Kraken exchange has partnered with The Economist to ask students, from selected MBA programmes, about their preference between the two digital currency networks and why.
They were asked the question:
“You have $1 mln to invest across Bitcoin and Ether. You cannot touch your investment for the next five years. How much of that $1 mln do you invest in each? Why?”
Kraken CEO Jesse Powell explains in a video:
“This competition is an opportunity for you guys to learn about digital assets and to take what you’ve learnt and develop a profitable digital asset investment strategy. We’re asking you to help us answer a question that has been hotly debated in the industry over the last year. Which is the digital asset of the future? Is it Bitcoin or Ethereum or both? Bitcoin is almost ten times the market cap of Ethereum. But in the past year, the price of Ether has appreciated more than ten times compared to only about three times for Bitcoin. Ethereum has taken a strong second place at five times the market cap of any other digital asset beside Bitcoin. The two protocols have different strengths and weaknesses. You have to consider technical differences, project governance and community values among others.”
While Prof. Ferdinando Ametrano, who currently teaches Bitcoin and Blockchain technology at the Politecnico di Milano, thinks that Bitcoin has a huge advantage over Ethereum, students’ opinions were split.
Three Ether vs. Eight Bitcoin
Each of the 13 participating teams from various universities across the world, produced both a five minute video and a detailed, analytical paper explaining their answer and reasoning.
So far, as at the time of this publication, the result shows Johns Hopkins Carey Business School going for a 50/50 investment share, while the team from Ivey Business School at Western University chose not to make any investment recommendation for the two networks.
Three teams say they will invest more in Ether: Porto Business School (80 percent ETH), Rutgers Business School (80 percent ETH) and Worcester Polytechnic Institute, Robert A. Foisie School of Business (100 percent ETH), while the remaining eight teams prefer Bitcoin: BYU Marriott School of Management (78 percent BTC), Creighton University, Heider College of Business (70 percent BTC), FIA Business School (70 percent BTC), Middlebury Institute of International Studies (70 percent BTC), Ryerson University, Ted Rogers School of Management (69 percent BTC), Tuck School of Business at Dartmouth (91 percent BTC), Tulane University, Freeman School of Business (67 percent BTC) and University of North Texas (60 percent BTC).
Johns Hopkins Carey Business School
Using a Two-Step model to compare return and risk profile of both networks, the John Hopkins team conclude that the return from both Bitcoin and Ether are comparable hence the 50%/50% investment decision.
Step One estimates the price of Bitcoin and Ether over five years using two different approaches – Trend Analysis and Cryptocurrency Demand/Supply Model, whereas Step Two undertakes a qualitative assessment of their inherent risks in performing as a virtual currency, digital asset, and a technology.
They say Bitcoin is expected to remain the dominant currency, whereas Ethereum has greater opportunity for growth due to its applicability though its price may not experience a higher price trajectory in the near future as its technology is largely unproven and has yet to improve significantly before it achieves stability and mainstream adoption.
Worcester Polytechnic Institute, Robert A. Foisie School of Business
The team made a 100% Ether investment decision based on the view that blockchain applications will rise in the coming years and Ethereum stands in a better position to generate revenue streams through partnerships with corporate or government agencies looking to utilize blockchain technology. They say Ethereum could serve as the operating system that provide programming talent, integration, security or other services to ensure it is the blockchain solution of choice.
Ivey Business School
Though they described Bitcoin as a more mature, stable, conservative platform with an emphasis on security and Ethereum as an agile, complex, and relatively untested platform whose purpose is as a platform for applications, the team chose to recommend investment in the surrounding ecosystem rather than either of the cryptocurrencies.
This is based on various reasons including that the intrinsic value of any cryptocurrency is extremely hard to assess; existing cryptocurrencies are very volatile and investors may permanently lose capital; lack of digital currency regulation; lack transparency, clarity of legal status and certainty of continuity; dependence on IT, developer and community support; and anonymity of the economic agents involved increase counterparty risk and create
a market that can be used for illegal activities.