In the wild world of crypto, various cryptocurrencies have proven to be an excellent store of value over time.
Due to their market performance, cryptocurrencies like BNB, Tether, and SOL have shown positive growth and maintained their store of value, especially during market shifts.
Among these cryptocurrencies, Bitcoin and Ethereum are the top two. However, almost every investor wants to know which store of value is better.
In this article, we compare these two crypto giants. We will look at factors like their market performance over the years, unique strengths, and future expectations.
Recommended reading: Solana vs Ethereum: Which Ecosystem is the Best
To know more, keep reading below!
Key Takeaway
- A store of value is essential in investing as it provides a safe haven for assets during market volatility, inflation, or economic uncertainty.
- Bitcoin’s decentralized ledger, cryptographic algorithms, and open-source code have established it as a more trusted and stable crypto investment even when the market is volatile.
- Ethereum, the world’s most versatile cryptocurrency, has gained traction with its smart contract and fast transaction capabilities.
- Bitcoin's scarcity and security make it a better choice, but Ethereum's flexibility and expanding use cases must be addressed.
Store of Value
Let's briefly define what we mean by “store of value.”
A store of value is an asset that maintains its value over time. It allows individuals to preserve their wealth and purchasing power regardless of how unstable the market is.
A store of value is essential in investing as it provides a safe haven for assets during market volatility, inflation, or economic uncertainty.
It helps protect wealth from depreciation and ensures that investments retain their value for future use.
Here are some popular assets known to have a high store of value:
- Gold
Due to its rarity, durability, and limited supply, this asset is traditionally considered an excellent store of value.
- Real estate
The real estate market appreciates year over year, making it one of the best stores of value.
- Currencies
Stable fiat currencies like the US dollar or Swiss franc are well known for serving as a store of value against other currencies with dwindling value.
Characteristics contributing to the store of value:
- Scarcity: Limited supply to prevent devaluation.
- Durability: Ability to withstand wear and tear or degradation.
- Portability: Easy to transfer and store.
- Divisibility: It can be divided into smaller units.
- Fungibility: Interchangeable with other units.
- Security: It is resistant to counterfeiting or tampering.
Note: Store of value should not be mistaken for medium of exchange. This is because “Store of Value” focuses on preserving wealth over time, prioritizing security and scarcity. While ‘Medium of exchange” enables transactions. It prioritizes convenience, speed, and widespread acceptance.
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Bitcoin as a Store of Value
Bitcoin, the granddaddy of cryptocurrencies, disrupted the traditional financial industry in 2009 as a digital, globally accessible version of gold.
Besides being regarded as the gold standard of cryptocurrencies, Bitcoin has been widely adopted due to its key features: a fully decentralized blockchain, a capped total supply of 21 million bitcoins dictated by the Bitcoin Protocol, and a robust security infrastructure.
However, the theory of the “Blockchain Trilemma” suggests that a blockchain can't simultaneously achieve optimal levels of the three fundamental properties of a blockchain network, which are:
- Decentralization
- Scalability
- Security.
In Bitcoin, the network prioritizes security and decentralization, which limits its scalability compared to platforms like Ethereum.
Note: Other than Bitcoin and Ethereum, different blockchain networks address the trilemma in various ways, often making trade-offs to suit their specific use cases and goals.
Bitcoin’s decentralized ledger, cryptographic algorithms, and open-source code have made it more trusted and stable even when the market is very volatile, making it a better store of value.
Bitcoin's adoption rate is 5.9%. Its dominance as the most valuable cryptocurrency is fueled by institutional investment, which has led to a surge in demand, thereby driving up its value.
Its use case expands beyond digital gold to include cross-border payments, DeFi, peer-to-peer payments, donations, speculation, investments, crowdfunding, etc.
Although it is still considered a risky investment, its unique combination of scarcity, security, and growing demand solidifies its position as a leading digital asset.
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Ethereum as a Store of Value
Ethereum, the first multi-faceted cryptocurrency, was created to address Bitcoin’s insufficiencies.
It is the pioneering blockchain that created the ability for developers and innovators to build upon blockchain technology, thereby creating a platform for various digital innovations which ETH secures (its native token)
As the world’s most versatile cryptocurrency, its blockchain gained traction with its smart contract and fast transaction capabilities.
Ethereum serves as a universal platform for tokenizing and owning real-world assets - including institutional stablecoins. Ethereum has created a way for individuals, financial institutions, and governmental bodies to own and participate in the growing digital economy.
Its expanding ecosystem, driven by Decentralised Finance, NFT marketplaces, Gaming, and increasing institutional investment, has positioned it as an attractive store of value for most investors.
You should know that Ethereum's blockchain was intentionally designed to support programmable smart contracts. This allows smart contract layers (known as rollups or L2s) built on the blockchain to leverage its robust security while optimizing for speed and scalability.
Ethereum's native staking yield increases with economic activity across the L1 (base layer) and ETH L2s, creating a synergistic relationship between the ecosystem's growth and sticker rewards.
In September 2022, the blockchain transitioned to Proof of Stake. Before that, it implemented the Ethereum Improvement Proposal 1559, significantly reducing the supply of more ETH tokens hitting the market.
The combination of both reduced the circulation of ETH coins in the market, thereby driving up its value and making it a strong store of value.
Recommended reading: Bitcoin vs Gold: Which is the Better Inflation Hedge?
Comparison: Bitcoin Vs Ethereum
The table below shows a side-by-side comparison of the characteristics of Bitcoin and Ethereum and their store of value potential.
| Features | Bitcoin | Ethereum |
| Purpose | Digital gold, a store of value | Smart contract platform, decentralized applications. |
| Consensus algorithm | Proof-of-Work (PoW) | Proof-of-Stake (PoS) |
| Total Supply | 21 million BTC (limited) | No fixed limit, currently around 120.29 million |
| Block time | 10 minutes | 12 seconds |
| Smart contracts | Yes, but relatively new | Yes |
| DApps | Yes | Yes |
| Scalability | Limited | Limited but Higher than Bitcoin. |
| Use cases | Store of value, medium of exchange, cross-border payment | Smart contracts, DeFi, NFTs, gaming. |
| Gas fees | None | Yes |
| Interoperability | Limited | Higher than Bitcoin |
| Development activities | Conservative, focused on security. | Active, focused on scalability and usability |
| Regulatory environment | Favorable | Favorable |
| Environmental impact | High energy consumption | Lower than Bitcoin (with PoS) |
| Growth progression | Established and steady | Rapidly growing |
| Market performance | Historically & presently volatile | Historically & presently volatile |
| All-time-high | ATH- $76,000 (2024) | ATH- $4,878 (2021) |
| Supply and demand | Strong demand, limited supply. | Growing demand, increasing supply |
From the table above, Bitcoin is heavy on security. Its limited supply makes it a stronger store of value.
Although the Bitcoin blockchain recently expanded to accommodate smart contracts and the building of DeFi tokens (BRC-20 tokens like Ordi, Pepe, Wojak, etc on its platform), it still has limited scalability and interoperability compared to Ethereum.
Its price performance over the years shows that it is excellent at maintaining a lot of value.
On the other hand, Ethereum is focused on flexibility and smart contracts, making it a robust platform for decentralized applications.
Its Price performance over the years (since it was created in 2014 by Vitalik Buterin and Gavin Wood) shows that despite market shifts, it can bounce back in value fast.
Conclusion
The ultimate store of value in cryptocurrency is a matter of debate.
Bitcoin's scarcity and security make it a better choice, but Ethereum's flexibility and expanding use cases can't be ignored.
The choice between Bitcoin and Ethereum as a store of value depends on your investment strategy and risk tolerance.
If you prioritize security and scarcity, Bitcoin may be your better choice. However, If you're willing to take on more risk for potentially greater rewards, you can choose Ethereum.
If you still can't decide, having both in your investment portfolio is excellent. However, when investing in the unstable waters of crypto, only invest what you can afford to lose.
FAQs
A store of value refers to an asset that maintains its value over time. It acts as a reliable medium for storing wealth. In cryptocurrency, a store of value is a digital asset that resists inflation while maintaining its purchasing power. It can be easily transferred or exchanged.
Bitcoin is widely regarded as the best store of value among cryptocurrencies. However, Ethereum's growing ecosystem, smart contract capabilities, and increasing adoption have led some to argue that it has the potential to surpass Bitcoin as a better store of value.
Ethereum's smart contract platform enables a wide range of decentralized applications (dApps) and use cases beyond digital currency. This versatility and programmability could increase Ethereum's value and utility, making it a more attractive store of value option.
When deciding between Bitcoin and Ethereum, consider factors such as market capitalization, liquidity, security, adoption rate, use cases, and potential for growth. Additionally, assess your personal investment goals, risk tolerance, and time horizon to determine which asset aligns better with your needs.
