Wondering if Ethereum is worth investing this year? Use the guide below and get your question answered!
Ethereum has lately attracted a lot of attention and many crypto enthusiasts are beginning to wonder if it is a good investment in 2021. Well, like the plethora of other cryptocurrencies, Ethereum is still highly volatile and might be a risky investment. However, if you are looking for long-term investment and won’t mind a few losses along the way, it might be worth the shot.
While it is still struggling with a market capitalization that is five times smaller than that of Bitcoin, Ethereum has a lot of room for growth. This makes it an ideal choice for investment especially if you are just getting your feet wet in crypto investing.
By the end of this guide, you should be able to decide if Etherium is a good choice for your investment needs or you should consider other altcoins. We will also reveal some of the most credible exchanges to get Ethereum and how to avoid losing your money.
Well, in this guide we are going to talk about Ethereum - the pros and cons of an Ethereum investment, Ethereum vs Bitcoin, and why you should consider investing in Ethereum. By the end of this guide, you’ll have a greater understanding of Ethereum — and you will be able to answer the questions “is Ethereum worth buying?”, and if so, "what is the best exchange to buy Ethereum?".
Before that, let’s clear out a common misunderstanding.
What is Ethereum?
Contrary to popular belief, Ethereum is not a cryptocurrency per se. It is merely a foundation or platform for creating digital financial systems commonly known as DeFi (Decentralized Finance).
The cryptocurrency that powers the Ethereum platform is known as Ether. However, most people refer to Ether as Ethereum so much that Ethereum has become a standard term for the cryptocurrency.
While there are numerous DeFi projects on Ethereum, Ether is the only trustless asset on the platform which means higher demand. This makes Ethereum a 3-in-1 asset since it can be a capital, consumable or collateral asset, all at once.
Read More: What is Ethereum? A Beginner’s Guide
So, Should You Buy Ethereum in 2021?
The volatility surrounding cryptocurrencies and the fact that Ethereum has seen much less mainstream adoption than Bitcoin means that a lot of people are still on the fence as to whether they should invest in it.
Although the smaller market cap might come across as a red flag for investors, it is actually a proxy for the massive room for growth. Like most cryptocurrencies, the price of Ethereum is unsteady but has grown from a record low to above the $1,900 mark.
Many crypto experts are confident that Ethereum’s record high price is imminent this year. For example, Raoul Pal, a Macroeconomics expert and former Goldman Sachs employee, is pretty bullish about Ethereum’s future. Pal predicts that the cryptocurrency’s price could surge to a record high of $20,000 in the current cycle.
This kind of confidence makes Ethereum an alluring prospect for investors looking to establish their footing in the crypto market. Having said that, Ethereum is a promising investment for young investors but is, nonetheless, still fairly speculative.
Crypto investors believe that Ethereum is worth buying in 2021 compared to other coins. Experts believe that Ethereum price could grow further this year.
Let’s quickly look at some of the reasons why Ethereum could be or could not be a good investment for you.
Why You Should Buy Ethereum
While we generally think that Ethereum makes for a good investment in 2021, we do not guarantee that you won’t lose your money. Being a speculative investment, it might not be a good option for you if you are risk-averse.
However, being the world’s second most popular crypto by market capitalization, Ethereum boasts of an enviable backing from the crypto community. As one of the most sought after digital assets, there are a number of reasons why buying Ethereum might be a good investment for you.
Here are some of the perks you get to enjoy as an Ethereum investor.
✅ It’s a liquid investment:
This means that the cryptocurrency can be easily converted into fiat currency without significantly affecting its value. There are many exchanges and brokerages where you can sell Ethereum for cash or other assets for a small fee.
✅ It has a low inflation risk:
Fiat currencies such as the pound sterling are regulated by governments which means they have high inflation risk. On the other hand, cryptocurrencies such as Ethereum are more transparent with low inflation risks. So, you don’t have to constantly worry about your investment losing value.
✅ It’s growing in popularity:
While Ethereum is still the second-largest cryptocurrency, it is becoming popular by the day. There are millions of people and renowned institutions who own Ethereum wallets. This coupled with the fact that other financial applications can run on the Ethereum platform, makes it one of the most popular and promising cryptocurrency right now.
✅ It’s the future of digital money:
Ethereum and Bitcoin have been invariably billed as the future of money. With more people becoming increasingly comfortable with digital money, Ethereum presents countless future opportunities for investors who are willing to embrace the arbitrary swings in price and volatility.
✅ The price is surging:
The price of Ethereum is skyrocketing by the day. This means it is the right time to invest.
Risks Associated with Ethereum Investment
Although Ethereum has proved to be a promising investment opportunity, it has several caveats that might make you take a pause. From the infamous DAO hack in 2016 that saw investors lose up to $55 million to hackers, to the fact that the price could drop in a blink of an eye, you might want to reconsider your decision.
Below are some of the concerns surrounding Ethereum investing.
❌ It’s highly volatile:
Like any other cryptocurrency, the price of Ethereum is unsteady. This means that you can buy it now for over $ 1,450 only to sell it weeks later for less than $100. We recommend working with an expert and keeping tabs on the market to avoid substantial losses.
❌ It’s not carefully regulated:
Although the lack of government regulations affords you some freedom, it also means the cryptocurrency market is laden with fraud and malpractices. If you were to be exposed to these irregularities, you could lose a lot of money in the investment.
❌ It’s vulnerable to hacking:
Given that most Ethereum exchanges are online-based, you stand a high risk of losing your investment to hackers. And since most of these exchanges are not insured by agencies such as the FDIC, it is very unlikely that you will be getting your money back.
It’s worth noting that most of the caveats to Ethereum investment are normal investment risks. If you are careful and have a good knowledge of the market, you should be able to avoid most of these risks.
For instance, to avoid hacking, you can store your Ethereum offline and sell it as soon as the price goes up.
Ethereum Price Predictions in 2021
Many experts have come out to predict Ethereum’s future in regards to its price and volume. While you might come across a few sceptics, the general consensus seems to be that Ethereum is poised for a bright future.
So, while Bitcoin continues to enjoy industry attention with the more than 60% market share dominance, many experts predict the price of Ethereum will rise much faster than that of BTC in the course of 2021.
According to data from CoinDesk, Ethereum is currently standing at an all-time high price of $1,918.52. The price has constantly been rising since the year kicked off. At the start of January, Ethereum was trading at around $730 and quickly surpassed the $1000 point within four days. Since then, the price stabilized above the $1000 point and is now surging towards $2000.
This is a clear indication that the price could rise higher than expected and hit new records this year. And if the expert analysis is anything to go by, there is a good chance that Ethereum will be a lucrative investment in the coming days.
James Todaro, a managing partner at Blocktown Capital and a renowned crypto pundit, predicts that Ethereum could eventually hit a $8500 in 202. This, Todaro says, is due to the growing demand for DeFi related options in the coming years.
Simon Dedic of Blockfyre seems to agree with Todaro’s sentiments. According to Dedic, there are only six cryptocurrencies that long-term investors should take seriously; ETH is the second on his list after BTC. He also predicts that ETH will soon hit the $9,000 mark in 2021.
Ethereum vs. Bitcoin: Which Should You Buy?
Both Bitcoin and Ethereum are in a race to mass adoption. While Bitcoin is undeniably more popular, Ethereum boasts of superior technology with a lot of room for growth. For this reason, there is not a definite answer as to which of the two is a better investment.
Financial analysts report that Ethereum is growing faster in volume relative to Bitcoin. This means that investors are now trading Ethereum more in proportion to Bitcoin. This is a good sign for anyone who is looking to buy Ethereum this year.
As long as Ethereum keeps acting as a platform for DeFi projects, there is a high chance of making more profits compared to Bitcoin. It has better technology, is much faster than Bitcoin and doesn’t have a limited supply like Bitcoin.
If Ethereum’s focus on DeFi doesn’t wane, it will be reasonably profitable. Whether to buy or not entirely depends on your own financial goals. If you are still undecided, we recommend working with an expert or doing more research until you are sure this is what you want to do.
Otherwise, looking at the recent numbers, we believe that Ethereum will make for a lucrative investment this year.
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Virtual currencies are highly volatile. Your capital is at risk.