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Ethereum
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=== '''''Crypto Market in General''''' === ==== '''Market Capitalization In The Crypto Ecosystem''' ==== The crypto market trades 24/7. For the purpose of our study, we focused on the universal coordinated time (UTC) daily price of a selected sample of cryptocurrencies that dominate the markets. Typically, the start price at the inception of the coin is close to zero, but during their lifetime, they achieve various levels (see tables 1 and 2 below). Notably, Bitcoin achieved the highest price to date in November 2021. It has since dropped more than 60% in value. [[File:StableCoins Price Summary (Oct 2018-Aug 2022).png]] [[File:Crypto Assets Price Summary (US $).png]] '''Historical Analysis Of The Crypto Ecosystem''' Despite considerable high returns, crypto assets have seen significant drops in value. The daily largest drop in price for Bitcoin and Ether was recorded around March 11, 2020, the date when WHO declared the COVID-19 crisis a pandemic. Table 3 below summarizes the largest price decline for the studied sample. [[File:Worst Single-Day Price Decline.png]] The highest 24-hour positive returns are also notable, and we show them in chart 5 below together with the largest drops in value. [[File:Crypto Assets Daily Percent Returns Summary.png]] We then looked at return correlation among the cryptocurrencies to better understand the interaction within their ecosystem. Despite the fact that the genesis of each coin is independent of each other and the fact that they were created on different platforms using different protocols and at different points in time, our analysis shows (since 2018) moderate-to-high correlation among the cryptocurrencies, excluding stablecoins. The stablecoins exhibit insignificant correlation with the other cryptocurrencies (table 4), which is somewhat expected. [[File:Historical Correlations of Daily Returns.png]] Next, we took a closer look at the 100-day correlation between Bitcoin and Ether and between Tether and USDC to break down the historical data into shorter periods. Chart 6 shows that the interconnectivity between BTC and ETH is consistently high, as is the overall historical correlation. As a comparison, we added on the same graph the rolling correlation between the two largest holdings in S&P 500, which are for Apple (AAPL) and for Microsoft (MSFT). The two largest stocks exhibit medium-to-high correlation, as do the two largest cryptocurrencies (BTC and ETH) (see chart 6). [[File:100-Daily Rolling Correlations of Daily Returns.png]] '''''Ethereum vs. Bitcoin''''' {| class="wikitable" |+Source: [https://www.coinbase.com/ Coinbase] (July 2023) ! !Ethereum<ref name=":1" /> !Bitcoin<ref><nowiki>https://www.coinbase.com/price/bitcoin</nowiki></ref> |- |'''Popularity''' |#2 |#1 |- |'''Rating''' |4.4 |4.5 |- |'''Type''' |Decentralized blockchain |Digital currency |- |'''Circulating supply''' |120.2M ETH |19.4M BTC |- |'''Total supply''' |Infinite |21M BTC |- |'''Market cap''' |$222.4B |$568.1B |- |'''All time high''' |$4,891.70 |$68,789.63 |- |'''Mining method''' |Proof of Stake (PoS) |Proof of Work (PoW) |} * Since Bitcoin stands as the pioneering and most renowned cryptocurrency, drawing a comparison between Bitcoin and Ethereum proves highly beneficial when analyzing Ethereum. As Bitcoin's primary competitor, ETH is '''ranked #2''' on most cryptocurrency platforms, while Bitcoin is '''ranked #1'''. * While this section focuses on comparing Ethereum and Bitcoin, it's essential to acknowledge that they are not of the same kind. Ethereum operates as a '''decentralized blockchain''', where cryptocurrency is merely one of its numerous applications (financial services, games, social networks, etc.). In contrast, Bitcoin exclusively functions as a '''cryptocurrency''', akin to the virtual counterpart of a dollar. * The circulating supply of a cryptocurrency represents the number of tokens that have been issued and are actively available in the market. For Bitcoin, over '''90% of its total supply''' has already been mined. On the other hand, ETH has an '''infinite supply'''. * While the concept of unlimited supply may raise concerns for ETH, it actually contributes to its stability as a cryptocurrency. This characteristic '''prevents scarcity-driven market''' behaviours and allows for a more sustainable and adaptable ecosystem for Ethereum, ensuring its continued relevance and functionality. *Vitalik Buterin, the founder of Ethereum, envisioned the creation of Ethereum with the goal of harnessing blockchain technology and extend its applications far beyond just being a digital currency like Bitcoin.<ref>https://time.com/6158182/vitalik-buterin-ethereum-profile/</ref>. *Ethereum uses the '''PoS''' mining method wherein miners' scores are determined by the amount of tokens in their digital wallets and the duration they have held them. The miner with the highest stake has a better chance of being selected to validate a transaction and receive a reward<ref>https://www.mckinsey.com/featured-insights/mckinsey-explainers/what-is-proof-of-stake</ref>. Bitcoin uses the '''PoW''' mining method, where miners are rewarded for the computational work they perform<ref>https://www.investopedia.com/terms/p/proof-work.asp</ref>.
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