The true difference between bitcoin and ethereum, according to Grayscale’s CEO

Each of the largest cryptocurrencies, bitcoin ( USD) as well as ethereum ( ETH–USD), fell this week due to an ban on cryptocurrency trading from China and indications of future regulations by the U.S. Securities Exchange Commission.

Ethereum prices generally move in tandem to bitcoin. However, investors should consider that the two currencies are used for different purposes, according to Michael Sonnenshein (CEO of Grayscale Investments), which is the largest cryptocurrency asset manager in the world.

Sonnenshein stated that this investing advice is applicable to the large number of coins available. He urged investors to learn about the use cases for each cryptocurrency to determine its viability as an investment.

‘Things such as bitcoin are inherently designed to be a digital currency or a store value,’ said Sonnenshein at Yahoo Finance’s All Markets Summit Plus : Crypto Investing. Things like ethereum, on the other hand, are intended to be more of an energy source to power decentralized applications.

He adds that investors face a challenge. “There are hundreds, if certainly thousands of digital currencies available.”

He says that many investors need to first understand the technology and the use cases for digital currencies in order to make a decision about which one is best.

Although prominent bitcoin critics question its efficacy in a form of currency, many bitcoin supporters believe it can be used for transactions. They point to companies such as ( OOSTK), and Starbucks ( SBX) which offer customers a way to pay in bitcoin.

Ark Invest CEO/CIO Cathie White stated that ‘Right now, high-value transactions are conducted over bitcoin. That is a very useful position.’

Ethereum is the second-largest cryptocurrency. It also supports the most non-fungible tokens (NFTs). These are unique digital assets that can only be traded, but cannot be duplicated. The March auction of a digital work by Beeple , which was worth $69 million, brought attention to NFTs.

According to Sonnenshein of Grayscale, despite the differences in coins, some investors may pass up the opportunity for cryptocurrency investment.

He says, “The truth about the digital currency ecosystem means that it’s probably not going to be suitable for all investors.” “We find that people who are willing to invest in digital currencies have higher risk tolerances and a longer investment time horizon.

Uncertain regulatory environments are partly responsible for the high level of risk in this space. Janet Yellen, Treasury Secretary, urged the adoption of rules to stabilizecoins. This form of cryptocurrency is linked to a commodity, currency or other asset like the U.S. dollars.

Last month, SEC Chair Gary Gensler called the crypto market the “wild wild West” and expressed a desire for regulation.

Crypto advocates insist that the market will continue to function even if new regulations are imposed by the United States. Kristin Smith, the executive director of Blockchain Association, told Yahoo Finance Monday that regulations ‘do not pose an existential threat for crypto.

Sonnenshein stated that investors have diversified their portfolios as the crypto market evolves, beyond bitcoin and even ethereum.

He says, “With that, we have seen a trend amongst investment to ensure that they’re doing it through an diversified lens, beyond just assets such as bitcoin [and] Ethereum where most of the market cap today is concentrated,” he said.

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