Market Cap Trend Comparison: Ether vs. Top 10 Cryptocurrencies


Introduction:

In the previous post, the market cap of Bitcoin was compared to that of the top 10 cryptocurrencies (excluding Doge) for each of Bitcoin's halving cycles. Additionally, a simple logarithmic model was established to estimate how much market cap growth Bitcoin could expect within the current halving cycle.

The Ethereum network's cryptocurrency, ether, is the focus of this post. Ether is a much younger cryptocurrency than Bitcoin, but it was able to make rapid market cap gains and has consistently held the #2 spot by market cap for years now. While Bitcoin and Ether are similar in many ways (decentralized, store of value, transferable, use the Proof-of-Work consensus algorithm, etc.), there are some key differences between the two:

  • Ether is a store of value that can be used to power financial/other operations (i.e. smart contracts),
  • Ether is transitioning to from a Proof-of-Work to a Proof-of-Stake consensus algorithm, which will change the dynamics of the market. 

This post is going to look at how Ether's market cap growth has compared to that of the top 10 cryptocurrencies (again, excluding Doge) for each of Bitcoin's halving cycles. Subsequently, a logarithmic market cap growth model will be presented and briefly discussed.

Method:

The method employed for this analysis is equivalent to that used in the previous post, the only significant difference is that Ether is assessed (instead of Bitcoin) relative to the market cap of the top 10 cryptocurrencies. The results for the market cap growth of both the top 10 cryptocurrencies and Ether are shown in the figures below.

Ether's maximum market cap growth was extracted within each halving cycle and that data was used to create a simple logarithmic growth model. The resulting figure is also shown below.

Results:

Figure 1 - Market cap growth of Ether and the top 10 cryptocurrencies after Bitcoin's first halving event:

Market cap growth after first halving event

Figure 2 - Market cap growth of Ether and the top 10 cryptocurrencies after Bitcoin's second halving event:

Market cap growth after second halving event

Figure 3 - Market cap growth of Ether and the top 10 cryptocurrencies after Bitcoin's third halving event:

Market cap growth after third halving event

Based on the data presented in Figures 1-3, Ether's performance and the performance of the top 10 cryptocurrencies are highly correlated (which makes sense considering that Ether is included in the top 10). The Pearson correlation coefficient (please refer to the previous post for a quick refresher on the significance of the Pearson coefficient) for each of the halving cycles are:

  • After first halving: 0.848
  • After second halving: 0.880
  • After third halving: 0.990

As shown by the correlation coefficient values, Ether has gradually become more correlated with the performance of the Top 10 cryptocurrencies over time (keep in mind that it has never not been correlated). Interestingly, Ether has remained fairly strong throughout the recent market downturn (this recent divergence can be seen in Figure 3), however, its market cap too has crumbled a little overnight.

As shown in the above Figures, the market cap growth that Ether experiences has almost always been larger than that of the top 10 cryptocurrencies combined. This indicates that a portfolio of Ether has historically performed better (in terms of market cap growth) than an index-like portfolio of the top 10 cryptocurrencies combined. Keep in mind that the market cap growth is calculated from the start of each halving cycle, which limits the number of buy-in events to three (one at Ether's inception and two at the subsequent Bitcoin halving events).

Figure 4 - Maximum Ether market cap growth model:

Market cap growth model

In the previous post, a logarithmic market cap growth model was developed for the Bitcoin. In this post, a logarithmic market cap growth model was created for Ether (shown in Figure 4). The blue dots in Figure 4 show the maximum market cap growth values from the data, the orange dashed line (labeled "fit 1") shows the linear fit including only data from the previous two bitcoin halving events, and the green dashed line (labeled "fit 2") shows the linear fit that you get using all of the data (the previous two and the current bitcoin halving cycle). Note that there is no data from Bitcoin's first halving cycle (as Ether didn't exist yet), so creating a model from the two or three data points is not ideal. In fact, I would assume that Fit 1 is absolutely wrong, and Fit 2 is somewhat more realistic.

Relative to the market cap at the start of the current halving cycle, the expected market cap growth values for Fit 1 and Fit 2 are 119,721.92% and 2,785.45%, respectively. Keep in mind that Fit 1 is ridiculously optimistic and Fit 2 being more reasonable so for Bitcoin's current halving cycle.

Conclusion:

The cryptocurrency market is currently in a reversal/retracement after many currencies have achieved new all-time highs. These reversals/retracements coincide with similar behavior in the stock market. Investors/hodlers should keep that this behavior is quite normal and should not be a cause for alarm; investors/hodlers have weathered events like this (and ones that were much worse) many times before. In the long term, holding Ether has proven to be a very lucrative and worthwhile investment; as shown above, Ether has consistently out-performed the top 10 cryptocurrencies both in this halving cycle and the previous one. With the significant upgrades being made to the Ethereum network, it is difficult to predict how market cap (and price) will perform in the future. Current sentiments indicate that a transition to a Proof-of-Stake consensus algorithm and implementing the fee burn proposal might be beneficial to Ether investors.

 

Comment below if you want to see how a particular cryptocurrency compares against the market cap of the top 10 cryptocurrencies. Comment below if you want anything in particular examined.  

If you appreciate the post, please leave a like/comment/tip below. Additionally, if you want to support this work, feel free to donate to any of the following addresses:

BTC:  bc1qkux20yl9u0ky9jsutanclf5yt0spjhlrf0sh78
ETH: 0xB74499C370359ecf11dB2EE9B0B602625Af953C3
DOT: 15kVFuW6Mu5a6ezGoSgc4XtVqqLon9F6ugFjK2SdbG4UCSSD
XTZ: tz1gxDiDBMVpuTreH4RaYiRzHq4Ds8AqsNxA
ATOM: cosmos157557w2rcw697lct3c7p8payqawc0ywa8vmhlt
BAT: 0xB74499C370359ecf11dB2EE9B0B602625Af953C3

Disclaimer: This post should not be construed as investment advice. Any reference to an investment's past or potential performance is not, and should not be construed as, a recommendation or as a guarantee of any specific outcome or profit.

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crypto-analysis
crypto-analysis

Engineer working in the space industry, with an interest in cryptocurrencies and data analysis.


Market Cap Analysis
Market Cap Analysis

A series of posts that numerically analyze the historical and current cryptocurrency market capitalization trends.

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