Evaluating Bitcoin and Ethereum from the perspective of fee revenue

Translated by Ding HAN and Yalan WANG

1. BTC mining profit could beat the risk-free interest rate on fiat standard, and most likely could also beat the BTC standard (but there is a lack of mining facilities across the globe), but BTC mining can hardly beat Holding the Ethereum.

2. Bitcoin has almost hit the ceiling I predicted in 2017 (the price was $2,500 at that time), that is: Bitcoin’s total market Cap reached the total market Cap of gold (equivalent to $300,000 per Bitcoin), and Bitcoin’s market Cap is unlikely to exceed the gold under a chaotic era.

Bitcoin price rose only 3.5 times in this 4 years’ cycle, its growth myth no longer exists. If you aim to capture a high growth token next bull round, you shall buy Ethereum which has no glass ceiling, if you want the stability, you shall directly buy gold, making Bitcoin in an awkward position.

3. Based on monetary freedom + contractual freedom, Ethereum is the only token in the blockchain that has been implemented with a large number of users & applications (especially out-of-circle applications) and a large amount of fee revenue.

Even if you treat ETH as a casino, according to the number of users, fee income and PE multiple of the casino, it has a real casino valuation as base. Unlike BTC, it is entirely a price-to-whatever ratio.

4. Over the last month, EIP 1559 has burned 118,000 ETH, plus 4,930 ETH miners fees and tips 16,240 ETH, a total of 139,000 ETH transaction fee. $1,200 per ETH, that is equivalent to 167 million U.S. dollars, while at the same period, BTC recorded a month fee income of 475 BTC, based on $21K per Bitcoin, we get only 9.98 million U.S. dollars.

ETH relies on currency freedom + contract freedom, its fee income is 17 times higher than that of BTC, therefore, ETH’s implied valuation should be 17 times that of BTC. The total market Cap of BTC is now higher than ETH, just because of the previous brand inertia and religious belief, which is only supported by confidence without real money. After the total market value of ETH exceeds BTC, it will collapse in an instant, just like the collapse of Nokia to Apple, feature phone to smart phone.

5. ETH’s burning mechanism, plus a high degree of staking (POS + Defi), making the same net profit (fee income), blow up a huge unrealized market cap, much larger than the stock market PE multiples.

Ethereum is like a stock with 100 million dollars profit high growth, the stock market will value it at 20–50 times PE, that’s 2~5 billion dollars market cap, but the burning mechanism + highly staked coins, 100 million dollars fee income, will increase the token’s price by 100~300 times, that is, 10~30 billion dollars of total market cap.

Please read this article for related knowledge of unrealized market cap: “[In-depth analysis] Following the capital flow, we examined the mathematics law behind the Luna crypto crash

6. ETH 2.0 production reduction is 90%, this supply and demand balance change is huge, equivalent to 3 times BTC halving, nobody knows how long will it take before ETH rise again. Just like this round of BTC before halving, there was a small bull run (April 2019 bull market, $3,000 to $14,000).

The Federal Reserve has carried out rate hike and reduced its balance sheet, but the volume of stablecoins market doesn’t decrease. The small funds in this industry aims to increase by 100 times while big capitals want to increase itself by several times, the interest rate of USD funds lending in the market before has been 6–12%, so there’s almost no impact when the interest rate turns from 0% to 3%.

Finally, important things cannot be underscored too much.

No one can predict the short term price movement and the number of users determine the price in the long run.

No one can predict the short term price movement and the number of users determine the price in the long run.

No one can predict the short term price movement and the number of users determine the price in the long run.

========= Q&A ==========

1. Q: Why not show us the ETH/ BTC exchange rate chart?

A: The ETH/BTC exchange rate ATH was 0.12 in the last run and it was caused by sector rotation(BTC rose to the peak and then fell back, ETH rotated up influenced by the FOMO sentiment), so it did not reflect the real value.

If you take the precious ATH $1440 in the last run divided by the previous Bitcoin ATH $19666, it will equal 0.0732, which is only a point in the last run, you will find the highest point in this run has been transferred into a solid plateau, the rate of which can reach to 0.06~0.085 throughout a whole year.

Q: The last run ATH was $1,400, and in this run it turns out $4,800. The growth myth of BTC no longer exists, neither would the ETH.

A: In this round, BTC and ETH has both risen by 3.5 times, but the inflation of BTC would be 2% and ETH’s deflation would be 2%. Let’s see whether both would raise by 3.5 times in the next run.

Q: There will be more and more countries that take BTC rather than ETH as legal tender, this is why holders’ conviction exists.

A: The fact that small countries now treat BTC as legal tender is part of BTC’s previous brand inertia and religious beliefs, how do you know that ETH will never be used as legal tender in the future? Can you assume that these countries will always use only feature phones instead of smart phones?

4. Q: There always come bugs in the process of switching ETH into the POS, the ETH 2.0 seems far beyond the horizon. Maybe we have to wait until 2024.

A: If you are a programmer and have seen the code and development process, you will never say so.

5. Q: Since you believe that new holders prefer ETH, how to explain the current number of BTC new addresses increases by 300,000 to 40,000 per day while the number of ETH addresses only increases no more than 10,000?

A: Most of the BTC addresses are not real user’s address but for BTC changing because of the BTC changing mechanism. Every time when you apply for a transaction with your wallet, it will generate a change address. However, there are real users behind every increase ETH address, and transaction fees data don’t lie.

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About B.TOP

B.TOP, the world’s first joint mining platform, lowers the entry barrier to cryptocurrency mining for anybody anywhere in the world by providing a one-stop solution for enthusiasts and professionals, both retail and institutional, to mine cryptocurrencies from the comfort of their homes or offices. B.TOP purchases the mining machines from the manufacturers install them in its industrial-scale data centres across the world, maintains some of the highest uptimes and charges no extra fee from its users until they have broken even. B.TOP is a wholly-owned subsidiary of BTC.TOP.

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