There is a common narrative that Ethereum is always outperforming bitcoin. The narrative is pushed among everyone in the community, from journalists to influencers to analysts and is generally accepted as fact.
But does it actually hold up?
Well, here is where the data stands:
How your portfolio would have performed if you bought bitcoin and Ethereum X many years ago
Visually representing the Ethereum versus Bitcoin chart
The reality is that Ethereum is an asset with more volatility, which oscillates back in forth outperforming bitcoin in bullish moves and underperforming bitcoin in bearish moves.
Both of these statements are 100% true, but yet paint such contrasting narratives.:
- Ethereum is in a massive uptrend and has outperformed bitcoin since 2020
- Ethereum is in a massive downtrend and hasn't made a new high against bitcoin in over 5 years
So why is "Ethereum always outperforms bitcoin" the dominant narrative most people believe? I have some theories:
- Journalists and influencers love telling a underdog narrative. If I work at CNBC, Coindesk, or am a Youtuber and am tasked with writing a story on crypto, I'm probably going to appeal to the David versus Goliath bias. Everybody loves hearing a story where 2nd place is moving up against 1st place. It gets more clicks, and people sympathize with the 2nd place person.
- The "Bitcoin is myspace" narrative. I'm not saying this is a valid viewpoint, but there are people who think the newest, fastest, blockchain with the most features is superior to bitcoin. Since these people think bitcoin is obsolete, they always have the bias that bitcoin is underperforming all of these altcoins even if the reality doesn't match.
- The amount of stuff built on Ethereum gives off a false impression it's worth more than it is. Ethereum has a large ecosystem, and because of its size, it feels like the entire world revolves around Ethereum and our brains value more things = more important, even if that narrative isn't true. You can build 5 million Shiba Inu variants on a blockchain, but if the value of something is 0, multiplying 0 by 5 million is still 0.
- Ethereum is a company with hundreds of employees, and a giant marketing team. There is also so much stuff built on Ethereum, and each one of those projects have raised massive amounts of money from investors and employ massive marketing teams to boost Ethereum and it's narratives. Bitcoin is fully decentralized and has no team, no budget, no company.
- "The Flippeneing" narrative. "The Flippening was a meme in 2017 where traders piled into Ethereum with the idea that Ethereum was going to flip bitcoin in marketcap, which never actually happened. The meme was revived in 2021 but Ethereum failed to surpass the 2017 highs.
