The Next Altcoin Adventure: The Ethereum Challenge

Introduction

Let's go on the next Altcoin adventure and analyze Ethereum and how it challenges other cryptocurrency ecosystems. Ethereum is the way of the future for cryptocurrency ecosystems. It can be traded on all the major cryptocurrency trading platforms, such as crypto.com, Coinbase, Robinhood, Binance, and other smaller platforms.

Ethereum, according to CoinRanking, is “a global, public decentralized blockchain designed to run peer-to-peer smart contracts and decentralized applications.” (Coin Ranking, 2025, URL: https://coinranking.com/coin/razxDUgYGNAdQ+ethereum-eth) Invesco describes the process of Ethereum.

“Decentralized blockchains bring together participants who don’t know or trust each other. Imagine a big, digital notebook that everyone can see and add to, but no one can go back and change. The Ethereum blockchain records all transactions and activities. How participants find consensus is vital for the network to function securely. The Ethereum network relies on a Proof-of-Stake (PoS) consensus mechanism. For example, someone who wants to give money to a friend creates a transaction sent to the network. Transactions and other important data are recorded in digital containers called blocks. Certain network participants known as validators are incentivized to propose and validate new blocks. They put up ether—Ethereum’s native currency—as collateral (the “stake”) and then are either rewarded or penalized for truthful or fraudulent behavior.” (Invesco, 2025, URL: https://www.invesco.com/us/en/insights/what-is-ethereum.html)

Ethereum is a stable currency to invest in because it has a stabilizing circulating supply of mined coins, which helps it keep up with the valuation of this altcoin currency. For reference, an Altcoin is any coin that is not Bitcoin. Ethereum has several advantages and disadvantages over Bitcoin. Let us begin with the disadvantages of Ethereum.

Disadvantages of Ethereum: Why you should not invest in Ethereum

Ethereum has several disadvantages that need to be discussed. (1) Ethereum has a smaller market cap than Bitcoin. (2) Government influence can either further the bitcoin and Ethereum market demand or lower the market demand. (3) Bitcoin is more universally accepted than Ethereum. These are the three disadvantages. Let's look at them more closely.

First, Ethereum has a smaller market cap than Bitcoin, which means the coin's value is not as high as Bitcoin's. Also, Ethereum has more coins than Bitcoin, which need to be mined before it can be a fully diluted supply of coins. Bitcoin only has 21 million coins left to mine, which means there will be an influx in demand for Bitcoin since it is at $93,000 per Bitcoin. Crypto mining is defined as

Second, Government influence on Bitcoin can increase demand, causing a shortage, which raises the price of Bitcoin. This is the law of supply and demand. The government has also been expanding the regulation of how Crypto can be bought and sold. An example of a government regulation on Cryptocurrency is the Financial Innovation and Technology for the 21st Century Act (or FIT21). However, it has been passed by the United States House of Representatives but has not yet been enforced.

This legislation targets at “emphasizing the role of the Commodity Futures Trading Commission (CFTC) as a lead crypto regulator in the United States.” (Solanki, March 21st, 2025, Cryptocurrency laws—Legal Glossary, URL: https://legal.thomsonreuters.com/blog/cryptocurrency-laws/#:~:text=No%20defined%20regulation%20is%20used,has%20not%20yet%20been%20enforced.)

This is just one example of how Government regulations can influence the price of bitcoin, which can either increase or decrease the demand for cryptocurrency. Bitcoin is starting to be discussed in the Texas Legislature. The Legislature proposed adopting a $500 million reserve of Bitcoin. It is introduced. This means our economy is headed to a Bitcoin Standard instead of a Gold Standard. However, cryptocurrency is not FDIC-insured, and you should discuss investing in cryptocurrency with your financial advisor. The anticipation of this bill increased the price of Bitcoin, leading to the third disadvantage of Ethereum and other altcoins.

Third, Bitcoin is more universally accepted than Ethereum and more tradable than Ethereum. All of the other altcoins are based on the Bitcoin standard. When Bitcoin goes down, so do all the other coins. Bitcoin is the measure of how well the cryptocurrency market is doing. It is an equilibrium price or the measure by which all other coins are measured. When the market cap gets reduced, all the coins suffer. Thereby, it causes a loss of value which defies one of the criteria of money which is stored value.

Bitcoin does not have stored value and can lose value over time since Bitcoin is a fiat-based currency. It is fiat-based currency because it is relying on the dollar value. When the dollar goes down, Bitcoin and other coins goes up (due to the lack of faith in the dollar which causes them to substitute the dollar with bitcoin). Currently, the U.S. Dollar Index showcases that the dollar value is 97.92 which means it lower than the 100 index in the past. This demonstrates the theory of related goods. The theory of related goods has two components one is complementary and the other is substitution. When we have a complementary good/coin/currency, both goods increase in value or price. For instance, the relationship between Ethereum and Bitcoin.

When Bitcoin goes up, Ethereum goes up.  When we have a substitute good/coin/currency, one currency goes up, whereas the other currency goes down. For instance, the relationship between the U.S. Dollar and Bitcoin is that when the U.S. dollar goes down, Bitcoin goes up. When the U.S. dollar goes up in value, Bitcoin goes down in value. This is the theory of related goods concerning the discussion of money. Then, you might ask the question, “How does money have stored value when it can increase and decrease in the worth of the dollar?” The U.S. dollar index and the Bitcoin index shows us the purchasing power of that medium of exchange.

Upon further investigation into the relationship between Ethereum and Bitcoin, I found a chart showing a ratio between them.

Figure 1: Ether/Bitcoin Ratio by Long Term Trends

According to long-term trends, an organization that showcases trends states, “the ratio in the chart…divides the price of Ether by the price of Bitcoin and represents the amount of Bitcoin it takes to buy 1 Ether. When the ratio rises, Ether is outperforming Bitcoin, and when it falls, Ether is underperforming.” (https://www.longtermtrends.net/ethereum-vs-bitcoin/)

 In Conclusion, these are the disadvantages of Ethereum and other coins. (1) Ethereum has a smaller market cap than Bitcoin, which means the coin's value is not as high as Bitcoin's. (2) Second, the government's influence on Bitcoin can increase demand for Ethereum, causing a shortage, which lowers or increases the price of Bitcoin. (3) Bitcoin is more universally accepted than Ethereum and more tradable than Ethereum. These are the disadvantages of Ethereum and other coins of that nature.

Advantages of Ethereum and Other alternative cryptocurrencies.

The advantages of Ethereum and other alternative cryptocurrencies are the following. (1) Ethereum is the fuel for decentralized applications. (2) Diversifying your financial portfolio. First, Ethereum is the fuel for decentralized applications. According to the Long-Term Trends Website,

Ethereum is the second-largest cryptocurrency by market capitalization after Bitcoin. It is the currency of the Ethereum blockchain and is often referred to as the “fuel” of the decentralized applications (dapps) running on the network. Ethereum is the most popular blockchain for running smart contracts and dapps. In fact, as of May 2023, 158 out of the top 200 tokens (as measured by market capitalization) are located on the Ethereum blockchain. They include stablecoins, DeFi projects, and tokens of decentralized exchanges. (https://www.longtermtrends.net/ethereum-vs-bitcoin/).  

Ethereum is coming for Bitcoin by accepting decentralized applications and smart contracts. This leads to the question: “What are decentralized applications concerning blockchains?”  Decentralized Applications are “software programs that run on a blockchain or peer-to-peer (P2P) network of computers instead of on a single computer.” (https://www.investopedia.com/terms/d/decentralized-applications-dapps.asp)

Decentralized Applications are normally built on the Ethereum platform and have “been developed for various purposes, including wallets, exchanges, gaming, personal finance, and social media.”  However, can Ethereum be universally accepted like Bitcoin? In this article, Ethereum can be widely accepted, just as Bitcoin is. Decentralized applications “safeguard user privacy, the lack of censorship, and the flexibility of development” (https://www.investopedia.com/terms/d/decentralized-applications-dapps.asp).  However, there are some potential drawbacks to using decentralized applications, including “an inability to scale, challenges in developing a user interface, difficulties in making code modifications, and security issues” (https://www.investopedia.com/terms/d/decentralized-applications-dapps.asp).

Decentralized applications (dApps) are imperative to Ethereum's success. BitTorrent, Tor, and Popcorn Time are dApps because they are part of a P2P network, which allows multiple participants to promote and create content. This is why Ethereum is the fuel for decentralized applications and one of the advantages of using and supporting the Ethereum network.

Second, Ethereum and other cryptocurrencies can diversify your portfolio. Diversifying your portfolio is important for a long-term return on investment and for maximizing your portfolio. Your portfolio should have some balance and some risk as well. For instance, for my portfolio, I have 6% in Cryptocurrency, 18% in Cash, 35% in Walmart 401k, 5% in Managed Investing Portfolio, and 45% in Roth and Individual IRAs. So, in this instance, I have diversified my portfolio to increase the chances of capital gains. However, Altcoins are investable for long-term gains. Ethereum will become institutionalized in the future because it is stabilizing, and cryptocurrency is becoming a new medium of exchange for institutions.

Third, Ethereum is becoming accepted and adopted across the marketplace. According to Coin World in the article, “Ethereum Adoption Surges 40% as Large Holders buy 2k ETH,”  

Ethereum’s adoption rate is approaching 40%, indicating a significant increase in user engagement and market interest. This surge in adoption is driven by a growing number of unique depositors, which has reached 1.83 million, according to IntoTheBlock. This trend suggests that both individual and institutional investors are increasingly interested in Ethereum’s ecosystem. (https://www.ainvest.com/news/ethereum-adoption-surges-40-large-holders-buy-2k-eth-2504/)

This is proven by the fact that Ethereum outperforms the S&P 500 as demonstrated by the graph below.

Figure 2: Ethereum v. S&P 500

As seen by this graph, Curvo, an organization dedicated to trend analysis, also showcases this table.

Table 1: Average Annual Return for S&P500 and Ethereum by Curvo

This table, by Curvo, showcases that in the last 5 years, Ethereum has increased in price by 936.2% versus the S&P 500, where it only increased in value by 117.9%. In this example, can we prove that Ethereum is better than the S&P 500? It depends on how well Cryptocurrency will be adopted across the board in the coming years. (https://curvo.eu/backtest/en/compare-indexes/ethereum-vs-sp-500?currency=usd)

Another graph demonstrates the different percentages over the last 5 years, starting from 2018.

Table 2: Ethereum v. S&P500 over the last 7 years by Curvo

As these graphs demonstrate, Ethereum has outperformed the S&P 500 and has been adopted by 40% of the individual and institutional markets. But will it continue to do so with competing altcoins such as Codename.Pepe, Lightchain.AI, Pepe Coin, and Shib Inu Coin? Will XRP be the next Ethereum coin to skyrocket over time or will Ethereum remain competitive against XRP? Again, only time will tell.

Concluding thoughts on Ethereum

There are always going to be some risks associated with investments in both the cryptocurrency and stock markets. This is not investment advice, because I am not certified to give investment advice. This is just a research article to see whether I should invest in cryptocurrency or the stock market. Always contact your local financial advisor to see how to invest in the cryptocurrency and stock markets. This article shows that Ethereum has outperformed the S&P 500 in the past decade since its launch. When you look for altcoins, look for presales. Even though Ethereum is high, its value will increase over time. So, invest while the altcoins are low because it could become much more expensive if more banks institutionalize the cryptocurrency market. Will it replace the dollar? Only time will tell.

References

Long Term Trends. (N.d.) “Ethereum v. Bitcoin.” Date accessed April 25, 2025. URL:https://www.longtermtrends.net/ethereum-vs-bitcoin/

Coin Ranking. (n.d.).  “Ethereum-Price and Chart.” Date accessed April 25, 2025.  URL: Ethereum (ETH) - Price & Chart | Coinranking 

The Investopedia Team, Jefreda R. Brown, Michael Logan. (June 28th, 2024). “Decentralized Applications (dApps): Definition, Uses, Pros and Cons.” Date Accessed April 25, 2025. URL: Decentralized Applications (dApps): Definition, Uses, Pros and Cons 

Curvo. “Ethereum vs. S&P 500: Historical Performance.” Date accessed April 25, 2025. URL: Ethereum vs S&P 500: historical performance from 2017 to 2025 

Solanki, Sneha. (March 21st, 2025). “Cryptocurrency Laws—Legal Glossary.” Thomson Reuters. Date Accessed April 25, 2025. URL: Cryptocurrency laws and regulations 

Invesco. (August 7th, 2024). “What is Ethereum, and how does it work?” Invesco. Date Accessed April 25, 2025. URL: What is Ethereum, and how does it work? | Invesco US 

Coin World. (April 22nd, 2022), "Ethereum Adoption Surges 40% as Large Holders by 2k ETH." AInvest. Date Accessed April 25, 2025. URL: https://www.ainvest.com/news/ethereum-adoption-surges-40-large-holders-buy-2k-eth-2504/