- Bitcoin price outperformed ETH marginally in 2022.
- Ethereum faces significant regulatory risks in 2023.
Bitcoin and Ethereum prices crashed hard in 2022 as the crypto industry faced a mountain of challenges. Some of the main headwinds were the soaring interest rates, rising inflation, and the collapse of Terra, Voyager Digital and FTX. In all, Bitcoin price dropped by 65% while ETH crashed by 68%. In this BTC vs ETH comparison, we will assess the better buy between the two.
BTC and ETH faces challenges in 2023
Bitcoin, Ethereum, and other cryptocurrencies plunged in 2022 as concerns about the industry rose. First, investors were concerned about the health of the global economy as inflation rose. Consumer prices jumped to the highest level in more than four decades in most countries. This rebound was mostly driven by higher energy prices after Russia invaded Ukraine.
Second, central banks like the Federal Reserve, Bank of England, and European Central Bank (ECB) delivered multiple rate hikes during the year. The Fed hiked by 450 basis points, making it the most hawkish it has been in decades. Historically, cryptocurrencies and other risky assets tend to underperform in a period of high rates. Indeed, the tech-heavy Nasdaq 100 index fell by over 30%.
Third, Bitcoin prices plunged after the collapse of Terra and its ecosystem. This collapse played a role into the collapse of other companies like FTX, Voyager Digital, Celsius, and BlockFi. As such, the fear and greed index dropped while outflows from exchanges rose.
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Outlook for 2023
Ethereum went through a major change in 2022 as the developers activated the merge. This merge helped Ethereum transition from a proof-of-work into a proof-of-stake network. PoS networks are usually more climate-friendlier than PoS platforms.
The merge sets the stage for more upgrades in Ethereum. For example, the Shanghai upgrade will happen in Q1 of 2023. It will make it possible for people to withdraw their staked funds. It will then be followed by another upgrade that will introduce sharding mechanism.
All these upgrades will be positive for Ethereum and its ecosystem. For example, sharding will turbocharge its network speed and reduce its costs. It will also help more adoption by dApp developers. Bitcoin, on the other hand, will not see any change in 2023.
Bitcoin vs Ethereum
So, which is a better buy between Ethereum and Bitcoin in 2023? Historically, the two assets tend to move in sync with each other. In the past five years, Ethereum price has done better than BTC. In 2022, BTC did better despite the merge hype.
Ethereum faces a tulmoutous performance in 2023 because of regulatory risks. By introducing staking, it effectively became a security. As such, it could be limited in the United States now that regulators are increasing their focus on the sector.
Analysts believe that the scrutiny will likely depend on the outcome of the SEC vs Ripple case in the US. If the SEC wins, it could increase its focus on other assets like ETH. Therefore, because of these risks, I believe that BTC price will do better than Ethereum in 2023.
