Mark Cuban: What I look at when comparing blockchains like bitcoin and ethereum

Mark Cuban: What I look at when comparing blockchains like bitcoin and ethereum

When comparing different blockchains, billionaire Mark Cuban looks at a few specific characteristics before investing.

“Most people look at speed and cost compared to BTC [bitcoin] or ETH [ethereum],” Cuban tells CNBC Make It. “While those things can be important, I look at blockchains as networks with development platforms via smart contracts.”

Cuban is referring to the capabilities of each blockchain beyond speed and cost of cryptocurrency transactions. Each blockchain, which is a decentralized digital ledger that documents cryptocurrency transactions and other information, is unique.

For example, the ethereum blockchain can execute smart contracts, which power decentralized applications like DeFi, or decentralized finance, and NFTs, or nonfungible tokens. The ethereum blockchain features its cryptocurrency ether, but can also work as a platform for other digital coins.

These aspects of ethereum are appealing to Cuban, he previously said. Due to its smart contracts, he likens this blockchain to the internet, since different platforms, from things like DeFi to social media sites, can be built on it.

Other experts agree. “Ethereum [is] looking for ways to become a fully working infrastructure platform,” Kathy Lien of BK Asset Management recently told CNBC. “Ethereum itself can perform a number of economic tasks, so it goes beyond” bitcoin, which is known as a peer-to-peer electronic cash system.

That’s why, according to Cuban, “the platforms that have the most active developers and create applications with significant utility for their users will have a network effect.” In turn, the blockchain could “generate significant fees,” which could fund the network, making it investible.

To mint, or blockchain verify, a token — like an NFT, for example — and transact on the blockchain, a user is typically charged a fee by the blockchain’s miners. These fees can be especially costly during high demand or congested periods.

In Cuban’s opinion, “depending on how fees are distributed, [it can] create a real revenue stream that increases the values of the tokens they mint,” he says.

For example, ethereum collects gas fees. That “makes it an income producing asset whose value should rise as its network expands,” Lien says.

Though some people may think that blockchains are only used for cryptocurrency transactions, the platforms could potentially be used for much more than that, as ethereum is. That’s why Cuban looks at the possible use cases for each blockchain before investing, rather than just the speed and cost to use them.

Cuban has invested in many blockchain companies this year, all of which are centered around smart contract capabilities. His portfolio includes NFT platforms, DeFi companies and ethereum scaling solutions.

Cuban has also been investing in cryptocurrencies like ethereum, bitcoin and others.

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Ethereum (ETH/USD) Strength Outshining Bitcoin (BTC/USD) Recovery

Ethereum, Bitcoin, ETH/USD, BTC/USD Talking Points:

Cryptocurrencies have started to show recovery but that appears to be uneven with Ethereum showing greater strength than Bitcoin

The analysis contained in article utilizes price action and chart formations . To learn more about price action or chart patterns, check out our DailyFX Education section.

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Cryptocurrencies are continuing to show hints of recovery after a really rough two-week-stretch. That recovery does appear to be a little brighter in Ethereum at the moment, which highlights a bigger theme that’s become more prevalent in 2021 as Ether is appearing to steal some of the crypto spotlight from the titan of Bitcoin.

At this point, there could be a bullish justification for Ethereum given the hold at higher-low support around the 50% Fibonacci retracement of the recent major move, spanning from the Jan 11 low up to the May high.

To learn more about Fibonacci, check out DailyFX Education

Ethereum Daily Price Chart

Chart prepared by James Stanley; Ethereum on Tradingview

Bitcoin, on the other hand, doesn’t look as healthy as there’s been a continued build of resistance around the $40k handle that’s capped this week’s recovery, at least so far. On the below chart, I’ve added a Fibonacci retracement around a similar major move, spanning from the January 4th low up to the April high.

Bitcoin Daily Price Chart

Chart prepared by James Stanley; Bitcoin on Tradingview

Bitcoin v/s Ethereum

A big driver behind the crypto rally was wider acceptance of cryptocurrency, led in part by the announcement from Tesla that they were a) going to put Bitcoin on their balance sheet and then b) accept the cryptocurrency as payment.

Soon after they announced that they’d stop accepting Bitcoin as payment due to the energy inefficiency by Bitcoin mining and this spurred a heated debate on the topic. But Musk stood his ground (on Twitter) and made a series of arguments behind his thesis. He also shared that he’s talked with North American Bitcoin Developers to discuss a more efficient energy strategy and that’s seemed to help with the recent recovery, to some degree.

But, a bigger debate exists around the long-term future of cryptocurrencies. Ethereum may hold some attractiveness from a usability standpoint when compared to Bitcoin. While Bitcoin is a proof-of-work currency that will require electricity to conduct transactions, Ethereum has already started to shift focus to Ethereum 2.0 as a more efficient medium. Ethereum also brings some additional value, such as with NFTs which highlights the fact that Ether is more than just a coin, its practically a full operating system. So, if we are looking at a future in which crypto will be a big part, Ethereum may be a bit more attractive than Bitcoin, and this can be seen in the 2021 trend so far. The chart below looks at Ethereum v/s Bitcoin, with higher prices showing bullish preference towards Ether v/s Bitcoin.

Ethereum (ETH/USD) v/s Bitcoin (BTC/USD)

Chart prepared by James Stanley; Tradingview

Why Might This Matter – and What is the Primary Risk?

The reason why this may turn out to be more than just a fad or a mania is because of central bank policy. At this point, the Fed still shows the appearance of relative calm in the face of rising inflation. The bank has continually said that they feel the inflationary indications that we’ve seen so far are transitory in nature, and will eventually take care of themselves.

That’s allowed the Fed to keep monetary policy really loose, but a combination of rising inflation with low rates means that real rates are going negative – which means a loss of purchasing power. And this was something noted by Elon Musk earlier this year when he was making his bull case behind crypto.

The biggest risk here is something we’ve seen pop up recently out of China, as governmental regulation could create a wave of change in the space, and this is likely the biggest item to contend with for crypto bulls.

The chart below shows the Federal Reserve’s balance sheet through last year, and notice the parabolic-move that’s happened in this data as the bank threw the kitchen sink at supporting the economy through the covid pandemic.

Fed Balance Sheet

Chart prepared by Brendan Fagan

— Written by James Stanley, Senior Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

Ethereum price: Investors will have to ‘stomach through much more’ warns market forecaster

Ethereum: Cryptocurrency price figures spike overnight

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Jim Bianco, the president and founder of Bianco Research, an organisation providing data-driven insights into the economy, believes cryptocurrency is reforming the financial system. Speaking on CNBC’s Trading Nation on Wednesday, Mr Bianco predicted those who could tough out the notorious volatility of cryptocurrency can expect a big reward in the end.

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He said: “Some of these coins, like Ethereum, are going to be a lot higher way down the road. “But you’re going to have to stomach through much more of what we saw in the last week coming in the next several months or year or so.” He added that cryptocurrencies have “a lot of promise”. Mr Bianco continued to say that, once cryptocurrency starts to play a fundamental role in the real economy, overall prices will be vastly higher.

Ethereum price: Investors will have to ‘stomach through much more’ price drops

Ethereum price: Jim Bianco warns investors likely to face tough times ahead

He also warned that all cryptocurrencies are vulnerable to up to 70 percent declines at any moment as the technology is still relatively new. The world’s second most popular cryptocurrency saw a surprise price drop between May 12 and May 23, resulting in a total loss of more than $2,000 (£1,408). At time of writing, the price of Ethereum seems to have made somewhat of a comeback, having jumped back up to around $2,700 (£1,901) over the last five days. Those thinking about buying Ethereum should consider the risks of investing in cryptocurrencies, which are notoriously volatile. Here in the UK, the Financial Conduct Authority (FCA) warned: “If you invest in cryptoassets, you should be prepared to lose all your money.” READ MORE: Ethereum price 2025 – Goldman Sachs predictions say Ether to dominate

Ethereum price - cryptocurrencies are notoriously volatile

Mr Bianco suggested that, going forward, gains for investors will slowly decrease as cryptocurrency becomes more mainstream in the economy. He said: “The risk and the reward is now you’ll have less risk and less reward once it gets adopted and the volatility slows down.” Mr Bianco has owned several digital coins since 2017, but rarely trades them. The prediction follows shortly after eccentric multi-billionaire Elon Musk jabbed at Ethereum’s founder, Vitalik Buterin, claiming he fears the rise of Dogecoin. DON’T MISS:

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