A hypothetical scenario where Ethereum’s market cap overtakes Bitcoin’s.
What Is the Flippening?
Flipenning is a situation hoped for by Ethereum fans, where the total market cap of Ether surpasses the total market cap of Bitcoin.
The term was coined during the 2017 bull run when Ethereum set its historical all-time high against Bitcoin.
During the 2017 bull run, the market bet on the greater flexibility of Ethereum with its ability to build applications based on smart contracts. The influx of liquidity led to a massive spike in the price of Ethereum, although its market capitalization later decreased again in relation to Bitcoin. At the time of writing, Bitcoin remains the most valuable cryptocurrency by market capitalization, with Ethereum in second place.
When Will the Flippening Happen?
Although it is commonly referred to as Ethereum overtaking Bitcoin in market capitalization, there are several other metrics where the two blockchains can be compared. In some of these metrics, Ethereum has already flipped Bitcoin.
For example, Ethereum has a much larger transaction count than Bitcoin at the time of writing (October 2022). Its transaction count is 500% of that of Bitcoin. Another metric is the total transaction fees generated by the blockchains, where Ethereum has flipped Bitcoin by many multiples. In transactions volume, it briefly flipped Bitcoin during the 2021 bull run but has since retreated again.
Other metrics where, at the time of writing, Ethereum has not flipped Bitcoin include:
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Trading volume
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Google search interest
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Active addresses
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Market cap
Is the Flippening Possible?
The flippening is a popular topic for discussion, particularly among the respective communities. Especially after the Merge, many in the Ethereum community predict a flippening in the near to mid-term. To understand whether flippening is possible, it is necessary to look at the total supply of both cryptocurrencies.
As is well known, Bitcoin has a fixed total supply of 21 million coins. Although the total supply could be changed by the community, it is highly unlikely this will be changed in the near or mid-term. Ethereum, on the other hand, does not have a fixed total supply. But thanks to the Merge, the issuance of new ETH has declined by over 90% and could even turn deflationary. That means that both cryptocurrencies will probably not see changes over 10% to their respective token supplies. Therefore, Ethereum will probably have to reach an ETH/BTC ratio of 0.17 or above to flip Bitcoin.
Another important aspect to consider is the use case of both cryptocurrencies. Bitcoin is commonly referred to as a digital commodity. Some people also refer to Bitcoin as “digital gold” because it has been the most reliable store of value out of all cryptocurrencies. Bitcoin is also older and is the last currency to use a proof-of-work mechanism to mine new coins. That makes its community conservative and averse to change. On the other hand, it has allowed Bitcoin to stay on top of the rankings since its inception.
Ethereum is also dubbed “digital oil” because it is used to facilitate transactions in the DeFi and NFT space. DApps need Ethereum to confirm transactions, which makes its utility based on smart contracts and their execution. Furthermore, it introduced a burn mechanism that triggers token burns during periods of network congestion. That could lead it to become deflationary, especially after its transition to proof-of-stake.
Both use cases are attractive, and the market will decide if digital oil or digital gold will be more in demand.
How Will the Flippening Happen?
It is important to note that a hypothetical flippening does not mean that one ETH will be worth more than one BTC. While Bitcoins could still be worth more in dollar terms, the total market capitalization of all coins added together would flip.
Another factor to consider is that Ethereum could flip Bitcoin even during a bear market. For example, if Bitcoin declined more than Ethereum, this would mean the gap between the two cryptocurrencies would narrow down. In other words, it is not necessary for Ethereum to gain an exorbitant amount of value for the flippening.
Some industry experts think that the correlation between the two assets will have to decline for Ethereum to flip Bitcoin. Among experts, the opinions differ wildly on whether this is possible. While some, like Chains.com Founder and CEO Anderson Mccutcheon, put the chances at 5%, others are more sure of it. Joshua Tobkin, CEO of SupraOracles, thinks that Ethereum or a similar platform will overtake Bitcoin, but only by the year 2035.
Others have also compared Bitcoin to Yahoo, which used to be the dominant website at the beginning of the 2000s. These experts consider that the greater utility of smart contract blockchain will inevitably lead to Bitcoin losing its top spot. One industry expert said:
“It’s almost inevitable that a Flippening will happen — the question rather is, will Ethereum stay number one afterward?”
