Bitcoin Dominance: The Case for and Against “The Flippening” 

The fact BTC is the dominant player in the markets is well known. Throughout the summer and early fall of 2023, BTC has hovered somewhere between 49-51% of the total cryptocurrency market cap. This is shown in the image below.

 

 

 

The point of the BTC-D (Bitcoin Dominance) chart is to show how much of the market cap the coin covers compared to the rest of the market. In 2023, the total market capitalization of crypto has ranged around $1-1.2 Trillion (1.58-1.9 Trillion AUD), and Bitcoin has represented somewhere around half that amount. It ebbs and flows, of course. Others – Ethereum (ETH), Tether (TUSD), Ripple (XRP) – have significant market caps, but the general trend has been that BTC represents around half the market, give or take a percentage point either way. The huge market cap, volumes, and liquidity make trading Bitcoin attractive for both retail and institutional investors. 

But will this always be the case? Some believe that Ethereum, in particular, will flip BTC in market cap at some point. They call this potential event “The Flippening”. The debate over whether or not it will happen is interesting because it gets to the heart of how traders and investors view cryptocurrency and the future of the sector. Before discussing the prospect of The Flippening, let’s take a quick look at Bitcoin and Ethereum’s attributes. 

Bitcoin

The first, biggest, and most well-known cryptocurrency. In fact, some proponents, what we call Bitcoin Maxis, believe that Bitcoin is not a cryptocurrency at all. When they refer to the industry, they will speak of Bitcoin and cryptocurrency as two distinct things. But that’s an argument for another day. There can only ever be 21 million Bitcoins, and around 19.5 million are already in circulation. This fact is weaponised by Bitcoin investors, who claim it is sound money when compared to the unlimited amount of fiat currency that can be printed by central banks. 

BTC is often termed a store of value, a hedge against inflation, and digital gold. While you can argue that someone could just create another Bitcoin – and they have tried – there is a mover advantage. And BTC developers have already integrated the network around the world. In short, you won’t defeat Bitcoin by mimicking it. 

Ethereum 

Ethereum is more than just a coin. In fact, ETH (the token Ether) and Ethereum can be seen as two different things. ETH powers the Ethereum network, which is, in a sense, a decentralised version of the Internet. The idea of Ethereum is not to replace money but to replace the current version of the worldwide web. This is often termed web3. The Web 1 era was the time of static websites and email in the 1990s. Web 2, the current iteration, is characterised by mobile and cloud computing, social media, and Big Tech gatekeepers like Apple, Google, and Meta. 

The goal of web3 is to put power back into the hands of the users, stripping out central authorities – Banks, Google, governments, and so on – to create decentralised peer-to-peer networks and applications for everything from gaming to finance to social media to public records. Developers build apps, protocols, and smart contracts on Ethereum in the same way as they build on the web. The current supply of ETH is around 120 million tokens. Unlike BTC, there is no limit on the number of ETH that can be created. 

The case for The Flippening

As we said earlier, arguing about the potential of ETH to flip BTC in market cap is all about how you see the future role of crypto. To believe it, you’ll have to believe in the idea of web3. You need to imagine that we build a new internet based on blockchain, with Ethereum as the heart and ETH as the blood. Consider, for example, that the title deeds of a property in Sydney are contained within an NFT and then transferred to another party in Melbourne in a peer-to-peer fashion without the need for a lawyer or real estate agent. Or picture social media with no central ownership where you are paid when you see advertisements. 

Those are some of the dreams of web3 enthusiasts. While Ethereum is not the only blockchain for web3 development – far from it – it is the biggest and by far the most influential. Many distinct crypto projects are built on Ethereum, and ETH is required to secure those networks. Ethereum is an ecosystem. If the goals of web3 are met, some believe that ETH will not only flip BTC but will leave it far behind. 

The case against The Flippening 

While Bitcoin largely enjoys the role of first mover, Ethereum is only the first mover up to a point. Yes, the consensus is that most of web3 will be built on Ethereum, but the concept is more complex than that. For a start, there is always the chance that a so-called Ethereum-Killer could come along and supplant it. The likes of Cardano and Solana have been called such in the past, and others could come along. Secondly, Ethereum is cumbersome, and it largely relies on Layer 2s (distinct blockchain projects) to scale it. The upshot is that there might not always be demand for ETH, even if much of the web3 infrastructure is built on it. 

Perhaps most importantly, many believe that web3 itself is idealistic. The decentralised utopia might be thwarted by regulation, and there remain questions over whether the whole movement is trying to solve questions that do not exist in the first place. Finally, we are only truly beginning to see the true adoption of Bitcoin by institutions. Some believe that the price could reach millions of dollars per Bitcoin and thereby gain a multi-trillion-dollar market cap. Even if the web3 movement is a success, BTC could become a store of value like the world has never seen, and ETH may never catch up. 

Conclusion: Two camps can co-exist 

For many of those involved in crypto – both in terms of investors and blockchain developers – the attitude to The Flippening is “who cares?”. Still, the arguments over the two largest cryptocurrencies by market cap can get heated. Bitcoin Maxis tend to believe in the purity of their project as sound money, almost worshipping Satoshi Nakamoto (the anonymous author of the Bitcoin White Paper) as a mythical demigod. ETH Maxis see a new internet and deride BTC’s Proof of Work mechanism as archaic. But the truth is that both Ethereum and Bitcoin now feel too big to fail. We would argue that if the Flippening were to happen, it would only be if cryptocurrency and digital assets were so entrenched in the global economy and society that we could no longer live without them. Despite their difference, both ETH and BTC investors would fervently hope for that. 

 

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