What is the crypto flippening?
Rebecca Cattlin January 12, 2022 8:30 PM
Whenever Ethereum hits new highs against bitcoin, the crypto community holds its breath to see if the smart contract platform will unseat the fan favourite as the largest cryptocurrency. Find out everything you need to know about the flippening and whether it will happen this year.
What is the flippening?
‘The flippening’ is the term used to describe the hypothetical event in which ether – the coin of the Ethereum network – becomes more valuable than bitcoin. This would be measured in market capitalisation, which is the total number of crypto tokens in circulation, multiplied by the value of a single token.
Bitcoin is the most successful crypto on the market – and the first – while Ethereum sits in second place. Bitcoin currently has an aggregate value of £598.9 billion, and Ethereum has a value of £296.4 billion.
In terms of market price, the two still seem worlds apart – BTC trades at around £31,693 as of January 6, while ETH sits at just £2,481 – but the supply of each coin has a big sway on their market cap.
Bitcoin vs Ethereum
The two cryptos share a lot of similarities. Each is traded online via exchanges and stored in cryptocurrencies wallets. Both are decentralised, meaning they aren’t regulated by a single authority. And both use an open-source distributed ledger to record transactions in, known as blockchain.
However, there are some crucial distinctions. While bitcoin was intended to be an alternative currency to traditional money – working as a store of value – Ethereum is a platform for exchanging contracts, non-fungible tokens (NFTs) and creating applications. Ethereum uses its own currency – ether – which is used to buy and sell contracts.
Bitcoin’s blockchain is not that sophisticated and cannot support smart contracts or applications.
The move away from bitcoin has perhaps been spurred on by its energy requirements and slow transaction speeds, which ether seeks to address. While Bitcoin can only process an average of seven transactions per second, Ethereum can process 15.
It’s worth pointing out that both pale in comparison to more traditional payment networks, such as Visa, which process an average of 24,000 transactions per second.
When will the flippening happen?
At current speeds, the flippening could happen in the next five to ten years. In 2017, during the crypto craze, Bitcoin represented 85% of the total value of cryptocurrencies, but this dominance has slowly been eroded. It now represents only about 44%.
However, some reports have suggested it could be as soon as 2022. It’s worth saying a lot of people thought it could happen last year and it didn’t.
In 2021, the price of Bitcoin doubled but the price of Ether increased fivefold. Ether’s price hit record highs in November 2021, reaching $3,620. But it declined as the year came to an end making it unlikely the flippening will happen anytime soon without another big push.
Bitcoin’s price did see huge volatility too, reaching an all-time high of £50,896 in November, but it also fell toward the end of the year amid China’s regulatory changes.
What will happen to bitcoin if there is a flippening?
Bitcoin is unlikely to just slink off into the background if it does lose the top spot. Its value is a matter of market sentiment, and it remains a vastly popular asset.
While competition is a factor in the market price, Bitcoin’s value is mainly driven by its supply limit. As there are only 21 million coins in circulation, its price could continue to be driven up as the crypto becomes scarcer.
The worst-case scenario for bitcoin is that it fails to adapt at the speeds of its competitors and becomes obsolete.
What will happen to all the alts if there is a flippening?
There’s no real way to know what will happen to other alt coins if a flippening occurs. It’s likely that initially, the whole market will experience significant volatility as everyone seeks to adjust to the change.
Currently, most alt coins follow the price movements of bitcoin, this could just continue. The relationship isn’t solely based on bitcoin’s market cap, but on its reputation and the original crypto’s institutional backing. However, they could swap to track ether after the flippening.
Another outcome could be that alt coin price movements become completely independent and aren’t tied to either market giant.
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