Cryptocurrency is digital, decentralized currency used for exchanging, buying and selling, investing, or storing assets. The first cryptocurrency, which was successfully launched in 2009, was Bitcoin. Since then, many other cryptocurrencies have appeared with their own blockchains and various cryptosystems. The second largest cryptocurrency is Ethereum. With the development of Ethereum, for the first time in the history of decentralized finance, the possibility of a “flippening” appeared, when Ethereum could overtake Bitcoin. In this article we will talk in detail about the phenomenon of “flippening,” how it can happen, and what the prerequisites are. Enjoy reading!
What does “flippening” mean in cryptocurrency? “Flippening” is Ethereum overtaking Bitcoin in terms of market capitalization.
Despite the fact that Bitcoin was launched in 2009, and Ethereum only in 2015, Ethereum quickly gained momentum and became the second-largest cryptocurrency. The total market cap of Bitcoin is approximately twice the market capitalization of Ethereum. Meanwhile, the capitalization of the second-largest cryptocurrency is three times greater than the capitalization of the third-largest cryptocurrency.
Although now the gap between Bitcoin and Ethereum seems quite impressive, we should not forget that Bitcoin had a head start of six years, and seeing how rapidly Ethereum is developing, one cannot deny the possibility of flipped Bitcoin.
To better understand the flippening phenomenon, we will look at Bitcoin and Ethereum in more detail. Bitcoin was launched in 2009 by Satoshi Nakamoto—or rather, this is his/her/their pseudonym. Due to the anonymity of the Bitcoin network, it is not possible to figure out who the creator (or team of creators) really was. Bitcoin is the first and largest cryptocurrency, and is based on the blockchain of the same name. Why has Bitcoin attracted so much attention? Two words: anonymity and decentralization. Unlike fiat currencies, where there is always an intermediary, there were originally no intermediaries in Bitcoin transactions, and no government controlled Bitcoin transactions or their quantity. Of course, with the advent of crypto exchanges, everything has changed: anonymity has practically disappeared, and the exchange itself can now act as an intermediary, but now transactions have become safer.
But where do Bitcoins come from, and who processes transactions? Bitcoins appear through the mining process. Mining is carried out by miners, who receive a reward in Bitcoins for a certain number of blocks. Every 4 years the amount of rewards in Bitcoin is halved; this process is called halving, and always affects the Bitcoin rate. In total, people can mine 21 million Bitcoins, of which 18 million have already been mined leaving 3 million still to be mined. The number of Bitcoins is limited to prevent the depreciation of the cryptocurrency. Ultimately, when all 21 million Bitcoins are mined, Bitcoin will rise in value due to scarcity.
Ethereum was first introduced in 2013, but was actively launched in 2015. The creator of Ethereum is Vitalik Buterin. If Bitcoin is simply a decentralized financial system, then Ethereum is not only a blockchain, but also a platform for creating decentralized services and applications.
Nowadays, intermediaries are everywhere. For example, Gmail helps us send messages, and banking apps help us send money to other people. Essentially, this means that our personal information, as well as our financial data, is stored on other people's devices. According to many, storing data elsewhere can be a problem. Decentralization is necessary to avoid storing confidential and important information elsewhere. This would mean that users would have less direct control, and also opens up many possibilities for censorship. In such cases, the intermediary may prevent users from performing certain actions.
In 2019, something like a “flipped Bitcoin” occurred; the transaction count on the EPC-20 network exceeded the transaction volume on Ethereum itself. Ethereum has grown rapidly in price, and continues to grow. Also, decentralized applications and projects are attracting more and more investors, which gives Ethereum more and more prospects.
Ether and Ethereum are expected to be the next stage of blockchain implementation. There are some fundamental things that you have to understand, and even the market has to assess, for the flippening to happen:
Let's take a closer look at them.
It is necessary to take into account the possibility of conducting transactions using one or another cryptocurrency. If transactions cannot be carried out, then this cryptocurrency is no different from other banking assets. This is a very important point for many, especially for those living in the United States, since the tax regime remains such that cryptocurrencies are treated as property, and each transaction can result in a tax liability. This is not good news for Bitcoin investors. However, Ethereum has proven itself to be a strong foundation with fungible tokens and decentralized finance.
As the market grows, so do customer needs. Today, cryptocurrency must have more and more distinctive features and original attributes in order to be noticed by investors, like:
This competition is creating an incredible variety of crypto projects, and the demand for them will only increase. Therefore, it is quite possible that new cryptocurrencies that stand out more from the rest will be able to outshine the old ones and flip Bitcoin.
Another crucial factor to be considered when comparing Ethereum and Bitcoin is their value in the marketplace. The crypto space experiences price volatility on a consistent basis, and this volatility extends to every currency that trades on the crypto market. Considering this asset volatility, it is possible for one cryptocurrency to take over another in market cap and value.
To understand if the flippening is possible, we need to look at the quantity of each type of coin. Bitcoin has a fixed supply of 21 million coins, and it's unlikely that this will change anytime soon. Ethereum doesn't have a fixed supply, but the Merge made it so that there are a lot fewer new Ethereum coins being created.
So, it's unlikely that either Bitcoin or Ethereum will have a big change in their supply. That means that for Ethereum to become more valuable than Bitcoin, it will need to be worth more than 0.17 Bitcoins for each Ethereum.
Another important thing to consider is what each coin is used for. Bitcoin is like digital gold. People use it to store their money, and they believe it will hold its value over time. Ethereum is more like digital oil. It's used to power all sorts of other crypto projects, like DeFi and NFTs.
So, briefly, here are some factors affecting the possibility of the flippening:
Fixed supply: Bitcoin has a fixed supply of 21 million coins, while Ethereum's supply is not fixed, but has been reduced significantly after the Merge.
Current value: For Ethereum to become more valuable than Bitcoin, it will need to be worth more than 0.17 Bitcoin for each Ethereum.
Use cases: Bitcoin is primarily used as a store of value, while Ethereum is used to power a wide range of crypto projects, including DeFi and NFTs.
There are a few other important aspects to understand about flippening.
In theory, a price jump does not mean that Ethereum will flip Bitcoin. A flippening can also happen in a bear market, if Bitcoin loses more in value as a percentage than Ethereum; then, the gap between currencies will narrow. Thus, a flippening does not necessarily consist of an exorbitant increase in the price of a currency.
Experts have differing opinions on the likelihood of a flippening; some believe that Ether will overtake Bitcoin by 2035, and some believe that the correlation between Bitcoin and Ether must decrease for a flippening to occur. It is impossible to give an exact forecast, since the crypto industry is a living thing that is constantly changing and developing.
It is impossible to say for sure whether a flippening will be a positive or negative event. Those who diversify their investments will be able to benefit in any case. In the end, the crypto market and its traders will be able to adapt to any outcome and to any changes, which are absolutely natural for the crypto industry.
It is impossible to say for sure whether a flippening will occur; it depends on many factors, and no expert can give an accurate forecast. All we can do is observe the market and draw our own conclusions, hopefully in time for any flippening to happen.
Flippening is when the market capitalization of one cryptocurrency begins to exceed the market capitalization of another cryptocurrency.
Ethereum Flippening, in a hypothetical scenario, is the superiority of the market capitalization of Ethereum over the capitalization of Bitcoin.
No one can tell you exactly when this will happen, but given the rapid nature of the development of cryptocurrencies, an Ethereum price of $10,000 in the future is not impossible.
DISCLAIMER: None of the authors, contributors, administrators, or editors connected to OWNR Wallet encourage readers to invest in cryptocurrency without doing proper research on their own. This article is purely for educational purposes only.
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