Is Ethereum a Good Investment Right Now?
Ethereum is on the radar of so many investors at the moment. This is quite understandable given that it is testing new highs every day. The current price rally has also reignited the debate on whether Ethereum is better than Bitcoin.
One thing that is often missed in such discussions is that Ethereum is not a cryptocurrency per se. It is more of a decentralized computing machine. Through it, developers from all over the world can develop decentralized applications (Dapps). Since developers use ETH to pay for usage of the platform, ETH is by default, one of the most used cryptos out there. This reality reflects in its value. At some point in 2018, it came close to flipping Bitcoin.
One thing that stands out about Ethereum is the fact that it has many striking similarities to Bitcoin. For context, Ethereum has store-of-value properties that are similar to those of Bitcoin. This is quite evident in the sentiments of some of the more vocal voices in crypto.
However, one needs to be mindful that the store of value property in crypto is still far from fully developed. Think of it this way, just a few short years ago, the market crashed by over 70%. Bitcoin fell from highs of over $20k to $3k. Similarly, Ethereum went from highs of over $1500 to under $100. While such wild swings may fade out due to the entry of institutional money, the market remains volatile.
For the risk-averse, the traditional markets remain the best bet for long-term value appreciation. Otherwise, for those who are ready to hold Ethereum for the end goal, despite the potential risk, Ethereum may be a good investment for them. It has the potential to outpace any other investment in the long run.
The price of Ethereum has increased dramatically this year, and it shows no sign of slowing down. Analysts estimate that the value of Ethereum ETH has plenty of room for growth ahead and investing in Ethereum is a smart decision for the long-term. Therefore, it could be a good time to buy and hold Ethereum ETH while the digital asset is performing very well.
Bitcoin vs. Ethereum
Ideally, there shouldn’t be an either-or when it comes to these two.
Both Ethereum and Bitcoin are probably going to be around and successful for long. However, for someone bent on choosing between the two, Ethereum stands out. For starters, they are both equally good as a store of value. Anyone who invested in both BTC and ETH when they launched is in a good financial position at this point. The only difference is that Ethereum has a much bigger use case than Bitcoin.
Ethereum allows for the development of smart contracts that can be used to power pretty much anything from finance to NFTs. Such capabilities, while possible on Bitcoin, are minimal. Ethereum’s capabilities in the development of Dapps stand out because it was built for this function. It even has its own programming language, called Solidity. Anyone who masters Solidity can get on the Ethereum blockchain and codify anything they can imagine.
On top of that, Ethereum has one of the best teams in crypto. The core developer team is ever working to ensure that the platform remains the best in the Dapps market. For instance, since the current price rally started, gas prices shot up, making it almost impossible for developers and investors to do their business on the Ethereum blockchain. To deal with this situation, the developer team, and the community, came up with the Berlin fork that changed how gas is computed. There will also be another fork later in the year that will lower the gas prices even further.
Ethereum is also in the process of shifting from a proof-of-work blockchain to a proof-of-stake blockchain. This will push gas prices even lower and drive up Ethereum adoption, and by extension, its value. This is one of the reasons why Ethereum could easily beat Bitcoin in the long run.
However, don’t take this as financial advice to jump on the Ethereum bandwagon. Talk to your financial advisor about it before investing.
How to Buy Ethereum
Ethereum is one of the most accessible cryptocurrencies to buy. It is listed on pretty much every crypto exchange that exists. Most crypto exchanges have Ethereum-based tokens as their primary offering. To shorten the process for you, here are some of the best exchange you can try out.
Buy ethereum on eToro
eToro has excellent ratings amongst investors for its ease of use. As long as you have basic computer and reading skills, you should be able to sign up on eToro.
By using eToro, you are guaranteed to buy both Bitcoin and Ethereum easily. The bottom line is that you don’t have to be some geek for you to use the above exchange. Besides, there are dozens of other exchanges that you can use and buy Ethereum today.
Advantages of Investing in Ethereum
Before discussing the advantages of investing in Ethereum, please note that it is a highly speculative financial instrument. You can easily lose most of your money investing in Ethereum. However, for those willing to take the risk, Ethereum has tons of advantages over traditional financial instruments. Some of the advantages of investing in Ethereum are as below:
1. It’s Volatile
For newbies who do not understand how markets work, volatility is risky. However, once you learn market dynamics, volatility can be a source of wealth. For context, anyone who short Ethereum in 2018 while it was trading at over $1000 made lots of money. That’s because it dropped to under $100. On the other hand, someone who bought at the sub-$100 levels has made a ton of money now that it is trading at $3k. Clearly, volatility is good. You just need to know when to buy or sell.
2. Ethereum Has Liquidity
Liquidity is essential when investing in any cryptocurrency. It always guarantees that you can buy or sell at any price you want. Highly liquid cryptocurrencies also tend to have very low fees, which is essential for profitable trading. Ethereum happens to be one of the most liquid cryptocurrencies. This means that you can trade it for any other crypto, fiat, or even traditional assets like gold at low fees. Its liquidity makes it better crypto to trade than any other in the market.
3. Ether is Not Negatively Inflationary
One reason why Bitcoin is loved is its capped supply. On its part, Ethereum is inflationary but in a different way from fiat currency. In fiat, it is the central bank that decides when to print more money. This explains why fiat currencies have been losing value since the gold standard was removed.
In Ethereum, inflation is built into the blockchain, and no one can alter it. It is also quite slow, and will never affect the value of Ethereum. It’s one of the key reasons why Ethereum stands out as a good investment for anyone who wants to safeguard value long-term.
4. Ethereum has an Established DeFi Ecosystem
DeFi is a relatively new concept, but it is growing rapidly on the Ethereum blockchain. However, since many people are yet to grasp how DeFi works, it has created lots of volatility for Ethereum (ETH). As mentioned earlier, volatility is good, and it’s one reason why investing in Ethereum is profitable.
Disadvantages of Investing in Ethereum
Ethereum and its entire ecosystem will no doubt shape the future of global finance. This means there is a good chance that it could keep growing in value long term.
However, like every other good investment, there are some downsides to investing in Ethereum. Here are a few that you should keep in mind.
1. Ethereum is a Highly Volatile Investment
Earlier, we stated that one of the advantages of investing in Ethereum is its volatility. However, the same volatility can wipe you out if you are not careful.
For context, Bitcoin was trading at $20k in December of 2017. A few months later, it had dropped to $10k, and at some point, dropped to $3k. Similarly, Ethereum went from upwards of $1500 to lows of $90 a coin. While the prices have since rebound, such volatility can wipe you out, especially if you are trading on leverage.
2. The Regulatory Environment is Uncertain
Cryptocurrency has been unregulated for the longest time possible. This created room for all kinds of criminals to thrive, including rogue exchanges. However, new and better regulations are coming. While these regulations are expected to make the market better, there is a risk that they could interfere with it.
For instance, it is not clear how regulations could affect DeFi. If they are unfavourable, they would pretty much crash the market. This is something anyone investing in Ethereum should be conscious of, and plan accordingly.
3. Hackers are Always Roaming Around
Most investors tend to leave their crypto holdings on exchanges. This is mainly due to the complex nature of most wallets. The risk is that if the exchange is ever hacked, you could lose all your assets in one go. Interestingly, even decentralized wallets are not free from the risk of hacking.
Recently, Metamask, one of the world’s most popular Ethereum wallets, raised the alarm about a phishing bot. The bot was designed to act like Metamask support, albeit asking users to provide their private keys. Such risks are real, and you could easily lose lots of money to scammers.
Understanding the Blockchain
Before jumping on the Ethereum bandwagon, it is essential to understand the basics of blockchain. Failure to understand these basics is what makes investors susceptible to hacking risks. The risks are especially elevated when it comes to storage. One of the aspects of the technology that you need to understand is the wallet.
The working of a wallet is quite complex. Crypto Wallet employs a computing concept known as cryptography. They are coded in such a way that the end-user needs two keys to access the cryptographically hidden data.
The first one is the public key. A public is generated by factorizing prime numbers making them almost impossible to crack. It is the public key that one uses as their address when sending or receiving crypto. The other key is the private key.
A Private Key is similar to a public key, but it denotes ownership of the asset. Anyone who holds the private key pretty much owns the asset.
It is also important to note that a crypto wallet does not store the cryptocurrency itself, but the private key. As such, the wallet private keys should never be shared with anyone. Without them, you have nothing.
Generally, there are two types of wallets that you can use, namely: Hardware wallets and digital wallets. Among the best digital wallets to store your Ethereum are, eToro and Coinbase Wallet. If you choose to go for a hardware wallet, the best in the market are Trezor, and Ledger Nano X. Whichever wallet you use, make sure to keep your wallet private keys; private. If you lose them, you lose access to your coins forever.
eToro – The Best Platform to Buy Ethereum
eToro have proven themselves trustworthy within the crypto industry over many years – we recommend you try them out.
Virtual currencies are highly volatile. Your capital is at risk.
Ethereum is a decentralized supercomputer used in developing decentralized applications.
How do I mine Ethereum?
Ethereum is moving to Ethereum 2.0, so mining may not be the best route at this point. However, you can mine it using ASIC miners, such as those sold by Bitmain.