Investors Who Try to “Beat Bitcoin” Are Doomed
Cryptocurrency is capable of so much more than just what we see from Bitcoin (BTC). Bitcoin can keep track of transactions, it’s a decentralized secure ledger, and, of course, it was the first and it remains the biggest.
Then again, there are other crypto projects that do more, smart contract functionality, AI networks, gaming – truly limitless possibilities.
So, on the surface, it makes sense that one of these smaller coins or new up-and-comers might “dethrone” Bitcoin someday.
See, in the crypto community, there’s been a concept batted around for a long time – it’s something called the “flippening.”
This is the idea of a moment where the total market cap value of, say, Ethereum (ETH) finally exceeds Bitcoin’s. Today, Ether’s total “market cap” is just short of $170 billion, while BTC’s is $350 billion – around a $180 billion difference, so it seems at least theoretically possible that a “flippening” might be in the cards someday soon.
Well, I’m going to show you why the people who believe in this are on the right track but reaching the wrong conclusion…
“Beat Bitcoin” Is the Wrong Game to Play
So, “flippening” kind of makes sense, because, after all, Ethereum has a much broader use case than Bitcoin. Bitcoin can store value, but Ethereum can be used for all kinds of smart contracts. It makes sense that the stronger use case would lead to broader adoption and higher value.
But the… let’s call ’em “flippeners“… have one important thing wrong: Ethereum isn’t the only smart contract platform crypto out there. It’s just the most well-known.
This means that Ethereum “flippening” and surpassing Bitcoin isn’t actually what we’re looking for here.
I mean, think about it. It’s like asking “when is the market cap of Google going to surpass the market cap of all the gold in the world? That’s when we’ll know that the internet has really made it big.”
That sounds absurd because it is absurd. (And for the record, all the gold in the world is worth more than $10 trillion, while Google’s is only over $1 trillion… which is still huge for one tech company.)
So, as for the so-called “flippening,” It’s never going to happen. Bitcoin is too foundational for crypto, and maybe more importantly, it’s only foundational for crypto and nothing else. It’s not a player in the game, it’s more like the court the game is played on.
If any crypto asset ever surpasses it, it would happen so far off in a totally unforeseeable future that there’s no point in speculating about it.
And it’s totally fine to imagine it or talk about “flippening” over drinks or bowls of Honeycomb or whatever, but the danger is in investing for that outcome. Do not juggle any allocations to try and maximize your exposure to “flippening” because it’s just not happening.
Besides, even if, at some far future date, some other coin was going to come along and surpass Bitcoin, it wouldn’t be Ethereum. That’s because, while most “civilians” may not be too aware of it, in the world of crypto, Ethereum is already old news.
Good news, but definitely old news.
It’s not the newest or most innovative smart contract platform crypto anymore, and it’s never going to be able to upgrade itself to the point where it’s just as effective as something newer or more innovative. A token project executed from the ground up to include new features is always going to have the edge over a project that wasn’t.
Right now, I think it’s really all Ethereum can do to maintain its position in the crypto world, rather than grow quickly. In a way… it’s kind of like Bitcoin in that regard.
The Real Smart Bet Is Crypto Itself
But there is another “flippening” that I do think matters: one that already happened. Right now, the level of “Bitcoin dominance” – how much of the overall crypto market’s value is constituted by Bitcoin – is at less than 40%. So, this other “flippening” already happened when that number fell below 50%.
Bitcoin saw its dominance fall below 50% most recently in early 2021, and it has remained there ever since. That means that, while the average person has only ever heard of Bitcoin, most crypto, by value, isn’t Bitcoin.
This is far from bad news. In fact, that’s how you’d expect a mature market of many different worthwhile assets to behave. If the stock market’s total value was tied up in one company, that’d be trouble. I mean, think of the 2010s market bubble; just six mega-cap stocks accounted for something like 25% of the entire value of the S&P 500, and 40% of the NASDAQ’s worth. Look where that’s gotten us.
And as more and more strong cryptos establish themselves, they’re going to add much-needed balance and liquidity to a crypto market that, at present, tracks overwhelmingly with Bitcoin. Big, diversified investment portfolios mean that this will always be something of a factor, but in the future, I expect it to be less so. Probably a lot less so.
And we’ll get a mature, healthy crypto market when this happens. I expect that the growth in value of non-Bitcoin assets and the process of gaining new users are going to drive each other in a powerful hyper-adoption cycle that will generate massive value for those of us already involved.
In the meantime, keep your crypto portfolio balanced. As I said, do not go overweight on ETH now or in the future. At the risk of repeating myself, it’s fine right now to be overweight on artificial intelligence (AI) tokens, but make sure your Bitcoin and Ether positions are reasonably sized – they’re foundational, not for big gains.