After being made public in January of 2009, Bitcoin became the first cryptocurrency ever to enter circulation. Although it remained a niche concept enjoyed by computer and finance enthusiasts, it has always retained its market dominance, even as other digital currencies began growing in popularity.
During the Bitcoin bubble in 2017 many of these new tokens also shot up in value exponentially, benefiting from the excitement around Bitcoin’s meteoric rise. For example, Litecoin, a token that offers faster transaction processing than the market leader, began 2017 valued at around $4. In December of that year, it peaked at around $300.
Another of these was Ethereum. This digital currency was valued at around $8 in January 2017 and reached its peak of $1,000 12 months later. The main USP that Ethereum has is that it is not just a cryptocurrency, but an entire decentralised network of infrastructure that can be used to run applications and smart contracts.
The versatility of Ethereum over Bitcoin led many to predict an event they called “the flippening”. This would be the day that Bitcoin and Ethereum flipped places in terms of market capitalization, with the latter taking the number one spot.
News articles were published in many major financial outlets, and an entire website called Flippening Watch was set up to help people track when the flippening would take place. The site is partly broken as of July 2020, with some of its tables unpopulated.
This is a good metaphor for the flippening itself, an event that never was. Instead, Bitcoin remains the highest valued and most capitalised cryptocurrency in the world. Why is that?
Slowdown in Demand
Cryptocurrencies, in general, haven't seen the widely predicted mass adoption among consumers for day-to-day spending. At present, there are many industries that are not adopting cryptocurrencies. For example, you can't walk into a supermarket or buy your train tickets using Bitcoin without using a service like the Coinbase Card that converts your digital money to a fiat currency to pay the merchant. The same applies to the entertainment industry, for example, while playing online casino games, sites like PokerStars Casino offer a range of different deposit options including MuchBetter, Visa and its own Stars Transfer service.
Apart from a short-lived spike in May 2020, daily Bitcoin transactions have fallen below their January 2018 peak, despite there being around 2 million more in circulation. The same applies to Ethereum.
First Mover Advantage
No matter what the industry, whichever business enters the market first, they have an advantage over the others. Amazon is a good example of this. It was the first online bookstore, allowing it to build up market share and expand into the one-stop-shop that it’s become today.
Because Bitcoin enjoys this first-mover advantage and it has a much stronger public awareness than any other cryptocurrency, it is often the first digital token that beginners buy. It’s, therefore, difficult to see this changing in the near future.
Why Didn’t It Happen?
The flippening didn’t happen because it was always a remote possibility. In hindsight, it’s clear Bitcoin’s dominance is going to be hard to beat. Instead, the prospect of the flippening was likely just hyped up because of the excitement around blockchain technology, in the same way the prospect that we’d be replacing fiat currencies in a couple of years was unrealistic.
Could It Still Happen?
The flippening absolutely could still happen; a recent report said it was “53% complete”. Bitcoin is 11 years old, which is nothing in comparison to traditional currencies like the dollars, pound and euro. Ethereum has only existed since 2015, meaning it has several years to catch up.
While Bitcoin has a higher profile, Ethereum offers more than just a store of value. Being an entire platform for developers to build decentralised apps (dApps), it has been used to create games, other applications and even other cryptocurrencies. For example, the Opera browser has been turned into a dApp while several social media applications have also been created on the network.
In the long term, this functionality and flexibility could help Ethereum to overtake Bitcoin in most or all key metrics: token value, market capitalization and daily transactions.