors are now searching far and wide for cryptocurrencies that could outperform Bitcoin in 2024. An interesting candidate ether (ETH 0.48%)which is still the second most valuable cryptocurrency in the world with a market cap of a whopping $270 billion.
While Ethereum may not receive the same hype as Bitcoin, it is definitely worth a closer look, especially if some of the catalysts that are expected to drive Bitcoin higher fail to appear. Let's take a closer look.
The Spot Bitcoin ETF
Almost everyone agrees that investor anticipation for a new spot Bitcoin ETF is the key factor driving Bitcoin higher right now. The underlying logic makes sense: a new regulated financial product for investing in Bitcoin is intended to attract money from both retail and institutional investors. If institutional investors with trillions of dollars in assets under management invest just 1% of their portfolio in Bitcoin, this could result in literally tens of billions of dollars flowing into Bitcoin. That would almost certainly cause the price of Bitcoin to skyrocket.
But there are several problems with this argument, he says JPMorgan Chase (JPM 0.50%). In a December research note to clients, JPMorgan Chase specifically noted that much of the hype surrounding the Bitcoin ETF may be undeserved. For one thing, spot Bitcoin ETF products exist elsewhere in the world (both in Canada and Europe), and they are seeing relatively weak demand. What's to say the US market will be different?
In addition, there are currently other Bitcoin investment products to choose from. Popular options include: Grayscale Bitcoin Trust (GBTC -0.23%) And ProShares Bitcoin Strategy ETF (SMALL -0.51%). So instead of a huge inflow of new money into Bitcoin, there could be a reallocation of money from existing Bitcoin investment products into the new spot Bitcoin ETF. The net impact in this case would not be nearly as great as some are now predicting.
The Bitcoin Halving
The second big catalyst for Bitcoin is the upcoming halving. This event, which only occurs every four years, takes place in April and is set to be one of the most talked-about developments in the crypto market this year. Over the last three halvings, the price of Bitcoin has risen sharply, and many investors expect the same thing to happen again. In fact, some are now predicting that Bitcoin could break $100,000 by the end of the year.
Image source: Getty Images.
However, keep in mind that a growing number of influential voices on Wall Street believe that much of the impact of the Bitcoin halving may already be priced in. If you buy into the efficient market hypothesis, which states that all publicly available information is already factored into prices, then perhaps the halving will be a non-event.
After all, the entire market knows when the halving will take place. There are websites with clocks that count down the seconds. And the entire market has plenty of historical data to work with. Admittedly, the crypto market may not be as efficient at pricing information as the stock market, but it's safe to say that every major Wall Street firm is aware of the impact of the Bitcoin halving.
The case for Ethereum
While Ethereum may not have the same catalysts as Bitcoin, the company is working on significant improvements to its overall blockchain architecture. Ethereum hasn't really lived up to everything it originally promised for The Merge as it transitioned to a much more energy efficient network. This year could be an opportunity to reassure investors that everything is still on track. If these improvements result in lower fees, faster transaction speeds, and higher overall throughput, this could make Ethereum significantly more attractive to investors.
Additionally, Ethereum is more likely to benefit from increased development activity in the crypto space than Bitcoin. That's because, unlike Bitcoin, Ethereum is active in almost every major niche of the blockchain and crypto world, including non-fungible tokens (NFTs), decentralized finance (DeFi), blockchain gaming, the metaverse, and Web3. During the long crypto winter that began in 2022, many of these areas went into hibernation. But in a crypto spring they could come back to life.
And the better buy is…
I've tried to make a compelling case for Ethereum, but when forced to choose between Bitcoin and Ethereum, I still choose Bitcoin. Yes, the new spot Bitcoin ETF could be overvalued. And yes, the Bitcoin halving cycle could be disappointing this time. But with so much support from institutional investors, Bitcoin is closer to the mainstream than ever before in its history. If there is only one cryptocurrency to buy in 2024, it is Bitcoin.
JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Dominic Basulto has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and JPMorgan Chase. The Motley Fool has a disclosure policy.
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