ETH or ADA is a better investment in 2024?

The market has witnessed a sudden increase in the price of ETH this week on various exchanges. What are the reasons behind this and what factors should investors consider to determine whether ETH or ADA is a better choice to buy?

Ethereum is about to celebrate its birthday on July 30th. The network was launched in 2015 to create a “world computer” with the same Web3 blockchain attributes as Bitcoin for storing money and making payments. Currently, ETH is the second largest cryptocurrency by market capitalization.

Cardano was launched on September 23, 2017 through an ICO, founded by Ethereum co-founder Charles Hoskinson. Currently, ADA is the 10th largest cryptocurrency by market capitalization.

One key difference between these two cryptocurrencies is the advantage for each coin and the legitimate reason to be optimistic or pessimistic about ETH or ADA.

But some other differences between the two networks are more complex trade-offs to evaluate and provide advantages for both. Here are 7 key factors that will impact the price of ETH in the future compared to ADA.

Price Analysis

The price of ETH is almost returning to ATH (all-time high) after a surge this week due to news about Ethereum ETF. Meanwhile, ADA still has a long way to go. This could really bring more optimistic benefits for Cardano’s coin, as there is still room for further growth.

The recent approval of the Ethereum ETF will completely change the investment landscape for ETH. If the bulls push the price above $4,000, a further 12.5% increase will push ETH to $4,500 - within the range of interest of the previous ATH of $4,721 in November 2021.

ETH 4-hour price chart | Source: Tradingview

Many traders have predicted that the price of ETH will reach $5,000 by the end of 2024. Some even have a more optimistic forecast of $10,000 for this year. Meanwhile, Bitcoin ETF issuer VanEck predicts $11,800 by 2030.

In the short term, the technical indicators of ADA and the moving average over the weekly time frame have recommended “Sell” on Thursday. Meanwhile, the technical indicators of ETH over the 7-day period recommend “Strong Buy”, according to data from Investing.com.

Regulation analysis

Charles Hoskinson must admit that US regulators seem to prefer Bitcoin and ETH over Cardano and other DeFi networks.

SEC approved Ethereum Futures ETFs in October, revealing that they seemingly do not consider ETH as an unregistered security. However, the US regulatory agency has classified ADA and other cryptocurrencies as unregistered securities in lawsuits against blockchain companies, while overlooking Bitcoin and ETH.

According to Fortune Magazine’s report on May 1, “Moreover, despite filing some lawsuits against cryptocurrency companies since April 2023, the agency has never considered ETH as a security in its complaints.”

The SEC lawsuit against Ripple has been going on for several years (since December 2020) and has yet to be resolved. This process has cost a significant amount of money and has made the future of cryptocurrencies uncertain under government supervision.

And of course, the market hates uncertainty. It may not be fair, but it is the factor that drives up the price for ETH and lowers the price for ADA.

Fundamental factor analysis

Fundamental analysis is the preferred method of investors, not entirely degen*. Instead of analyzing technical charts or the mystical economics of meme currency, those who follow the trend of fundamental analysis look at investment prospects and ask what would the author Benjamin Graham of “The Intelligent Investor” do if he were here?

Graham said:

“Smart investors are realists who sell to optimists and buy from pessimists. In the short run, the market is a voting machine but in the long run, it is a weighing machine.”

If the projected future revenue of the business discounted to the present exceeds the current market value, it could be a good investment. If they match or fail to meet the market capitalization of the business, it could be an inefficient investment.

ADA: $258.4 million TVL (3% annual bonus rate + 121% annual growth rate) / Market cap: $16.4 billion

ETH: $64.5 billion TVL (5.5% annual reward rate + 145% annual growth rate) / Market cap: $450 billion.

Based on the data above, unaffected by any other context, it seems like Cardano is winning because its inflow of capital constitutes a much smaller portion of the market capitalization compared to Ethereum (0.019 and 0.22). However, this is only if we expect Cardano to grow at a similar rate to Ethereum in the future.

The uneven acceptance by both parties will pose difficulties for Cardano unless a use case, feature/benefit, and a market-disrupting story for cryptocurrency retail on the Internet are found.

Gas fee

Cardano has lower and more predictable fees, but higher fees on Ethereum are not necessarily a bug. Higher fees make it more expensive to abuse the network for criminal activities without receiving money, making the network safer.

Bitcoin leads the industry for several reasons: slow network, high fees, low transaction bandwidth, but it holds a significant capital reserve. In many ways, these integrated costs determine the eligibility of participants better than any know-your-customer (KYC) and automated policies, regardless of any other basis except the ability and willingness to pay for the network.

For newcomers, entrepreneurs, startups, and investors starting with smaller amounts, a blockchain network with lower fees like Cardano is more advantageous than a smart contract blockchain network. Transaction fees on both networks are very different and increase dramatically with high frequency usage.

Average transaction fee on Ethereum | Source: Ycharts

Easy to use

Some people in Web3 feel that Ethereum has usability issues. The network becomes too complex with complicated layers, steep learning curves, and potential security threats.

“Supporter of blockchain Daniel Cawrey recently wrote:”

“Ethereum is becoming a multi-layered system like lasagna, where complexity and fees are pushing people to the sidelines, causing concerns about interaction and security.”

Like the higher transaction fee of Ethereum, although that is true, the complexity of Ethereum may be the reason why ETH is rising. It could simply be evidence of the success of the network. As Cawrey acknowledges in this section, the network is starting to achieve the concept of a “world computer”.

Activities of whales

The gigantic deposit of 15,000 ETH by whales into Kraken on May 18th, as reported by Whale, signaled a potential ETH price drop. However, after the approval of the Ethereum ETF by the US SEC, increased whale-scale transactions have brought positive results to the network, according to data from IntoTheBlock.

Large number of ETH transactions | Source: IntoTheBlock

Meanwhile, Cardano whales are extremely optimistic about ADA in May. They have increased their holding ratio to 11% in one month. Whales tend to make smart money based on the most advanced analysis and market prospects to know what they are doing, so that is positive and bullish for Cardano.

ADA Holdings Balance | Source: IntoTheBlock

Memecoin

Meme coin is a definite advantage for Ethereum. Although Cardano also has meme coins, there are no notable coins and not at the top of the market capitalization rankings like SHIB, PEPE, and FLOKI of Ethereum.

Cardano has succeeded in creating a simplified, lower-cost version of Ethereum, but the cryptocurrency market tends to reward projects that highlight their technology with memes. The NFT collection of Orange Pill Moon Boys or something with a dog image might do this.

Degen: participants in high-risk and usually short-term investment activities. These individuals often invest in new, unproven or highly volatile digital assets with the hope of making significant profits in a short period of time.

You can check the price of ETH and ADA here.