Prediction: Ethereum Will Outperform Bitcoin Over the Next 3 Years

Bitcoin (CRYPTO: BTC) and Ether (CRYPTO: ETH), the native token of the Ethereum blockchain, are the world's two most valuable cryptocurrencies. They're both considered "blue chip" tokens with more staying power than the smaller altcoins and meme coins.

Over the past three years, Bitcoin's price has risen 145%, while Ether's has increased only 16%. But over the next three years, Ether could have a shot at outperforming Bitcoin again.

Image source: Getty Images.

Why did Bitcoin outperform Ether over the past three years?

Bitcoin, which is actively mined with the energy-intensive proof-of-work (PoW) consensus mechanism, is often considered "digital gold" due to its scarcity. Nearly 20 million of its maximum supply of 21 million tokens have already been mined, and its mining rewards are halved every four years. The Securities and Exchange Commission (SEC) also approved Bitcoin's first spot price exchange-traded funds (ETFs) in early 2024.

Ether, which transitioned from the PoW mechanism to the more energy-efficient proof-of-stake (PoS) mechanism in 2022, can't be mined anymore. It has a circulating supply of 121 million tokens with no supply limit. Still, its blockchain supports staking (locking up tokens to earn interest-like rewards) and smart contracts (for developing decentralized apps and other tokens). The SEC approved Ether's first spot price ETFs in 2024, but they didn't include any staking features. It didn't approve its first batch of staking ETFs until late 2025.

Over the past three years, Bitcoin attracted more investors because it could be valued by its scarcity and considered an alternative to gold and other hard assets. The growth of Ether's developer ecosystem could drive its value, but it faces stiff competition from faster PoS blockchains like Solana and Cardano.

Why could Ether outperform Bitcoin over the next three years?

Over the next few years, Ethereum plans to improve scalability, reduce network congestion and gas fees, and boost overall efficiency through three major upgrades: The Verge, The Purge, and The Splurge. It will also continue to expand its Layer 2 (L2) "rollups", which bundle together its Layer 1 (L1) transactions and process them off-chain at higher speeds.

Those upgrades should reinforce Ethereum's position as the world's largest blockchain-based development platform and widen its moat against Solana and Cardano. Declining interest rates could also drive more investors to stake their tokens (or buy staking ETFs) for higher yields.

Lower rates and a warmer macro environment could also drive more investors to take on greater risk for larger gains. Smaller altcoins like Ether could benefit more from that shift than Bitcoin, which is already the world's most valuable cryptocurrency.

If you expect Ethereum to keep improving, the decentralized application market to keep growing, and institutional investors to look beyond Bitcoin for more crypto winners, then it could be smart to accumulate more Ether today while the bulls look the other way.

Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and Solana. The Motley Fool has a disclosure policy.