Bitcoin vs. Ethereum Compared: A Crypto Investor’s Guide

Bitcoin (BTC) or Ethereum (ETH)? This is a key question in the minds of many crypto investors who want to allocate their capital in the best way possible.

Understanding the technologies behind these cryptocurrencies and learning what makes them special is key to making sound investment decisions.

In this article, we talk about the key features, use cases, risks, and market outlook for BTC and ETH in 2025.

Table of Contents Table of Contents

1. Key Takeaways
2. Bitcoin vs. Ethereum Explained
3. What Are the Key Differences Between Bitcoin & Ethereum? Comparison Table
4. BTC vs. ETH Use Cases & Features
5. Bitcoin vs. Ethereum Overview: Which Is Right for You?
6. Pros & Cons of Ethereum vs. Bitcoin Investment
7. ETH vs BTC: Market Outlook for 2025 & Beyond
8. The Bottom Line: Should I Buy Bitcoin or Ethereum?
9. FAQs
10. References

Show Full Guide

Table of Contents

1. Key Takeaways
2. Bitcoin vs. Ethereum Explained
3. What Are the Key Differences Between Bitcoin & Ethereum? Comparison Table
Show Full Guide
4. BTC vs. ETH Use Cases & Features
5. Bitcoin vs. Ethereum Overview: Which Is Right for You?
6. Pros & Cons of Ethereum vs. Bitcoin Investment
7. ETH vs BTC: Market Outlook for 2025 & Beyond
8. The Bottom Line: Should I Buy Bitcoin or Ethereum?
9. FAQs
10. References

Bitcoin vs. Ethereum Explained

Bitcoin: Peer-To-Peer Electronic Cash Payment

It is designed to be a peer-to-peer electronic cash payment network that allows anyone to make online payments without going through a financial institution.

Bitcoin is powered by a decentralized network of miners who validate and facilitate transactions. This makes Bitcoin transactions permissionless, censorship-resistant, 24/7, and open to all.

Ethereum: Decentralized Platform for Applications

While Bitcoin focuses on peer-to-peer payments, Ethereum is designed to be a decentralized global platform for applications. You can compare it to Apple’s App Store or Google’s Play Store.

Unlike corporate-controlled App Store and Play Store, Ethereum is permissionless, meaning that anyone can build and use decentralized applications (DApps) on Ethereum.

Ethereum pioneered the use of smart contracts, programmable code which is executed automatically when predetermined conditions are met, on blockchains.

“While Bitcoin was the world’s first decentralized, peer-to-peer digital currency and is considered the world’s first digital gold, Ethereum was the first global computing platform analogous to an App store in a smartphone, allowing developers and entrepreneurs to launch decentralized internet services,” said crypto asset manager 21Shares in a research report.

What Are the Key Differences Between Bitcoin & Ethereum? Comparison Table

Bitcoin and Ethereum were created with different use cases. In the table below, you will find a summary of the key differences between Bitcoin and Ethereum.

BTC vs. ETH Use Cases & Features

In this section, we focus on how Ethereum is different from Bitcoin when it comes to utility and features.

An overview of the use cases of Bitcoin and Ethereum will help you understand the key properties of the two premier crypto blockchains.

What Is Bitcoin Used For?

1. Decentralized Peer-to-Peer Payments

Bitcoin offers its users an alternative to fiat currencies. Value can be transferred over the Bitcoin network without having to rely on commercial banks.

While fiat currency payments require the approval of banks to go through, Bitcoin transactions are permissionless. Users do not need to go through the lengthy process of creating bank accounts to use the Bitcoin network. All you need is to download a free-to-use crypto wallet to start making Bitcoin payments.

Most importantly, the Bitcoin payment network is global, censorship-resistant, and runs 24/7.

2. Cross-Border Payments

The global nature of cryptocurrencies makes Bitcoin a convenient asset to make cross-border payments.

The traditional finance system requires users to wait lengthy processing time, often prolonged by banking holidays and clearance. Add banking fees and foreign exchange conversion fees to it, and you have a system that is inferior to crypto networks when it comes to cross-border payments.

Bitcoin transactions are typically confirmed within 10 minutes. Users only need to pay gas fees to miners to send tokens from one wallet to another.

Forex costs are a scandal. Esp for Indian residents (like freelancers) who get small payments. We looked at $1000 transfer. Costs eat away 4.4%. How? Bank commission, GST on commission, forex spread, GST on forex amount. Read more: https://t.co/ZVwlXzkzR5. Story by @Shiprasorout pic.twitter.com/n2pP6Nd66w

— Neil Borate (@ActusDei) October 19, 2022

3. Digital Gold

Bitcoin is referred to as “digital gold” due to its inflation hedge property and store-of-value status.

Bitcoin derives this property due to its limited supply. Only 21 million BTC tokens can ever be mined.

We also have to talk about Bitcoin’s halving feature which reinforces its inflation hedge property. Halving refers to a rule coded into the Bitcoin blockchain which reduced the number of BTC tokens emitted by half roughly every four years.

For example, before April 2024, Bitcoin emitted 6.25 BTC tokens per block. After Bitcoin’s fourth halving event which occurred on April 19, 2024, Bitcoin emissions were reduced by 50% to 3.125 BTC tokens per block.

4. Diversification

Bitcoin is also used as an investment asset for investors who wish to diversify their portfolios beyond equities, debt, real estate, and gold.

It is seen as a unique asset that does not react to macroeconomic conditions the same way traditional finance assets may respond.

Over the last 12 months, as of November 28, 2024, the 30-day Pearson correlation of Bitcoin to US equity benchmark index S&P 500 has ranged between -0.86 to +0.86, data compiled by The Block showed.

What Is Ethereum Used For?

1. Decentralized Applications (Dapps) & Decentralized Finance (DeFi)

Ethereum’s biggest advantage over Bitcoin is its programmability, which allows it to host some of the most popular DApps in the world.

The world’s most valuable smart contract platform is the birthplace of DeFi, where iconic dApps such as Uniswap (UNI), MakerDAO (MKR) and Aave (AAVE) all started their journey.

On Ethereum, you can trade cryptocurrencies, stake tokens, participate in crypto lending and borrowing, create custom crypto tokens, buy non-fungible tokens (NFTs), and play blockchain games.

DeFi Renaissance ?? https://t.co/Uy8I3W0pHO

— Aave (@aave) November 20, 2024

2. Real World Asset (RWA) Tokenization

The ability to create fungible and non-fungible tokens on Ethereum has allowed developers to represent real world assets such as government bonds, corporate bonds, real estate and art in the form of tokens on the Ethereum blockchain.

Tokenization of RWA allows investors from across the world to invest in assets that would otherwise be unavailable to them.

As of November 2024, Ethereum was the biggest RWA tokenization blockchain in the world, with tokenized assets (excluding stablecoins) worth over $3 billion, rwa.xyz data showed.

Ethereum is securing more RWA’s than all other networks combined, and growing. pic.twitter.com/nSRWtw9stM

— tomuky.eth (@tomuky) November 19, 2024

3. Stablecoins

Stablecoins are fiat-pegged cryptocurrencies on a blockchain. US dollar-pegged stablecoins like USDT and USDC are the most popular stablecoins in the world.

These tokens provide crypto investors with stability during volatile markets. Stablecoins have also proved to be useful assets for currency hedging and cross-border payments.

As of November 2024, 53.3% of the global stablecoin market cap was on Ethereum, data on DefiLlama showed.

4. Investment

Like Bitcoin, Ethereum is a popular investment asset among investors.

Following the approval of spot Bitcoin ETFs in January 2024, Ethereum’s ETH token also received the coveted spot ETH ETF in July 2024, opening up the gates for retail and institutional investors to invest in the crypto without worrying about self-custody and other technical requirements.

5. Staking

A key advantage of Ethereum over Bitcoin is the feature of staking.

Staking is the process of locking up ETH tokens in a smart contract to be eligible to validate transactions on Ethereum. In return, validators earn network rewards for their contributions.

Therefore, staking has made ETH a yield-bearing asset.

Bitcoin vs. Ethereum Overview: Which Is Right for You?

Is Bitcoin or Ethereum better? The answer to this question is subjective and depends on your investment outlook, risk appetite, and understanding of the technology.

In the section below, we have compiled a list of Bitcoin and Ethereum-specific risks that potential investors need to be aware of.

3. ETH provides a new uncorrelated yield for the financial economy

ETH staking yield: 3.23%
ETH inflation since Merge: -0.03%
Real yield: 3.25%+

BTC yield: 0%

A Strategic Reserve should hold the premier proof of stake asset, ETH, alongside BTC as a new source of yield

(4/7) pic.twitter.com/Qi6MxhkHZC

— VivekVentures.eth ???? (@VivekVentures) November 24, 2024

Bitcoin Investment Risks

Ethereum Investment Risks

Pros & Cons of Ethereum vs. Bitcoin Investment

Let’s summarize the pros and cons of Bitcoin and Ethereum:

Bitcoin

Ethereum

ETH vs BTC: Market Outlook for 2025 & Beyond

Strategic Bitcoin Reserve Bill Will Send Bitcoin Prices Higher

If we compare the market performance of Bitcoin and Ethereum in 2024, we see a clear investor preference for the former due to its growing acceptance among institutional investors, corporations and governments.

The falling ETH/BTC ratio (-30% year-to-date as of November 28, 2024), increasing Bitcoin dominance (+13% year-to-date) and surging spot Bitcoin ETF asset under management are a testament to Bitcoin’s ever-increasing popularity.

Now, investors are keeping a keen eye on whether a bill to create a strategic Bitcoin reserve in the US sees the day of light in 2025.

ICYMI: I just announced I will introduce legislation to establish a strategic Bitcoin reserve! #Bitcoin2024 pic.twitter.com/P36AcdmPFF

— Senator Cynthia Lummis (@SenLummis) July 27, 2024

ETH Is the Contrarian Bet, Expert Says

As for ETH (+56% year-to-date), the token underperformed Bitcoin (+125% year-to-date) and its L1 rivals, such as SOL (+131% year-to-date) and BNB Chain (+107%), due to uncertainties related to its rollup-centric scaling plans.

However, Ethereum continues to dominate the world of decentralized finance accounting for over 57% ($69.19 billion of $119.62 billion) of total value locked (TVL) across all smart contract blockchains, DefiLlama data showed.

Ethereum also remains the king when it comes to RWA tokenization. Traditional finance institutions have shown a preference for the reputed Ethereum blockchain’s high degree of decentralization and security when it comes to tokenizing assets.

According to rwa.xyz, Ethereum held a 76.4% market share in RWA tokenization with a total value of $3.07 billion tokenized assets (excluding stablecoins). Its closest rival Stellar tokenized assets worth $245.5 million (excluding stablecoins).

In September 2024, Matt Hougan, chief investment officer of Bitwise, called Ethereum a “potential contrarian bet” and said, “from my seat, none of Ethereum’s challenges seem existential.”

Ethereum is the best contrarian bet in crypto right now. https://t.co/PLJD3bkhyt

— Matt Hougan (@Matt_Hougan) October 16, 2024

The Bottom Line: Should I Buy Bitcoin or Ethereum?

If you are thinking of investing in BTC or ETH, we would like to remind you that cryptocurrencies are highly risky and volatile assets. Always do your research before investing.

Bitcoin versus Ethereum analysis clearly shows that both cryptocurrencies hold their top positions due to numerous real world use cases and potential investment opportunities.

This article should not be taken as financial advice. It was written for informational purposes only.

FAQs