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2020 was an impressive year for the Ethereum network and the Ether (ETH) price. In November, the Eth2 deposit agreement was quietly launched and by the end of the month the contract had reached capacity with 524,288 Ether blocked.
When Black Thursday occurred on March 12, almost all cryptocurrencies had their price squashed and Ether was not spared from the carnage. After trading for just $ 86 on March 12, the price of Ether surged to post a year-to-date gain of 322% and the altcoin set a 2020 high of $ 635.70 on December 1.
Despite the accolades Bitcoin received when it hit a new all-time high today, Ethereum’s price actually outperformed BTC in 2020.
Despite this stellar performance, Ether is still around 59% below its all time high of 2018 at $ 1,431 all time high. Even with the price well below its all-time high, the altcoin’s $ 67 billion market capitalization outperformed automaker General Motors and the CME group.
It is worth noting that these comparisons are questionable as listed companies have assets, liabilities, capital expenditures, sales and employees. While the same cannot be said for Ether, traders will still compare the two.
Long-term investors tend to establish multiple competition scenarios, growth analyzes and valuation multiples. Meanwhile, traders will primarily care about price and volume.
Aside from the differences in the two assets and the drivers of their value, it’s worth noting that some of the newer trading platforms offer cryptocurrencies and stocks simultaneously.
Mobile app-based brokers such as E * Trade, RobinHood and eToro have tens of millions of users and as the effortless access ramp these platforms offer will make it easier for a wider range of investors to interact with digital assets.
How Ether compares to companies with similar market capitalization
Colgate-Palmolive is a member of the S&P 500 Index and the company has a market capitalization of $ 73 billion. The company was founded in 1806 and has recorded a net profit of $ 2.7 billion in the past 12 months.
US Bancorp also has a market capitalization of $ 67 billion, is the fifth largest US bank and is also a member of the S&P 500. The company was founded in 1968 and also owns Elevon, a credit card processor.
Finally, with a market capitalization of $ 64 billion, CME Group owns the Chicago Mercantile Exchange, which was founded 172 years ago. Its net income has been $ 2.1 billion for the past 12 months and the stock also includes the S&P 500 index.
Although Ether shares a similarly sized market capitalization, it doesn’t look like the companies listed above. The cryptocurrency has no balance sheet or income statement. Therefore Ether behaves more like commodities like gold, oil and Bitcoin. The chairman of the US Commodity Futures Trading Commission (CFTC) also expressed a similar view.
As clearly illustrated in the graph above, there are almost no similarities between Ether and listed companies. While those stocks trade an average of $ 283 million per day, the cryptocurrency is over $ 2 billion, according to Messari data.
The same can be said of Ether’s volatility, the standard measure for fluctuations in daily average prices. Cryptocurrencies tend to have much stronger movements, mainly because they are not based on sales or growth expectations.
While Ether’s 90-day annualized rate exceeds 80%, it’s 20% for Colgate-Palmolive and 32% for CME. Meanwhile, US Bancorp exhibits 47% volatility, and while this is unusually high for most stocks, it is still within a mile of the levels seen among cryptocurrencies.
Growing companies have given Ether a run for the money
Not all companies are the same, and a few select tech companies have competed in Ether’s bull run. For example, Zillow is on the run with a market cap of $ 25 billion, and so is Square, which is at $ 94 billion.
Both Zillow and Square have managed to double their revenues over the past two years and each have huge market share growth potential in their industry.
Unlike Ether, they carry the brunt of capital spending, marketing, and other growth problems. Despite this, both have still managed to record gains of 220% over the past thirteen months.
Crypto and stocks are becoming less and less of an apple and orange conversation
It is a relatively futile exercise to imagine the potential market for Ether. First, cryptocurrency penetration is minimal, and recent studies show that only 7% of Americans have bought Bitcoin. Therefore, the percentage of those who actually use the Ethereum ecosystem is much lower.
Unlike listed companies, Ether is part of open source software. In this way, updates and new system interconnections are possible. While it’s hard to value the network’s ability to evolve, today’s Ethereum 2.0 Genesis Block launch could be seen as an example as Ether’s price has seen an impressive rally leading to the upgrade.
To conclude, it’s fair to say that Ether has much higher potential than the vast majority of listed companies, but that doesn’t mean investors will ignore its market cap valuation versus growth tech companies.
The views and opinions expressed herein are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your research when making a decision.
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