Ask HN: Why is Bitcoin rising but ethereum remaining stagnant? | Hacker News Reader

Ask HN: Why is Bitcoin rising but ethereum remaining stagnant?

48 pointsaecorredor71 comments

I’ve been watching this actively, and have a few theories:

The last major forks (ETH:ETC, BTC:BCH) both created net positive value; that is, the total value held after the split was greater than the value of a single chain.

So, I think the so-called ‘smart’ money ahead of the fork has been to buy BTC, since history seems to show it will be worth more post-fork. Fork looks more likely -> more buying.

And of course the rising price creates its own momentum. There are three general outcomes from the fork: one or the other side ‘wins’, and there’s a shit-chain spawned, or they both coexist.

In the coexist world, we have a pretty interesting set of market moves ahead; if the debate is as divisive as it looks on twitter, then the whole crypto world will be holding ‘shit coins’, but not ones others think are shit, along with their preferred fork.

It seems possible that they may turn some of those into Ethereum, and it seems likely to me that some traders will ‘get back’ to Ethereum post-fork; all those would indicate some cautious optimism about ETH prices later this fall.

And of course if BTC just totally nukes itself, then I think you’d see a major flippening back to ETH.

1) The gargantuan Chicago Mercantile Exchange says they'll start trading futures contracts on Bitcoin later this year.

2) There's a "flight to safety" quality to Bitcoin. It's proven secure in the face of 9 years of constant attacks. Ethereum is newer and not as proven yet.

3) Bitcoin has a much more powerful mining network, currently cranking 10 exahashes per second and growing fast. Ethereum is at 100 terahashes per second (about 100,000 times less), and growing slowly.

4) Bitcoin is scarce and deflationary. Ethereum is abundant and inflationary.

Why is it inflationary?

The bitcoin network rewards miners with 12.5 new BTC every 10 minutes or so (~1,800 per day).

The ethereum network rewards miners with 5 new ETH approximately every 15 to 30 seconds (~18,000 per day).

Bitcoin's total supply is now about 17 million BTC, and will never exceed 21 million BTC.

Ethereum's total supply is now about 96 million ETH with no upper limit.

> The ethereum network rewards miners with 5 new ETH approximately every 15 to 30 seconds (~18,000 per day).

This is not true. After the last hard fork, the reward for miners went down to 3 ETH.

It's a little complicated with uncles, etc., but the net result is more than 20,000 brand new ETH created every day.

Here's a chart of daily block rewards.

https://imgur.com/a/JG9W5

because that's how it was built [1]

[1] https://en.wikipedia.org/wiki/Ethereum#Ether_supply_increase...

But only (1) is a logical explanation for _recent_ price movement, no?

I don't think any economist would consider Ethereum's growth to be "inflationary" -- the rate of marginal increase of money supply tends to zero, just like Bitcoin's.

To be considered "inflationary", it would have to increase the block reward exponentially over time, rather than just keeping it constant -- linear growth is insufficient.

And all that is assuming a non-existent fixed relationship between inflation/deflation and monetary base. Note that I say "monetary base" and not "money supply" because the two are related but not equivalent. No mainstream (Keynsian) economist would really consider "monetary base" to be a critical economic indicator, and even monetarists would quibble. Only Austrians would consider it important, but they use the terms "inflation" and "deflation" to refer to money supply, so they would not consider Bitcoin deflationary either.

When proof of stake comes to ethereum in a year or less, the total supply of ethereum will actually decrease very slowly over time. Bitcoin will always continue to add coins to the network, albeit in smaller amounts. Eth will subtract coins from the network.

3) apple and orange. They are not using the same (Proof Of Work) algorithm for mining.

Or it's because more shady merchants (drugs dealers) accept BTC. Why does anyone think it's more in-depth than that?

Because something interesting is going on recently, which is what prompted OP's question. Making an observation that was just as true 6, 12, 18, etc months ago doesn't make for a compelling argument about current, new developments.

Because the BTC ecosystem has enough moving parts and varied actors that there's no way you can explain anything useful about its behavior in such a glib manner.

The people you're talking about DO NOT BUY and HOLD. EVER.

The entire idea is to expose yourself to variable risk as little as possible.

so the coins are sent literally the second you can send them.

you don't sit on them for a day, even for a few hours.

you also pay through the nose for decent confirmations with BTC leading to forked coins like LTC/ETH being the de-facto way today, because you pay pennies instead of dollars to get a decent confirmation time.

Last year? Maybe, but not in Nov 2017 ;) Basically, you're wrong and should feel ashamed for being so ignorant.

Firstly Ethereum could only be considered "stagnant" from a price perspective as a great deal of development is definitely ongoing.

So a better question might be: why is Ethereum not experiencing the same levels of hype and price growth as Bitcoin right now?

My guess would be that rising ICO anxiety is causing enough flight from Ether to other currencies to suppress any hype-induced price bumps.

After an ICO the companies have to start cashing out Ether to fund their business plans so the success of ICOs puts downward pressure on Ether unless the ICOs are successful enough to bring new money into the ecosystem.

The ICO craze seems to have peaked and to be in rapid decline now with many governments cracking down or threatening to crack down on fraud so it is doubtful that ICOs can really bring new money to the table at this point.

The other big question on Ether (for me) is the talk about going from proof-of-work to proof-of-stake. That sounds like something that would sharply cut the price of Ether, which is good if you want the network to actually be useful, but bad if you are a speculator.

>The other big question on Ether (for me) is the talk about going from proof-of-work to proof-of-stake. That sounds like something that would sharply cut the price of Ether, which is good if you want the network to actually be useful, but bad if you are a speculator.

Why is that? I'm pretty uninformed on this stuff...I get that POS basically replaces risk via electricity cost with risk via an Ether stake...but I don't get how it changes the supply or demand...

Also some of the "ICO high" is wearing off as reality sets in (some ICOs are garbage) and regulation begins.

Supply and demand.

There is no limit on the supply of ETH, whereas there will only ever be 21 million bitcoins in existence.

It doesn't make sense to speculate on the price of ETH, because it's never going to be scarce. Even the current price of ETH makes no sense, except you need it to buy into ICOs.

Kind of like there will only ever be 1 million pixels http://www.milliondollarhomepage.com/

I'm just a tiny bit bearish on digital currency.

Actually when proof of stake hits, ethereum's supply will actually decrease. Buterin has stated multiple times and also said the total supply will be around 100,000,000.

"It doesn't make sense to speculate on the price of ETH, because it's never going to be scarce."

This is totally not true. I hate seeing people post FUD like this about ETH. It does not grow unbounded.

Here's a post from Vitalik himself describing it in more detail

https://www.reddit.com/r/ethereum/comments/5izcf5/lets_talk_...

> I hate seeing people post FUD

I hate people accusing others of spreading FUD. What happened to people being simply mistaken? Do you have any proof his or her ill intent?

Fair point but when someone says "X will never ..." as a justification for it not meeting that qualification and there being no evidence that their assertion is true, there is either (a) a fundamental misunderstanding of X or (b) malicious intent.

I don't think suggesting FUD is explicitly saying that (b) is present, it could well be (a) but if that's the case it is still harmful and one can spread FUD without the malice. But it is reckless and irresponsible to state something which is simply not true as if it were fact. This is a problem in our current world and one which has run rampant and I think it is necessary, particularly in forums such as this, to question the assertion of unverified facts.

I think there's a straight forward explanation. Bitcoin has fundamentally proven its stability this year. It's already had one fork and China cracking down on it hard. It was a major test for Bitcoin and the net result was Bitcoin came out literally stronger than ever after a drop that was, in hindsight, just a blip. If that news didn't trigger a devastating sell off it's somewhat difficult to imagine what would.

Another key point is that Bitcoin also has inherent value as a currency. You can pay for things easily and quickly directly with Bitcoin in an increasing number of places. Should somewhere like Amazon decide to start directly accepting Bitcoin, the price would go through the roof.

And one more debatable issue is that Bitcoin is in a way a sort of metronome or heartbeat for cryptocurrencies as a whole. Almost like a reserve currency. If Bitcoin fails, it would likely have a devastating ripple effect throughout the entire crypto community. "If Bitcoin fail - anything can fail." is something that would likely be uttered rapidly in response to any other crypto. So an investment in Bitcoin can in a way be seen as an abstract investment in cryptocurrency itself. If you accept this, then the corollary is that other coins are indirectly marked against Bitcoin. So you would be implicitly taking on additional risk for unclear gains.

Because the people buying it and driving up the price don't care about block chain or alternate economics or anything like that. It looks like stock that keeps going up. Plenty of people are buying it purely as an investment.

I'd say two things at this point in time: 1) All-time high, it's pre-fork time, Bitcoin is still a long position, so people who have a lot of cryptocoins are trying to expand their portfolio BTC %. And all new investors are coming to BTC. ETH, like every other altcoin right now, is being traded in favor of BTC, so no way value will go up pre-B2X. 2) ICO banning, regulations, and general uncertainty at new coins make Ethereum & ETH, as far as price speculation goes, a less favorable proposition, since its speculative driver (ETH for ICO) lost momentum. IMHO it's remarkable the ETH/USD price is still stable, hovering at US$300.

It's meaningless to speculate on these short-term price movements.

There's a possibility that the pricing is being determined by macroeconomic forces, but then it seems like you'd see price movement in traditional commodities as well (like gold) and we're not seeing that. In all likelihood this is the combination of some set of factors -- the CME group's involvement or more people looking to enter the market, etc., and Bitcoin's preeminence in the cryptocurrency space.

There's the movement of Bitcoin Cash, which is going up at an even faster clip (now) after stagnated for a while after the post-fork excitement. This is not obviously connected to any of the CME-based news.

Most likely is that each coin is acting somewhat independently. As much as you can say that Ethereum is stagnating, it's not stagnating any more than Bitcoin was a year or so ago.

Only time will tell if the current pricing changes are reflecting some deeper reality, but I'd hesitate before attributing anything like that until we have more information.

Why did a red and blue colored canvas by Mark Rothko sell for 75 million dollars?

Memes are weird and money is even weirder.

Easy way to launder $75,000,000 out of China by buying the canvas, transporting it out of China and then selling it.

That's why it's worth $75,000,000.

I find it odd that everyone thinks Chinese money laundering is the source of high valuations and not unprecedented amounts of central bank money creation. It is a function of their own efforts to devalue their currency more than the foreign ones so that they stay competitive exporting. Bubbles all around.

Not a very scientific theory, and not much collected evidence but based on my observations Bitcoin get's much more press, more people know about it and want to buy it. It's all very speculative. To say 1 bitcoin is worth 7000 USD is the same as saying I can manage to sell all my bitcoin for that much which is likely not the case. As with all assets, the moment a major player loses confidence and signals such in the market, there will be a sell off and major crash in the value.

EDIT: anectodal evidence, this week more than 10 non-tech people who ask me for investing advice asked "should i buy bitcoin". The moment non-experts begin to ask if they should be buying something is generally a good signal that something is bubbling

There is a fork coming up, people are hoping to profit off of both chains.

Ethereum just had a hard fork where a ,,quick patch'' for a bug was created 2 days before the fork. The developers didn't agree if there should be a hard fork or no at that point. I would never put my money on a system like this, and I would never roll out a system like this where I can make tens of billions of dollars of damage so easily.

Also people who were using an official Ethereum multi-sig wallet to be extra safe lost real money, because the devs don't even bother testing the smart contracts that they provide (while Bitcoin devs just created a language from ground up that allows proving properties of smart contracts)

Because BTC has had many changes in available supply. With BCH and 2X a lot of people that otherwise would happily hold their coins in cold storage have been "forced" into moving their coins around for "flippening" of the forked coins.

Also consider that a very large amount of coins was seized when BTC-E (corrupt exchange working with criminals) and AlphaBay (defunct darknet drug website) were shutdown around the same time. It's not just the capital that was seized (and is still be processed by many governments that co-operated) but also the flow of money that was interrupted.

I would say brand recognition among amateur investors. Amateur investors, just like in the dot-com era, drive huge upsurges in prices, and tend to be indicative of the late stages of a bubble. Even Richard Shiller though, a really brilliant economist, does not even try to attempt when bubbles will "pop", but a good rule of thumb is they don't last longer than 10 years. It's hard to argue when this all started, but if you date the rise of the "start-up era" (which I am lumping in here with bitcoin) to say 2010, that gives you about 2 years max.

BTW this was all very common in the 90's with the rise of day-trading. People would literally give a company 50k and they'd be given a terminal at some rent-a-office to start trading (but with their own money not the firm's!!!).

One guy lost so much money, he killed as many people as Columbine: https://en.wikipedia.org/wiki/Mark_O._Barton. I wonder if this will happen again.

Ethereum is stagnant because it's no longer profitable to mine with a GPU as it was during the summer.

Bitcoin is rising because it's about to fork.

Still plenty profitable to mine if you already have a rig. A 6 card RX470/480 setup will gross about $9/day.

Even with a rig like that it will take around 10 months to break even. Ethereum will be moving to proof of stake in the future. There is no set date but it could be in approximately 1 year. At that point all these gpu rigs will need to switch to other less profitable cryptocurrencies.

We're reaching the point where it may not be possible to break even before Ethereum switches to proof of stake. Consequently, it's recently become easier and cheaper to buy gpus suited to mining.

I did say "if you already have a rig". For the time being, it still makes more sense to mine than liquidate cards.

The market is all over the place right now for mining altcoins. NiceHash-Cryptonight (pays out in BTC) will currently gross ~$18-20 a day with the same mentioned setup.

How much after electricity?

A bit over ~$7/day if you pay ~12.5cents/kWh. Obviously everyone's situation will be different.

I've stopped mining. It's still a little profitable on paper (~$1/card/day after subtracting electricity cost) but only because you can't measure what impact mining has on the life of your hardware.

This is my theory - Proof of Stake.

Ethereum is going to hard fork (whenever they can figure out) to a proof of stake model - CASPER.

https://www.coindesk.com/shifting-changing-ethereums-casper-...

This means that there is no serious investment on the farm side of things. No chinese miners running to invest millions of dollars to build mining farms.

To a large extent ETH is centralized in its stewardship through Buterin. So, the whole ecosystem is holding its collective breath. The next phase of growth (or fall) will only come after CASPER.

Getting my pop corn ready for first at least a 50% hair cut on BTC value.

You and everyone else predicting it since it was $200.

The mania phase is pretty clear here. What goes up like that must come down. It's simple as that.

Study currencies, stocks and commodities price histories before and after they entered parabolic phases. Nothing lasts forever.

>>Study currencies, stocks and commodities price histories before and after they entered parabolic phases. Nothing lasts forever.

Right. Except the ones that do. And even if you correctly predict that BTC is going to collapse... when? At $2000? At $5000? At $7100? Are you doing anything to bet on it by shorting it? Or are you just prognosticating and trying to timestamp a comment so in [x] months/years you might be able to link back to Hacker News and say: "A-ha! I knew it," ignoring all the other predictions you may or may not have made that didn't come true.

It's easy to say BTC is going to collapse. A lot harder to have some conviction behind it and act.

The last time Bitcoin was priced under $200 was in January of 2015. You're correct that it hasn't experienced a drop of 50% at any point since then.

On the other hand, Bitcoin was also priced under $200 just over a year earlier, in November 2013. In December 2013 it spiked over $1000 before crashing. The $200 in January 2015 is where it eventually stabilized.

This doesn't invalidate your comment, by any means, but it does illustrate that such a collapse is not out of the realm of possibility.

(All prices sourced from https://www.coindesk.com/price/)

Last "real" price before forks and flipping started was around $2500.

You're absolutely correct. We're certain to see big crash at some point.

I remember when Bitcoin crashed from $30 to $8. That was brutal.

Later it crashed from $100 to $40.

Crashed again from $1000 to $300.

More recently it crashed from $5000 to $3000.

Enjoy your popcorn while the rest of us hold through the crashes!

I'm surprised nobody has mentioned the CME news: http://www.cmegroup.com/media-room/press-releases/2017/10/31...

(My own explanation is that it's all a big speculative bubble and price moves are essentially momentum on top of noise, but nobody came here to read that :))

I understand how Futures work in commodities. Can you give me a TLDR primer on how this works for currencies?

Just like any other cash-settled commodity.

http://www.cmegroup.com/media-room/press-releases/2017/10/31...

My theory is that ETH is a useful medium of exchange for buying compute resources from "the world computer", but BTC is better as a store of value. And the dollar continues to be better than both of them as a unit of account.

Basically, competing forms of money are breaking down into specialized kinds of money. Automatic atomic swaps between blockchains will make the specialization even more obvious over time.

Market value is based mostly on emotion. A lot of people buying into the hype have heard of BTC, but not as many have heard of ETH.

People are mostly buying it to resell it. BTC price goes up because BTC price is going up. ETH price is not going up because it's not going up.

Sometimes the inferior technology wins too as long as it's been adopted more widely. Cryptocurrency value is based heavily on network effects.

Bitcoin is still the word most strongly associated with blockchain. So whenever someone wants to make money off that new blockchain thing Chad made a million buying, they default to Bitcoin.

Then Phil and Susie also made money since Tammy and Jeff bought in as well, so Tom and Jennifer buy it too. Etc.

More people are buying bitcoin than ethereum. Therefor the price goes up faster. Supply / demand.

Does nicehash have an effect on how alt coins are priced compared to bitcoin. It's a market where you mine altcoins for bitcoins. Not sure how large it is, but wondered if it was affecting the relation to prices.

No different than asking "Why is the internet service Facebook growing but the internet service Twitter isn't?" or "Why did the internet website Facebook grow but the internet website WebVan didn't?" Bitcoin and Ethereum serve different purposes (a store of value and maybe a currency vs. a computing platform, respectively).

Because Etherium is altcoin while BTC is the main one.

Cause ETH requires all the servers to process a single transaction to validate it. The tech makes no sense.

Ethereum has no defined use case, bitcoin is at the least a store of value. ETH is no different to LTC, NMC or any of the myriad other alt coins. You would be better asking why LTC is stagnant rather than ETH. Further ETH is an unlimited coin so it could never see the scarcity that BTC has built in to it.

How is Ethereum less of a store of value than Bitcoin?

The most apparent reason is that ETH does not have a set supply cap, whereas BTC is 21,000,000.

Two use cases: 1) Smart contracts (currently the most used blockchain to run one); 2) New tokens/cryptocoin (most used blockchain to run ICOs). Disagree with Ethereum value proposition/implementation all you want, but saying "there's no defined use case" is nonsense.

Smart contracts have not exactly been successful as far as I can see. the biggest news in ETH was the fork to ETC and the reasons behind it. Combined with the limitless supply it means it will never be worth more than bitcoin.

also ICOs seem to be the newest fraud on the block, thats not ETHs problem, just like darknet market use wasnt BTC's problem, but the 2 use cases you have provided are not shining examples.

I agree it has some potential uses but its main uses have to date been quite flawed. It would need to restore confidence in its uses before it attracts some serious interest.

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