Plenty of investors know that many things that are predicted about cryptocurrencies like Ethereum (ETH 1.07%) never come to pass. But sometimes even the most widely accepted estimates that fail to come true.
For Ethereum in particular, there's one much-discussed milestone that looks to be very distant despite many people believing that it'd already been achieved. Here's why it matters and how you should invest as a result.
CRYPTO: ETH
Key Data Points
This much-awaited flipping looks more like a flop
During the past five years, Ethereum's price increased by about 700%. Between its status as the home blockchain for decentralized finance (DeFi) and non-fungible tokens (NFTs), among many other projects in its ecosystem, its dominance often seemed assured, especially during its meteoric ascent in 2021. That led many investors to believe that one day it would become the largest cryptocurrency.
They even coined a special term for it. Specifically, the "flippening" refers to the possibility of Ethereum's market cap flipping that of the top dog in the cryptocurrency world, Bitcoin (BTC 1.73%). For a while, the flippening was thought to be inevitable, given Ethereum's then-meteoric rise. Today, however, the flippening looks like a pipe dream born by speculative excess rather than well-grounded reasoning about the odds of one coin gaining enough value to surpass the other if given enough time.
Take a look at this chart depicting the ratio of Ethereum's market cap to Bitcoin's during the past five years:
Fundamental Chart data by YCharts
On this chart, the flippening would be confirmed as soon as there was a value greater than 1. As you can see, Ethereum's market cap was closest to Bitcoin's throughout most of 2021 through the start of 2023. Today, Bitcoin's market cap is close to $1.7 trillion, whereas Ethereum's is just $234 billion.
So there won't be a flippening anytime soon despite it being supposedly a slam dunk. In fact, it probably will never happen.
CRYPTO: BTC
Key Data Points
Don't hold your breath
The main lesson here is that you should not get overly attached to any narratives you hear that extrapolate a coin's long-term performance on the basis of its favorable performance in any given period. In other words, do not let the prevailing sentiment of today influence your opinion on an asset's price in the future because sentiment is fickle and often driven largely by short-term price action.
Beyond that, it's important to reflect on why an event like the flippening might drive someone to buy Ethereum in the first place. It's a catchy story that one asset is so superior to another highly favored asset that it's destined to overtake it in value. But investors don't make returns on the basis of whether arbitrary milestones relative to other coins are reached or surpassed, so it's an open question whether something like the flippening matters at all except for marketing purposes.
Furthermore, with Ethereum's struggle to remain relevant in the face of newer, cheaper, and faster competing chains like Solana, it's hard to see the set of catalysts that would drive it to continue gaining in value at a rate anywhere fast enough to eventually flip Bitcoin. There are simply too many other appealing places for investors to allocate their capital right now to expect them to park all of it in a chain that's not significantly more interesting than it was a few years ago.
Another takeaway here is that you shouldn't let price-based milestones influence whether you buy, sell, or hold a coin. Remember, it technically could have flipped Bitcoin if Bitcoin's price had crashed, which wouldn't have contained much relevant information about why it could be expected to grow in the future. Ethereum never accomplishing the flippening is thus a symptom of its challenges rather than the cause.
Develop your own ideas about how much a coin should be worth, and then invest accordingly. And if you haven't thought about whether Ethereum is worth continuing to hold rather than sell, there's no time like the present. If you're not sure where to redeploy the capital should you decide to do so, Bitcoin or Solana are good choices.
