How Ethereum (ETH) outperformed Bitcoin (BTC) in 2021

Key Takeaways:

• ETH price outperforms BTC in 2021 with 530% surge.
• NFT, DeFi explosion and other blockchain prospects were catalysts that helped ETH beat BTC.

NIGERIA (CoinChapter.com) – Bitcoin has been the best performing crypto asset year-on-year for many years. This is evident from its large dominance over altcoins. However, the situation changed in 2021 as many factors propelled Ethereum to outperform the flagship cryptocurrency.

The entire crypto space experienced a radical price explosion in 2021, with Bitcoin maintaining its place as the number one crypto by market cap as it reached its new all-time high of above $68,000 within the just concluded year.

Many altcoins also experienced similar price explosions, including ETH. The number one altcoin surged by 530% during 2021, a stronger gain than the Bitcoin surge of roughly 101%. Further analysis indicates that in each of the four quarters of last year, ETH performed better than BTC.

Beyond price, how Ethereum managed to outperformed Bitcoin in 2021

Beyond price actions, Ethereum recorded a very adventurous 2021 driven in part by growth prospects for the blockchain platform from a sharper focus on the metaverse as Facebook, now named Meta, ramped up its commitment to expand in the online, 3-D space.

Sandbox, a metaverse gaming platform backed by Ethereum, has been drawing in millions of dollars in funding, including from Japanese heavyweight Softbank.

Virtual land deals worth millions of dollars on Sandbox and Ethereum-based platforms have also bolstered Ether.

Also, the explosions in the DeFi, which attracted billions, Non-Fungible Token (NFT) craze which helped increase gas fees. All of these added up to help Etereum outperform Bitcoin in 2021.

One of the factors that boosted ETH’s performance was the EIP-1559 update, which reduced Ether’s inflation rate. It introduced a new fee structure that made Ethereum deflationary in nature. One of the first deflationary blocks that appeared on the network shortly after that brought less ETH to the network than what was burned.

The ‘flippening’: ETH to outgrow BTC

However, amidst all the success stories with ETH in 2021, the coin still lags behind the number one cryptocurrency, Bitcoin. ETH’s market cap sits at $405 billion compared to Bitcoin’s $812 billion. But investors are watching to see if Ether will take bitcoin’s market cap crown. Crypto hedge fund manager Rahul Rai said that he believes Ether will outgrow bitcoin before the middle of 2022 in what experts call “the flippening.”

Similarly, Ethereum’s better performance over Bitcoin seems to be far from over. This is because Bitcoin has entered the new year with the same price action and volatility as last year. Bitcoin has lost -7.5% of its value on the seven-day chart while ETH has lost less -6.5%. The crypto market slid into a tender zone in the wee hours of Wednesday, with 8% of the entire crypto market capitalization vanishing to thin air.