Ethereum Classic (CCC:ETC-USD) traded for $89 on May 18, whereas Ethereum (CCC:ETH-USD) was priced at $3,407. So you can see, Classic is a cheaper way to buy Ethereum. ETC-USD has some differences in features and structure, but for the most part, it is a way to buy into the bigger token and own more of the cryptocurrency.
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But what about performance? After all, Ethereum is up 367% so far this year. ETH-USD ended last year at $730.37, according to Yahoo Finance. As of this writing on May 18, it is at $3,407. That puts its price at 4.67 times the Dec. 31 price, or 367% appreciation. (Remember, we have to deduct 1.0 or 100% to actually measure the gain or upside).
But look at this. ETC-USD ended last year at $5.70, according to Yahoo data. That means at today’s price of $89, the crypto is now 15.64 times the Dec. 31 price. That means its performance has been 1,464% (don’t forget to deduct the 100%).
So, this means that Ethereum Classic has significantly outperformed Ethereum, up 1,464% vs. 367%, respectively. That’s 4x better performance. What is going on here?
Ethereum Classic’s Standout Features
Just like Ethereum, Ethereum Classic is designed to run smart contracts. It came about as a result of a “fork” in 2016. A fork is a split between developers of a cryptocurrency. A programming and/or policy change is proposed which the followers in one group do not agree to follow.
The fork in 2016 was from a “dispute over how to best resolve a hack that stole over $50 million,” according to Decrypt.com. Ethereum Classic is a continuation of the original blockchain platform. According to its advocates, it is “free from external interference and subjective tampering.”
Ethereum Classic also has a limit of 210 million tokens. Ethereum does not have such a limit. According to Coinmarketcap.com, ETC-USD already has 116.3 million ETC in circulating supply. That represents 55.4% of its total.
So it is going to be a while before the token runs into a supply squeeze that would be anywhere near that of Bitcoin (CCC:BTC-USD). Bitcoin has 18.7 million issued and outstanding of its total 21 million total supply cap, or 89% of the total. Given that less than 11% of the total Bitcoin available can be mined, the supply squeeze adds to the upward price pressure on Bitcoin.
In late 2020, Ethereum Classic Labs enabled ETC owners to gain access to the fast-growing DeFi market (decentralized finance). They introduced “Wrapped ETC”, which will allow ETC owners to “stake” their tokens. This is where they agree to not trade the tokens for a specified period and receive interest payments in Wrapped ETC in return. In effect, it is sort of like how a certificate of deposit works at a bank.
What To Do With Ethereum Classic
Some see ETC tokens as a faster way of making money on the Ethereum blockchain platform. Its market cap is only $10.3 billion. Ethereum has a $395 billion market value. So ETC’s value is just 2.6% of the value of ETH.
Here is the thinking. Assume that people will bid up the price of ETC so that it is 10% of ETH. That would give it a market cap of $39.5 billion. And of course, by the time that happens, ETH would likely be up at least another 50%. So that would give it a market cap of $60 billion (i.e., 10% of $600 billion).
Let’s say it takes three years for this to play out. That implies a 482.5% gain over three years and represents a great ROI for most investors. On an annually compounded basis, the ROI is 79.9% each year for three years. That would be 9x faster than ETH’s 50% gain.
Given how far and fast Ethereum has risen this year, and the apparent “catch-up” outperformance by ETC as well, this seems doable. Therefore, many investors in Ethereum will likely consider diversifying some of their future ETH purchases by buying ETC instead.
On the date of publication, Mark R. Hake held a long position in Bitcoin (BTC) and Ethereum (ETH). The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.