Ethereum classic (CCC:ETC USD) traded for $89 on May 18, whereas ether (CCC:ETH USD) was priced at $3,407. So you can see that Classic is a cheaper way to buy Ethereum. ETC-USD has some differences in features and structure, but for the most part it’s a way to buy into the larger tokens and own more of the cryptocurrency.
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But what about performance? After all, Ethereum is up 367% so far this year. ETH-USD ended the last year at $730.37 according to Yahoo Finance. At the time of this writing on May 18, it sits at $3,407. This makes the price 4.67 times the price on December 31, or a 367% increase in value. (Remember we need to subtract 1.0 or 100% to actually measure gain or upside potential).
But look at this. ETC-USD ended last year at $5.70, according to Yahoo data. This means that at today’s price of $89, the crypto is now 15.64 times where it was on December 31st. That means his performance was 1,464% (don’t forget to subtract the 100%).
So this means that Ethereum Classic has clearly outperformed Ethereum with a gain of 1,464% versus 367%. That’s 4x better performance. What is going on here?
The outstanding features of Ethereum Classic
Just like Ethereum, Ethereum Classic is designed to run smart contracts. It came about as a result of a “fork” in 2016. A fork is a split between developers of a cryptocurrency. A program and/or policy change is proposed that the followers in a group do not agree with.
According to Decrypt.com, the 2016 fork arose out of a “controversy over how best to solve a hack that stole over $50 million.” Ethereum Classic is a continuation of the original blockchain platform. According to its proponents, it is “free from external interference and subjective manipulation”.
Ethereum Classic also has a limit of 210 million tokens. Ethereum has no such limit. According to Coinmarketcap.com, ETC-USD already has 116.3 million ETC in circulation. That is 55.4% of the total amount.
So it will be a while before the token enters a supply shortage close to that of Bitcoin (CCC:BTC USD). Bitcoin has 18.7 million issued and pending from its total supply cap of 21 million, or 89% of the total. Given that less than 11% of all available bitcoin can be mined, the tight supply is adding to the upward pressure on bitcoin.
In late 2020, Ethereum Classic Labs gave ETC holders access to the fast-growing DeFi (decentralized finance) market. They introduced “Wrapped ETC” which allows ETC holders to “stake” their tokens. Here they agree not to trade the tokens for a period of time in exchange for receiving interest payments in Wrapped ETC. In fact, it works much like a certificate of deposit at a bank.
What to do with Ethereum Classic?
Some see ETC tokens as a faster way to make money on the Ethereum blockchain platform. The market cap is only $10.3 billion. Ethereum has a market value of $395 billion. So the value of ETC is only 2.6% of the value of ETH.
Here is the thinking. Expect people to increase the ETC price to 10% of ETH. That would give it a market cap of $39.5 billion. And of course, ETH would likely surge by at least another 50% by then. So that would give it a market cap of $60 billion (ie, 10% of $600 billion).
Let’s say it takes three years for that to have an impact. That’s a 482.5% gain over three years and represents a great ROI for most investors. On an annual basis, the ROI is 79.9% every year for three years. That would be 9x faster than ETH’s 50% gain.
Given how far and fast Ethereum has climbed this year, and the apparent “catch-up outperformance” of ETC as well, this seems doable. Therefore, many Ethereum investors will likely consider diversifying some of their future ETH purchases by buying ETC instead.
At the time of publication, Mark R. Hake held a long position in Bitcoin (BTC) and Ethereum (ETH). The opinions expressed in this article are those of the author and are subject to InvestorPlace.com’s publicity guidelines.
Mark Hake writes about personal finances mrhake.medium.com and runs the Total Earnings Value Guide which you can view here.
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