Ethereum has been capturing more industry attention as the days go by. This coin is the second-largest by market cap and is rumoured to be set to overtake Bitcoin. Now that Ethereum has begun some of the major upgrades that it has been planning, experts are wondering if it is about to explode are become the number one cryptocurrency on the market.
There are plenty of reasons to consider adding Ethereum to your portfolio. It seems that this cryptocurrency is just getting started on its journey to take over the Defi sector are reach new highs in the crypto-market.
Ethereum’s Revolutionary Blockchain
Ethereum is a programmable blockchain. It not only allows cryptocurrency to be sent; it also enables the launch of other crypto coins. You can buy and sell services, games and applications without the risk of censorship or data theft. A decentralized system is at work within Ethereum which can be used as a hub for multipurpose activities, creating an entire online digital economy.
Because all you need is internet access and to set up a digital wallet, Ethereum aims to offer fairer ways to manage money. Banks often refuse account applications and have the power to block payments or freeze assets. This is not the case with Ethereum and other decentralized financial systems, which is why it is growing in popularity globally.
The way that the user earns money and interest on the system and sends money to others is up to them. There is also the global ease of the internet system and accessible lending for those who wish to borrow money or loan money to other Ethereum users.
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Ethereum Taking over in NFTs and the Defi Sector
Ethereum is a central fixture of the decentralized finance (Defi) sector because of the flexibility of its blockchain system and its ability to support other coins alongside ETH.
New coins are choosing to launch from Ethereum’s blockchain as ERC-20 tokens which can be exchanged in the same ways as ETH. This increases Ethereum’s hold on Defi and makes it a much better choice to invest in than many other crypto coins.
Non-fungible tokens (NFT) add another set of functions to Ethereum, increasing its scope further. These NFTs are unique, which has made them perfect for those wanting to mint digital artwork or stamp other collectables with a distinct fingerprint.
NFTs can be used to represent anything that can not be exchanged. Unlike currency where the individual units do not matter, art can not be exchanged for another piece of art as though they were the same. Replicating supply and demand and allowing for unique items within the Ethereum ecosystem is drawing investors to Ethereum.
Ethereum’s Major Upgrade
The real power of the Ethereum system came into play with the Beacon Chain upgrades made in December 2020. Prior to this, the Eth1 software was the sole system in use, the update triggered the use of the newer Eth2 system. The Ethereum foundation describes the Beacon Chain and what it can do:
‘The Beacon Chain will introduce proof-of-stake to Ethereum. This is a new way for you to help keep Ethereum secure. Think of it like a public good that will make Ethereum healthier and earn you more ETH in the process. In practice, it will involve you staking ETH in order to activate validator software. As a validator you'll process transactions and create new blocks in the chain.’ - The Ethereum Foundation
Before this Ethereum had previously used the Proof of Work (PoW) protocol, which is also used by Bitcoin. However, this system is slow and has a high energy cost. Instead, the Proof of Stake (PoS) system began to emerge.
Ethereum decided to adopt the PoS system from December 2020 but left the PoW system available for those who were already using it. This allowed for a smooth transition, while the PoS consensus continues to be developed, allowing much faster and more energy-efficient transactions to take place. Eth2 also aims for much greater scalability and security than the previous system allowed for.
The Hard Fork
Because the blockchain was functioning in these two separated forms there was a hard fork initiated in April 2021. This purposefully split off the old nonupgraded nodes which were not going to remain compatible with the Eth2 system as it developed. This became Ethereum classic and prevented complications occurring on the main Ethereum blockchain which now has newer consensus rules due to the PoS system.
Ethereum’s Plans to Reduce Gas Prices
The smart contracts which take place on the Ethereum blockchain are fuelled by a virtual ‘gas’. This is the system’s way of limiting the computing resources that are consumed on the Ethereum network and this allows them to apply fees. The gas can be thought of as a unit of energy consumption, charging for each transaction based on the energy it takes to complete.
As the Ethereum system becomes more popular, the gas limits are driving up the fees. Also, because the gas price is actually the amount that you are bidding for each unit of gas, this is not standardized. You decide what you are happy to pay and this is measured in ‘gwei’.
This creates competition because the miners who execute the smart contracts take the highest fees possible, giving higher fee transactions priority. If you are willing to make your transaction lower priority and therefore slower, this is cheaper. However, if you pay too little your transaction will fail and the gas used will not be refunded.
However, the Layer2 initiative that Ethereum is working on aims to improve user experience and scalability and bring down gas prices. This being achieved would be great news for investors and would curb some of the problems brought by the popularity of the current system. This should trigger further upward momentum for Ethereum once the gas prices are under control.
Trading ETH to USD
In the past year, Ethereum has seen consistent increases in price. The upwards curve began slowly, but as the Defi sector boomed in 2021 Ethereum’s prices soared upwards. This time last year, in May 2020, prices were around the $200 mark. By February 2021 the new year take-off had seen this go up by nearly 1000% to almost $2,000. In mid-May 2021 Ethereum hit an astonishing all-time high of $4382.73, showing exceptional growth for 2021.
Will Ethereum Rebound from the Last Correction?
Although the highest peak also saw the greatest correction, back down to $2080.37 two weeks have passed and Ethereum is rising again. The current price is $2864 at the time of writing, which still puts the returns for 2021 at a respectable 234% increase. ETH is trading with a total supply of $116M at the moment, but a market cap of $332.51B leaves room for massive potential growth.
The most recent correction may have been substantial, but the overall trend is upward. The trajectory for ETH is very positive going into the second half of 2021 and if this continues then there is still money to be made with Ethereum. Vitalik Buterin, Founder of Ethereum is unconcerned about the dip, stating in an interview with CNN’s Matt Egen:
‘And often enough, the reason the bubbles end up stopping is because some event happens that just makes it clear that the technology isn't there yet.’ - Vitalik Buterin, Founder of Ethereum.
Buterin is confident that with the new technological developments in place, this latest drop is just a symptom of the need to get all the new technology full online. Once the current projects are rolled out, Ethereum should have no trouble bouncing back and regaining its previously bullish position.
Predictions for Ethereum in 2021 and the Future
There are a lot of positive factors associated with Ethereum now and moving forward. Ether is one of the only non-bitcoin affiliated altcoins to achieve and maintain high coin values. However, new investors want to know if Ethereum will continue to go up and if there are still profits to be made with this coin.
As there are several upgrades in the pipeline, all of which put scalability as a high priority, Ethereum continues to look like a good investment opportunity. Even though ETH token prices are relatively high compared to most of the crypto sector, the scalability of the company leaves room for returns to be gained if the value continues to go up.
When Ethereum merges its mainet with the new Beacon chain upgrade and becomes fully reliant on the Proof of Stake census protocol it will greatly reduce its energy consumption and increase its speed. This is scheduled for later in 2021. If the Layer2 initiative also brings down gas prices, these two achievements will greatly increase the company’s scalability and improve the ETH stock price. These possibilities may show in the market as early as the end of 2021 but should have a lasting impact over the next three to five years.
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Ethereum Trading Forecast for 2021
The cryptocurrency sector is volatile and there are no guarantees with any investment. There are also bullish and bearish cycles that are seen across the Defi market. While investing at the right points in these cycles can lead to great profits, the trading pattern can be difficult to predict.
Founder Vitalik Buterin is confident that the technology is finally able to support the scalable potential of Ethereum:
‘It feels like crypto is close to ready for the mainstream in a way that it wasn't even four years ago...Crypto isn't just a toy anymore.’ - Vitalik Buterin in an interview with Matt Egen, CNN.
Although the strength and scale of the next bearish trading period are unknown, the overall trajectory for Ethereum has been very positive throughout 2021. There have also been some extremely bullish periods that have yielded great returns for those who already had ETH in their portfolio.
The signs are looking good for Ethereum moving forward, the infrastructure is being carefully prepared in order to give Ether a bright future in the Defi sector.
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Who is behind Ethereum?
Ethereum was devised by Vitalik Buterin and his team in 2013. Over the course of the following year, Buterin pushed his idea forward, crowdfunding in order to develop the technology. By the 30th July 2015, the system was ready to be launched and it made its entrance into the market with an opening amount of 72 million coins. These were Ether tokens (ETH) which are the native currency of the Ethereum system.
What is Ethereum?
Ethereum is an open-source blockchain with the ability to create smart contracts. It provides a platform for users to create decentralised applications which they can then use as part of the Ethereum system. This is the most popular blockchain currently and therefore it holds a key position within the world of decentralized finance (Defi).
How does Ethereum compare to Bitcoin?
Ethereum is currently ranked as the second-largest cryptocurrency by market capitalization. Bitcoin monopolised industry interest in the early years of cryptocurrency. It was not until Ethereum began to push its smart contract functionality that critics began to see Ethereum as a real threat to Bitcoin’s supremacy.
Bitcoin still has a much larger market cap of nearly $7B, whereas Ethereum sits at $2.81B at the time of writing. Although Bitcoin remains dominant so far, there is plenty of institutional demand shifting towards Ethereum, partly due to its strong position in the Defi sector as a whole.
As investors move away from Bitcoin, wondering if there is any more money to be made in that system, Ethereum is benefiting from its second-place position. There is currently $116.01M Ether coins in circulation compared to Bitcoin’s $18.2M. This shows just how popular Ether has become in the market.
Should I invest in Ethereum in 2021?
Ethereum is investing in the shift to PoS and experts believe that this will allow it to overtake Bitcoin and reach new highs. Ethereum is planning for longevity and scalability should yield sizeable profits for those who invest in 2021.
Is Ethereum still going to go up?
There has been some worry that the more expensive cryptocurrencies will not continue to show growth. However, there are clearly opportunities for Ethereum to grow substantially given the scalability of the system and the constant upgrades occurring.
A panel of experts have pooled their knowledge and predicted that Ethereum will achieve highs of around $20,000 by 2025. This would be an increase of 400% and does not take into account the further peaks that may be caused by upgrades occurring in later years.
A few members of the expert panel, which met this year, felt that this was a low estimate. These crypto analysts felt that $100,000 was a more likely price for Ethereum to achieve by 2025. One of the people who backed the higher estimate was Sarah Bergstrand, Bitbull Capital’s chief operating officer, who is predicting continued success for Ethereum.
What will ETH prices rise to in 2021?
While it is not certain, it is thought that Ethereum will recover well after its recent correction. Trading forecaster Jim Bianco was sure of this in his interview with CNBC’s Trading Nation saying:
‘Some of these coins like Ethereum are going to be a lot higher way down the road’ - Jim Biano, Market Forecaster
Experts clearly feel that the price of Ethereum will continue to rise, pushing it back towards its $4382.73 all-time high. In the week following the drop, Ethereum rebounded nearly $700. If this trajectory continues Ethereum will bounce back over the next month and will be able to increase the positive returns seen so far in 2021.