Better Buy: Bitcoin vs. Ethereum

Bigger is just better this time!

(Bitcoin: Most investors in the cryptocurrency space are probably best served by holding both some Ethereum and some Bitcoin. But if I had to choose just one of these sector giants, it would have to be Bitcoin. There are two main reasons for this conclusion.

First, many cryptocurrencies are trying to do the same thing as Ethereum, and some of these alternatives come with significant technology improvements. I count three Ethereum rivals among the top 12 cryptocurrencies by market cap.

Solana (CRYPTO: SOL runs through smart contract transactions much faster than Ethereum. So do Avalanche (CRYPTO: AVAX and Cardano (CRYPTO: ADA. All three also use more environmentally friendly blockchain structures, giving decentralized app developers another reason to select a different smart contract platform over the leading Ethereum solution.

Taken together, this trio is already worth 25% of Ethereum's total market value. All have also outperformed Ethereum in 2021, often by a large margin:

Bitcoin has rivals but the simpler value-storage and money-moving functions of this cryptocurrency leave less room for disruptive challengers. Add up the five largest digital currencies not named Bitcoin in this part of the cryptocurrency sector, and you get a total market value of $107 billion -- a mere 12% of Bitcoin's dominant footprint.

That's where my second reason to prefer Bitcoin comes in. The cryptocurrency industry's grandfather holds an important first-mover advantage.

The long-term winners in this subsector must work to gain acceptance by (deep breath) consumers, governments, banks, investment managers, financial services, retailers, subscription services, charitable institutions, street-corner acrobats, and birthday party entertainers. And more, of course -- those are just the most obvious money-handling categories off the top of my head.

Bitcoin is already working its way into most of these segments (except the party clowns, who may drag their color-spangled feet more than most). Other digital currencies are trying to follow suit but Bitcoin is setting the pace for the industry as a whole. For example, any retailer that accepts Litecoin or Dogecoin is guaranteed to take Bitcoin, too. And that's not a two-way street.