The flippening is underway? Or is it?
This is a topic that is starting to get some attention. I wrote about this recently yet am following up because there is more data coming in.
Of course, we have to be careful about short-term activity versus long-term trends.
Bitcoin is established as the leader in crypto-assets. Over the last 15 years, it fended off all competitors, increasing its dominance. The brand is second to none when it comes to crypto and institutions are now swallowing it up in droves.
None of this means that its place at the top is in cement. Over time, things change.
At present, Ethereum is gaining some momentum. This might be nothing more than a blip. However, it is the start to something a new paradigm, we should explore it.
The crypto industry of today is nowhere near what it was 5 years ago. Today, it is driven by institutions. Wall Street is heavily involved, bringing trillions of dollars to the table.
For the moment, there are two approaches that are being taken.
The first is the focus upon the treasury by publicly traded corporations. Using Michael Saylor's strategy, the idea is to acquire the crypto-asset and put it on the balance sheet. Over time, if the asset appreciates, it strengthens the holdings of the firms. Also, leverage is applied by raising capital via the debt or equities market.
Another way to go about it is to simply purchase shares in the Bitcoin or Ethereum ETF. This is an easy path to gain exposure to the pricing moves while omitting the hassle with custody, write downs, and other regulated components that are in place with crypto.
Here is where we see some signs that things are, indeed, changing. Again, this might be short-term noise cause by momentum but it is worth placing some attention.
Over the last month, the number of companies that announce their intention to add Ethereum to their balance sheet exploded. There were numerous instances where companies raised money specifically to buy ETH.
Of course, explosion is a relative term.
When compared to the number of companies with Bitcoin on their balance sheets, this pales. We also can take a look at it from a dollar perspective, where the BTC still far outpaces ETH.
As they say, you have to start somewhere.
The baseline for Ethereum as a balance sheet asset for public companies was almost nil a month ago. I am sure there were some who had purchased it but I cannot recall a single company. In other words, it was not a widely held idea.
That is no longer true today. Each week, the announcements keep growing. This will be have an impact if there is an outpacing of BTC by ETH.
Ethereum is closing the gap, at least with Blackrock.
This week, BlackRock’s Ethereum ETF (ETHA) recorded more capital inflows than its Bitcoin counterpart (IBIT), reversing a well-established trend. Institutional investors, once focused on the queen of cryptos, now seem to be turning to Ethereum, judged more promising, more profitable… and increasingly essential.
This is something that is getting some attention. For a short period, ETH was more attractive than BTC. Since this is driven by institutions, it is the thinking of Wall Street.
We have to be mindful that BTC is near an all-time high whereas ETH is still far below its peak.
Market activity aside, there could be another factor causing the push into Ethereum. The potential for yield is also present. While it is not approved, Blackrock already filed with the SEC to offer yield on ETH. This is something that will not be a part of Bitcoin ETFs.
So whether it is the quest for yield or alpha, ETH took a step forward.
This might be the trend for the rest of the year if Mike Novogratz is correct. The noted crypto advocate (and Wall Street player) forecasts that ETH could outperform BTC over the next 3-6 months. Naturally, this is just a forecast, so take it for what it is worth.
However, if we factor in the additional Ethereum (exposure) added to balance sheets when compared to Bitcoin along with a market outpacing, that could result in a further closing of the gap between the two.
These are the signs that we could be moving towards the flipping of the two market caps. It will take a while to pan out if things do move in that direction.
