While Bitcoin still ranks as the undisputed market leader with a massive $2.3 trillion market cap, Ethereum has been on an absolute heater of late. In the period from May to September, Ethereum more than doubled in price, easily making up any lost ground with Bitcoin. So, which is the better buy right now?
For good reason, Bitcoin receives a lot of accolades as the top-performing asset of the past decade. In eight of the past 10 years, it has been the top-performing investment asset in the world. And in most years, it hasn’t even been a close race. It’s not unusual for Bitcoin to turn in triple-digit annual gains.
But Ethereum is no slouch, either. In fact, over the past five years, Ethereum has actually outperformed Bitcoin. Take a close look at the TradingView chart below. In that period, Bitcoin is up by a head-spinning 938%. But Ethereum rose even faster at 1,059%.
What’s particularly striking is how Ethereum has managed to remain one step ahead of Bitcoin over that time period, aside from a nasty dip earlier this year, when the price of Ethereum absolutely nose-dived. Admittedly, past performance is no guarantee of future results. So, I don’t really know how either Bitcoin’s or Ethereum’s performance will look over the next five years, but they may be a lot closer than many people realize.
Another key factor to keep in mind is the rise of new digital asset treasury (DAT) companies. Simply put, these are companies designed to do just one thing: buy one specific cryptocurrency. They raise capital from outside investors, and then immediately put that money to work buying as much as they can of a specific cryptocurrency.
Here, too, Bitcoin gets all the accolades. That’s because the first true DAT was Strategy (MSTR -0.20%), the company formerly known as MicroStrategy. In August 2020, Strategy began to accumulate Bitcoin for its balance sheet. Over the past five years, it has steadily built up its hoard of Bitcoin to the point where it is now the world’s largest corporate holder of Bitcoin. At last count, Strategy owned a staggering 640,000 Bitcoin, or about 3% of all Bitcoin in circulation.
But don’t overlook what Ethereum treasury companies have been up to recently. There are now 71 of them, holding an estimated $22 billion in Ethereum. And the amount they hold has more than tripled since July. Currently, Ethereum treasury companies hold 3.5% of all Ether in circulation, so they are now a force to be reckoned with.
This massive upsurge in buying helps to account for Ethereum’s explosive price action this summer. Given the cryptocurrency’s relatively limited supply — just 120.7 million coins — there was nowhere for the price to go other than up once dozens of companies committed to buying Ethereum in bulk.
Ethereum may have one hidden advantage over Bitcoin: It is a proof-of-stake blockchain, while Bitcoin is a proof-of-work blockchain. This might sound like a lot of crypto mumbo-jumbo of interest only to blockchain developers.
However, this key feature does create the opportunity for Ethereum investors to earn passive income via staking. In crypto parlance, staking simply refers to the process of locking up your crypto for a certain period of time. In return for staking your crypto, it is possible to earn rewards.
Right now, the average staking yield for Ethereum is 3%. That might sound minuscule, but it can be a huge incentive for institutional investors looking for a performance edge. Think of earning an extra 3% on anything. Over time, it can really add up.
The current thinking is that Ethereum treasury companies might be able to use this 3% staking yield to create a flywheel effect. The more Ethereum they buy, the more Ethereum they can stake. This gives them an advantage over Ethereum exchange-traded funds (ETFs), which, until recently, had been barred from offering staking rewards to investors.
As a result of this hidden moneymaker, investors should be willing to attach a higher premium to the shares of publicly traded Ethereum treasury companies. In turn, these companies can raise more money from outside investors at a lower price. They can then buy more Ethereum, and the process can be repeated. In short, the flywheel keeps spinning.
It’s hard to argue with Ethereum right now. It’s outperforming Bitcoin both this year and over the past five years. And there appears to be incredible momentum behind the Ethereum treasury companies. It’s almost like a switch has been flipped, and investors are now racing to hoard as much Ethereum as possible.
Thus, as surprising as it may sound, Ethereum may actually be the better buy right now, heading into the final months of 2025.
