(Bloomberg) — Bitcoin, the world’s biggest cryptocurrency, has always reigned supreme in the land of digital assets. But now, thanks to an eye-popping surge by Ether, fans of the No. 2 token by market value are reviving predictions that it is destined to one day take over the throne.
In crypto parlance, it’s known as the “flippening” — and it’s still likely a ways off, if it happens. Ether’s market value of around $210 billion is less than half the size of Bitcoin’s even after Ether surged 50% over the past month. And yet, believers are energized with a fresh optimism as a milestone approaches that they say will increase the chances of it happening — perhaps sooner rather than later.
“I keep hearing people repeating the question, ‘wen flippening?’,” Quantum Economics Founder and Chief Executive Officer Mati Greenspan wrote in a note, using the crypto-slang employed by market faithful. “Even though there’s no guarantee this will ever happen, just looking at the numbers, it does seem like this event is getting closer by the day.”
Boosters of Ethereum have touted the blockchain as a better version of Bitcoin almost since it was conceived by programmer Vitalik Buterin in 2014 and launched a year later. Bitcoin’s white paper was unveiled in 2008 and credited to Satoshi Nakamoto, the name used by the presumed pseudonymous individual or group who developed it.
Ether has surged in recent weeks as optimism grows over its long-anticipated software upgrade, which will facilitate a move from the current system of using miners to a more energy-efficient one using staked coins. The switch to this so-called proof-of-stake system is expected to take place in September after being kicked down the road for several years. Ethereum developers have recently signaled continued progress in testing the new system, and they are holding a series of events for prospective stakers and other community members in the coming weeks.
QCP, a crypto trading shop, said that its desk has traded “an incredible amount” of Ether call options over the past days, adding that hedge funds have been large buyers. “We expect this demand to continue as we approach the merge in September,” they wrote in a markets update on Telegram.
Ether has gained roughly 50% since mid-June, and Ethereum-related assets have also advanced. Uniswap, a decentralized crypto exchange that’s most popular on Ethereum, has jumped about 70% over the past month, data compiled by Bloomberg show. In the meantime, Bitcoin’s dominance has dwindled to around 40% of the market, down from 70% in January of last year, according to CoinMarketCap.
“We do like Ether, and we think it’s a major differentiator,” said Joe DiPasquale, CEO of BitBull Capital, which manages cryptocurrency hedge funds. “Bitcoin has been the hundred-pound gorilla, but Ether is really the other hundred-pound gorilla. Everything else trails behind.” His firm holds Ether and has been buying while the coin was making its climb from $1,000 to $1,500. DiPasquale added to his position last week.
The flippening “is very possible,” said Bodhi Pinkner, an analyst at crypto asset manager Arca. “We have a favorable view of Ethereum,” he said, adding that it will, following the Merge, become a deflationary asset. “So that changing dynamic bodes theoretically well for Ethereum’s price relative to Bitcoin, especially in an environment of tightening.”
To be sure, this is not a new development. Crypto crowds have long looked for signs that Bitcoin’s dominance could diminish as other projects and tokens emerge. And while work on the Merge has been going on for years, it’s been delayed many times. It was most recently expected to take place in June, but was delayed once again.
“The Merge itself is an extremely risky event and any number of things can go wrong,” Quantum’s Greenspan said. “As always in the markets, higher risk can equate to higher returns. And they don’t call it risk because it’s fluffy and safe.”
Henry Elder, head of decentralized finance at Wave Financial, agrees.
“The Merge is over-hyped from an ETH price-perspective,” he said. “It’s an incredibly important technological change for Ethereum, but 99.99% of users will experience no difference whatsoever until months or years later. Meanwhile, the impacts of reducing and reallocating issuance will take a while to filter down to ETH prices.”
He points to Bitcoin’s halving process, which is a pre-programmed update that cuts Bitcoin rewards for miners in half every four years or so. The impact of such an event can also take months to be seen in the market, he said.
“I wouldn’t be surprised to see prices pump into the Merge, but I don’t think it’s a sustainable catalyst until the second half of 2023,” Elder said.
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