Ethereum is now the cryptocurrency of choice for institutional investors – here’s why

It looks as though Ethereum (ETH) is overtaking Bitcoin (BTC) as the most popular cryptocurrency for institutional investors.

Here’s why the smart money is pouring into Ether and why this token is in a position to knock Bitcoin off its perch as the crypto of choice for big funds.


How does Ethereum work?

The Ethereum network works in a different way to Bitcoin’s. There is a lot more functionality, which is why you’ll see projects such as:

DeFi (decentralised finance)
NFTs (non-fungible tokens)
Smart contracts

This is why Ethereum is sometimes described as ‘blockchain 2.0’. What’s even more interesting is that the network is currently undergoing a huge transformation.

Once the upgrading of the network is complete, this cryptocurrency will work using a different model. The new format removes the need for miners and will make the whole system much more energy-efficient than Bitcoin.

Who’s buying Ethereum?

According to analysts at JP Morgan bank, big investors are targeting Ether.

In a note to customers, analysts at the firm explained how Bitcoin futures were trading below the actual price of a Bitcoin, hinting at a shift in sentiment.

Instead, inflows from institutional investors seem to be increasingly focusing on Ether. This pivot from Bitcoin to Ether could be a sign that the reign of Bitcoin is starting to wane.


Why are institutional investors flocking to Ethereum?

For now, Bitcoin is still king, but the Ether token is attracting a lot of interest.

Many large investors are flocking to Ethereum for a number of reasons:

They see a lot more room for growth as the overall market cap is nowhere near that of Bitcoin’s.
Lots of developers are choosing to build on the network, which may lead to more real-world use cases.
When the Ethereum 2.0 upgrade completes, it will be a much more environmentally-friendly crypto. This will make it easier for investors to justify putting money into the token.
There are already working programmes on the Ethereum network. If DeFi and NFTs take off, this will attract even more money.
While Bitcoin has a fixed supply, Ethereum is more programmable which offers much more flexibility.

Why choose Ethereum over Bitcoin?

Bitcoin has been the most popular cryptocurrency for institutional investors because it is one of the easiest to understand.

This means it can be easier to explain and justify to clients. However, now that more people are starting to get to grips with the crypto world, it’s becoming more apparent that there are alternatives.

Ethereum is more complex than Bitcoin (it’s all very complicated if you ask me!). But once people understand the differences, it becomes clear that something like Ether offers unique advantages.

Final thoughts

It’s important to realise that this is all still in the realm of speculation.

Institutional investors can afford to take a gamble on these new technologies, just like they can put money into a risky start-up. It doesn’t really impact them if they lose their investment.

But for those of us without such deep pockets, there are plenty of more reliable ways we can be investing our hard-earned money.

The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of investment advice. Bitcoin and other cryptocurrencies are highly speculative and volatile assets. They carry several risks, including the total loss of any monies invested. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

The post Ethereum is now the cryptocurrency of choice for institutional investors – here’s why appeared first on The Motley Fool UK.

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