Yet, its market cap is 1/4 of Bitcoin's market cap.
Is that because it is considered less secure? Is ETH less well distributed than BTC? Or am I missing something completely different?
Since these smart contracts need gas fees paid in Ethereum, you'd want to have Ethereum prices be stable and ideally lower.
There's also constant inflation whereas Bitcoin will be limited to 21M cap with an estimated 3-4M Bitcoin permanently lost.
And of course, Bitcoin benefits from first mover advantage, network effects, security, more decentralization, etc.
- in many people's minds cryptocurrency and bitcoin are synonyms
- it's pointless to try to look for reasons in a market that's so detached from reality
I really wish people would stop using this term to describe the price. It is really meaningless as a measure of current or future value. There is zero residual or fundamental value because there are no fundamentals.
Calling the product of number of tokens and current price of tokens a market cap makes about as much sense as calling a current a voltage.
Also note there is BTC and there is everything else. You should analyze them differently. i.e. BTC may reach PMF, the rest are likely relegated to fade from most people's minds
So looking at eth market cap vs btc market cap is apples vs oranges. You should look at smart contract market cap as a sector which includes BNB, DOT, ADA, and others.
Why is BTC > ETH? BTC is like digital gold and investors are buying BTC instead of bonds and other typical safeguards against inflation.
Market cap is almost a random number, though: the number of available items times the price of current transactions.
A most relevant number would be the total equity invested in the available items. I'd certainly like to see that number, and if anybody has a link it'd be much appreciated.
1) Immaculate Conception. The fact that no one ever knew who Satoshi was and that he disappeared (died??) is hugely important. Crypto is all about removing as much trust from the system as possible, and having a leader (or worse company) behind a crypto provides a point of potential failure/corruption. I'm also a big fan of Ethereum, but having a figurehead like Vitalik incurs a large risk that he has disproportionate power to drive things in directions that aren't to the benefit of the entire network. It's almost like Bitcoin was a gift from the gods.
2) Extremely hard to change. I hear it all the time, Bitcoin is too slow, has too few features, is too hard to change, etc. Resistance to change is a very good thing for a monetary system. This is a distributed system that's now trusted with over 1 Trillion USD. Do you really want such a system to be easy to add new features to? If I'm Papa Musk and I'm dumping 1.5 Billion into Bitcoin I want security and reliability to be top priorities, not features. Bitcoin has had consistent development over the years by top notch engineers, but the rate of change has always been extremely conservative in an effort to preserve what makes Bitcoin unique and valuable for the long term.
3) Large market cap. Large market cap IS a feature. Imagine you're Tesla and you want to store 1.5B in BTC, you can't do this if the market cap is too small, because there either wouldn't' be enough value in the network, or you'd drive prices up wildly acquiring your stake. A high market cap allows individuals, corporations, and governments (next wave of demand I believe) to store very large amounts of wealth. As such, there's a tremendous advantage to being the frontrunner in the crypto game, because you have the largest market cap, and thus attract more investors, which further drives the market cap up. This is a feedback loop that strongly favors the coin with the highest market cap, the highest security, and the longest record of trust. I'm not saying it's impossible to break this cycle, but it's going to be extremely unlikely at this point.
4) A name that's synonymous with cryptocurrency and money. Bitcoin has an enormous branding advantage, in that when people hear it they instantly think crypto/money. Ethereum, eh not so much. I like its name more than a lot of other cryptos (Polkadot, WTF!), but it's not even in the same league as the iconic name Bitcoin. A lot of people are simple minded, they don't want to invest in something with a name they can't trust. You always have to keep in mind that money is more a social/psychological phenomenon than a technological one. Yet people get lost debating the merits of various crypto features, and forget about all the social reasons BTC is number one and has set in place the positive feedback cycles that will most likely keep it as number one. People are highly irrational when it comes to trust, and having a reliable brand name that's proven over time is disproportionately valuable.
5) Most secure network in crypto. Bitcoin is by far the most secure, and a double spend attack would be ridiculously expensive at these prices. This is another positive feedback loop that favors the coin with the largest market cap. Higher market cap leads to more people mining, which increases security via increasing the cost to double spend, which increases demand and further increases market cap.