Learn the pros and cons of investing in Ethereum so you can judge for yourself if it’s a worthwhile investment.
Interested in investing in Ethereum? Do you want to know all the benefits and flaws of investing in Ethereum (ETC), the second-most traded digital asset? Wondering if Ethereum can be a millionaire-maker? Then you’re in the right place!
Before you invest in Ethereum, you must understand what it is that you’re getting into, from top to bottom.
Firstly, Ethereum is a lot more complex than transactional cryptos like Litecoin or Bitcoin. It offers traders the chance to get involved in something entirely different and potentially much larger - a decentralised, digital ecosystem.
And while this presents a solid investment opportunity, investing in Ethereum without knowing what ETH is, what it does, and how to spot a red flag would be a big mistake.
Keep on reading to find out if the advantages of investing in Ethereum outweigh its disadvantages and decide for yourself if Ethereum is a good investment.
What Is Ethereum?
Ethereum is an innovative open-source blockchain technology that can support not only financial transactions but smart contracts, decentralised applications (dApps), tokenised assets and decentralised financial services.
Its native currency ‘ether’ (ETH) is the second-largest cryptocurrency by market cap at the time of writing and has held that position for several years.
If you are a newbie, you may be asking yourself what open-source blockchain technology is. And in all fairness, it can be an overused phrase planted in articles without any clarification.
Blockchain - also referred to as ‘Distributed Ledger Technology’ (DLT) - is a decentralised platform (run by different computers across the world) that stores blocks of information to make transactions and stored data transparent.
Open-source simply means that the platform is accessible, so anyone from any corner of the world can track data.
Have you considered investing in Ethereum?
Ethereum also supports a wide variety of different tokens (ERC-20 tokens). One example of many would be BAT, the most popular coin for digital advertising and content creation.
Because of its tech potential, investing in Ethereum is a popular financial venture, both in the short and long term.
So, to help you make an informed decision about your next market move, here are the pros and cons of investing in Ethereum.
The Pros of Investing in Ethereum
What are the benefits of investing in Ethereum?
What are the benefits of investing in Ethereum? Here’s a quick look at the pros of investing in Ethereum.
✅ Well-known Founder And An Expanding Developer Community
Launched in 2015, Ethereum has managed to revolutionise the cryptocurrency investing scene pretty quickly.
Though Ethereum is not the first cryptocurrency, ETH has become one of the most popular digital assets. The team behind Ethereum - particularly Vitalik Buterin - is admired by many.
And part of the reason people have so much trust in Ethereum is their transparent roadmap.
Ethereum’s developer ecosystem is also expanding, with more than 250,000 active developers, as per ConsenSys. Such strong support is an advantage when it comes to Ethereum investing.
✅ Ethereum Is Decentralised
Perhaps one of the main pros of Ethereum investing is its decentralised structure. As stated above, blockchain technology is decentralised and transparent, initially created to offer an alternative to traditional banking systems.
One curious fact about Ethereum is that there’s no over-concentration of users, with over 15,7911 nodes spread across the globe.
As Ethereum allows people to execute deals and transactions without central banks or third parties, this can also help users deal with restrictive regulations, unfair transaction fees, and even censorship worldwide.
✅ Ethereum Is More Than A Cryptocurrency
Talking about advantages, we should emphasise the fact that Ethereum is more than a cryptocurrency.
The platform supports smart contracts, dApps (or apps that exist on a blockchain), and numerous Decentralised Finance (DeFi) projects, which is one of the main advantages of investing in Ethereum.
As such, Ethereum can be used in different sectors (for example, gaming, medicine, and energy distribution); it can foster the tokenization of art (such as NFTs), patents, voting history, medical records, ID verification, crypto-collectables, and other complex agreements.
✅ Ethereum Continues To Attract More Businesses
Many big companies support the development of Ethereum, with Ethereum Enterprise Alliance being one of the leading organizations monitoring Ethereum.
As third parties become redundant, it is likely more and more investors will get into Ethereum investing.
One of the main figures interested in Ethereum is venture capital firm Andreessen Horowitz.
Besides, another pro of investing in Ethereum is the fact that Ethereum facilitates numerous Initial Coin offerings (ICOs). ERC-20 tokens are often seen as the standard for fundraising and ICOs.
And on that topic, it’s no secret that CryptoKitties - with the opportunity to improve digital ownership - took the world by storm and reached a funding amount of $12 million, as per Tech Crunch.
✅ Ether Is Not Capped
Unlike Bitcoin, Ether (ETH) is not capped and has practical utility. Transactions come with self-executing contracts and fast transaction times.
Interestingly, Vitalik once said that Ethereum will be able to process over one million transactions per second soon. If possible, it would be a huge advantage to investing in Ethereum.
✅ More Secure Than Most Cryptos
Ethereum has a very large community of active developers spread across the world. This means that it is harder for malicious users to gain control of the blockchain.
In blockchain technology, popularity = security. Arguably, the only crypto more secure than Ethereum is Bitcoin.
✅ Ethereum 2.0 (Eth2) Is Coming Soon
By far, the biggest reason to buy Ethereum in 2022 is Ethereum 2.0! One of Ethereum’s main goals this year is its move to proof-of-stake and fully launching Ethereum 2.0.
The transition is taking place through a series of upgrades (it’s not like turning off and on a switch), and while we still don’t know when it will be completed, it is believed to happen by the end of 2022 and could do wonders for the price of ETH.
According to Emily Mason of Forbes, a report by two senior analysts at JPMorgan estimated that Ethereum’s move to proof-of-stake could lead to “staking pay-outs to balloon to $20 billion in the quarters following the launch of Ethereum 2.0 and $40 billion by 2025”.
Further to that, Ethereum will go from being an ‘inflationary’ crypto to ‘disinflationary’ crypto after the upgrade because more of the token supply will be burned.
✅ Ethereum Is The Hub Of The Crypto Market
Today, some of the biggest cryptos are still based on Ethereum, such as Uniswap.
When cryptos build bridges to Ethereum, it opens them up to much of the crypto market. Even Ethereum Classic, which had a brutal divorce from Ethereum, is building a bridge to access Ethereum’s resources.
✅ Second-Most Popular Crypto In The Market
After Bitcoin, most newbie crypto traders start looking at Ethereum. As the second-most popular crypto, it looks the safest and profitable.
Furthermore, there are tonnes more material on Ethereum online which helps people understand its goals. (Plus, it’s not as complex to understand as some other projects out there, e.g., Uniswap, Chainlink.)
Typically, most newbie traders only start looking into other cryptos once they’re satisfied with Ethereum.
✅ Institutions Continue To Find New Ways To Trade Ethereum
Buying and selling Ethereum via an exchange or broker is not the only way to trade it. There are tonnes of investment vehicles where you can participate in ETH without actually owning it.
One of the biggest investment products created for Ethereum so far is the Grayscale® Ethereum Trust, a product of Grayscale, which is owned by Barry Silbert’s Digital Currency Group.
At the time of writing, the trust has $10 billion in assets and has grown 305.77 % since its inception.
And Anthony Scaramucci, who briefly served as Donald Trump’s White House Communications Director, has said he will create a private Ethereum fund and will file for an Ether ETF as well.
All this not only increases the amount of Ethereum trading, making it a more liquid asset to trade, it also spreads the word and increases adoption - the most crucial factor to Ethereum’s price in the long run.
Ready to invest in ETH?
The Cons of Investing in Ethereum
There are certain cons that investors should be aware of. Like any investment, putting your money into Ethereum isn’t risk-free. So, here’s what you should know about the risks of investing in Ethereum.
❌ Ethereum Struggles With Scaling
Unlike Bitcoin that has one single function, Ethereum acts as a ledger, a platform for smart contracts, and so on and on, which can lead to bugs, breakdowns, and hacks.
While its multifunctionality may be an attractive feature, some investors are simply wary of investing in ETH because the more features it includes, the more vulnerabilities there are that could be exposed.
On top of that, Ethereum still must deal with scaling and network congestion issues to attract more cryptocurrency investors.
❌ Ethereum Uses A Complicated Programming Language
While Ethereum is Turing complete and uses a programming language similar to C++, Python, and Java, Ethereum’s own language Solidity can be pretty tricky to learn.
One of the main problems is that it’s not easy to find beginner-friendly tutorials.
Here we should note that Solidity is not only a programming language; it also generates machine-level codes and acts as a compiler for the Ethereum Virtual Machine.
❌ High Transaction Fees Have Pushed Some Developers Away
In early 2021, congestion on the Ethereum network pushed transaction fees to extraordinary levels and many projects looked to migrate elsewhere where transaction fees are more stable.
YCharts captured how absurdly high transaction fees reached in 2021, taking off almost instantly from January, spiking in February, April, and then twice in May.
Average Ethereum transaction fees, July 2020 to July 2021. Source: ycharts.com
Uncertainty also makes building dApps tough. It’s not something that can be done when you don’t know how much Ether you will need each day. Such uncertainty can milk a budget dry.
❌ Ether Is More Like Gas
Unlike Bitcoin, often considered crypto gold, some claim that ether is more like gas used to run smart contracts.
As we know, gas fees describe the costs needed to execute a transaction. Such underestimations might be a big con for some cryptocurrency investors.
❌ The Smart Contract Arena Is Extremely Competitive
While Ethereum may have merged the ideas of smart contracts and blockchain and introduced the idea of dApps, they are far from alone in this market.
Cardano, Binance Coin, Ethereum Classic, Tezos, EOS, Chainlink, Polkadot, Stellar - the list goes on and on of potential competitors.
Each one building off what Ethereum started and adding something a little extra that could give them an advantage in the market.
Of the list above, Cardano and Binance Coin present the biggest threats to Ethereum right now.
Cardano, which was founded by Ethereum co-founder Charles Hoskinson, has a peer review system and it could wipe the floor with Ethereum if its smart contracts appear to be better.
Meanwhile, Binance Coin’s Binance Smart Chain has proven to be a major hit, offering a much cheaper platform to create smart contracts on.
❌ Ether Is Not Capped!
Yes, we listed this as a pro above, but for many traders, it’s also a major con because it means Ether lacks scarcity.
In comparison to Bitcoin, which is capped at 21 million coins, an unlimited amount of Ethereum can exist.
If the market is suddenly flooded with new Ethereum, it would be a disaster for Ethereum holders as it would devalue their profits.
❌ Investing In Ethereum Can Be Risky
Just like any other cryptocurrency, investing in Ethereum can be risky. Cryptocurrencies are highly volatile, which can increase profits but also multiple losses.
Ether’s prices have gone through many ups and downs in the past, which can be a big drawback for some investors, especially beginners. In addition, Ethereum’s fees are also fluctuating, which is also problematic.
Is Ethereum a Good Investment and Should you Invest in Ethereum?
Most investments come down to the risk vs reward factor. In other words, do the potential rewards of investing in Ethereum outweigh the possible consequences of the risks?
No surprise that thanks to its innovative technology and huge market cap, Ethereum keeps attracting big businesses. On top of that, Ethereum is more affordable than bitcoin.
In the end, though the pros of investing in Ethereum could outweigh its cons, depending on how you measure them.
Put simply, Ethereum is an investment with lots of potential rewards, but it’s something you should do some research on before you consider adding Ethereum to your portfolio.
Though Ethereum investing can be risky - with tonnes of competitors out there - the truth is that Ethereum has revolutionised the cryptocurrency market and is a great way to diversify your portfolio.
The final decision is down to you. You are the only one to decide whether you should invest in Ethereum or not.
Check Out: Will Ethereum Make Me Rich In Ten Years?
How Much to Invest in Ethereum?
One of the main rules in the investment world is to invest only money you can afford to lose, and Ethereum is no different.
The good news is that today, cryptocurrency investing is highly accessible. One can start trading with as little as $100 and invest in just a fraction of Ethereum.
With eToro, for instance, you can easily buy and sell ETH and trade CFDs of over 90 cryptocurrency pairs.
Will Ethereum Be a Millionaire Maker?
Ethereum already is a millionaire maker and the value of Ethereum is likely to increase further as demand increases.
While Ethereum price predictions are speculative due to the high volatility of the cryptocurrency market, we can simply try to analyse the factors that affect Ethereum investing.
The main factors that influence cryptocurrency investing are supply and demand, and market sentiment. When it comes to Ethereum, it is often considered the number one altcoin.
Sentiment has been fuelled by growing tech innovations and projects. With millions of Ether in DeFi apps, the demand for Ethereum might also keep increasing.
At the time of writing, according to DeFiprime, there are 215 DeFi projects on the Ethereum network, making it the largest DeFi platform.
And the DeFi market, in general, has grown massively in 2021. According to Christine Kim of CoinDesk, the DeFi market grew 150% in the first quarter of 2021.
Plus, most people strongly believe that the release of Ethereum 2.0 could lead to a high increase in demand.
While we can’t turn back time and buy ETH in its token sale to make a fortune, with enough knowledge, investing in Ethereum can potentially become a profitable investment over time.
But please remember, any investment includes some risk. So, only invest what you can afford and do as much research as possible before making a final decision.
Now you know the pros and cons of investing in Ethereum.
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Virtual currencies are highly volatile. Your capital is at risk.
How To Become An Ethereum Millionaire?
Buy and hold has proven to be the best way to profit from investing in Ethereum and much of the crypto market.
While you can make money in the short term with Ethereum, it requires more effort.
And as we have seen, despite the sharp falls here and there, in the long-term, Ethereum has increased in price. Ethereum is still trading at a higher price now than at the beginning of the year.
Long-term investing will also leave you less exposed to risk because you make fewer trades and will give you more time to focus on other things.
As Ethereum is adopted by more people, it is expected that we will see a rise. So, don’t worry too much about following the charts - lookout for news about adoption.
How Much Ethereum Will Make You A Millionaire?
Approximately 317.48 ETH would make you a millionaire (in US dollars) at the time of writing.
What Is A Flash Crash Ethereum Millionaire?
A ‘flash crash Ethereum millionaire’ is a very lucky person who buys Ethereum in a sharp dip at a very low price (flash crash) just before the price recovers.
Crypto enthusiast Callum Campbell posting on Steemit believes he caught someone who may have become a flash crash Ethereum millionaire.
If you remember anything from Pros and Cons of Investing in Ethereum, Will It Be a Millionaire Maker? Make it these key points.
- Ethereum is one of the most popular investment options in crypto. It ranks second by market cap, just after Bitcoin.
- Smart contracts, DeFi apps, and a variety of tokens. Just a few of Ethereum’s use cases.
- Ethereum can be used in different sectors far beyond finance. Including medicine, voting, and gaming.
- While Ethereum is an innovative platform, it still has a long way to go. One of the main events that crypto enthusiasts and investors are anticipating this year is the launch of Ethereum 2.0 that will focus on proof-of-stake.
- Many financial experts are positive about Ethereum’s growth. Though nobody can predict the future of Ethereum and guarantee that Ethereum will be a good investment.
- Ethereum is an investment with a lot of potential rewards. From Eth2.0, a growing DeFi market, and a variety of new ways to trade.
If you liked our article Pros and Cons of Investing in Ethereum, Will It Be a Millionaire Maker please share it with anyone who might be interested in investing in Ethereum too.
Still have questions about investing in Ethereum? Perhaps these frequently asked questions will help?
What Is The Downside To Ethereum?
A potential downside to investing in Ethereum right now could be that there is some uncertainty around Ethereum 2.0’s completion. It is being rolled out in a series of upgrades.
And there is always the possibility that it could do nothing for Ethereum’s price and volatility and could greatly frustrate miners who will have to adapt.
Furthermore, we still don’t have a date for when Ethereum 2.0 will be 100% ready.
Is Ethereum A Good Investment 2022?
Yes, Ethereum is both a good investment in 2022 for the short term and long term. This is primarily because Ethereum 2.0 is expected to be finished and ready this year.
This major upgrade could significantly boost Ethereum’s prices.
Can You Become Rich From Ethereum?
Ethereum has already made many crypto traders a small fortune with long-term investing offering the best chances of becoming rich with Ethereum.
Ethereum is currently trading at a much higher price than it began last year at. So even if it's below its ATH, if you bought your tokens last January and sold them now, you'd still make a considerable amount.
Experts expect ETH value to rise again soon which means you should expect a lot from the token in the future.
What Are The Risks Of Investing In Ethereum?
Ethereum, like most cryptocurrencies, is highly vulnerable to price volatility, regulation, and the price of Bitcoin.
The crypto market, being very young and smaller than other markets such as forex or stocks, makes it more vulnerable to dramatic price changes.
However, over time, as the market grows, this volatility should slowly dissipate.
In regards to regulation, Ethereum is not as much in the spotlight as Bitcoin, but in recent months we have seen more hostility towards the crypto market in certain parts of the world that could have a knock-on effect.
On top of that, Bitcoin is potentially the biggest influence on Ethereum price. News about Bitcoin, whether it be good or bad, has a habit of dragging ETH up or down.
This is because interest in Bitcoin typically spills over to Ethereum and then other altcoins.
Other risks that could affect the price of Ethereum include inflation or a lack of interest from traders.
Is Ethereum Better Than Bitcoin?
In several ways, Ethereum is better than Bitcoin technologically and has far more applications.
Bitcoin was designed to be digital cash, an alternate way to transact value from one individual to another using blockchain technology.
Ethereum took that idea to the next level, seeing the full potential of blockchain technology to decentralise far more than just transactions.
And with far more use cases available to Ethereum, there is potential to see its use spread much faster.
Ethereum also has the potential to develop much faster. As far back as 2019, it was revealed that Ethereum had twice as many core devs per month than Bitcoin. (The most of any crypto, not including community project developers.)
And with Ethereum working in a more structured organisation, they can also be more productive. Meanwhile, some hardcore Bitcoin fans don’t want change at all.
But despite that all, Ethereum will likely struggle to ever be as popular as Bitcoin because of its comparison to gold.
As Shark Tank’s Kevin O’Leary said in June 2021:
“[SIC] The institutionals are interested in Bitcoin as a property. That’s the gold standard of digital currency. You can debate why it is. It just is nothing else is going to replace it”.
Will Ethereum Overtake Bitcoin?
Several top analysts and experts believe that Ethereum has the potential to overtake Bitcoin. They typically point towards Ethereum’s transition to proof-of-stake and Ethereum’s wider potential as reasons why.
Todd Morley, a co-founder of Guggenheim Partners, believes that Ethereum is “where the action is”. He explains that it has larger utility than Bitcoin because of its smart contracts and noted how fast Ethereum is developing.
Elsewhere, Messari analyst Ryan Watkins highlights how Ethereum 2.0 will change Ethereum’s monetary policy and Ethereum may become “more secure than Bitcoin”.
Ethereum also has a better reputation than Bitcoin, which still struggles to convince people - particularly those who are not very technical - that it’s not about committing criminal acts.
You rarely hear people talking about Ethereum and illicit dealings on the dark web, do you?
Who Owns The Most Ethereum?
According to Etherscan, the largest Ethereum wallet appears to belong to Wrapped Ether, which holds approximately 7,024,627.26201877 ETH, or 6.01445163% of the entire supply.
The second and third largest wallets belong to ‘Eth2 Deposit Contract’, and ‘Binance 7’.
Some people believe that Vitalik Buterin owns the most ETH, but the data seems to disprove this. However, his wallet may be amongst that list and if so, it would be wise not to be revealed (he would certainly be the target of hackers).
Furthermore, we cannot be certain how many addresses an individual might have. For example, Binance is known to operate several wallets at once.
What Companies Use Ethereum?
In 2019, 32 out of 50 of Forbes blockchain list chose to work on Ethereum, according to Christina Comben.
She also points out that three major companies are using Ethereum to springboard their projects.
- JPMorgan. They have used Ethereum to create a digital US dollar.
- Amazon. Decided to make the Ethereum platform their ‘open-blockchain standard’, adding it as an option for its Amazon Managed Blockchain service.
- Microsoft. Microsoft has built their cloud storage platform, Azure, on top of Ethereum.
Some companies are indirectly working with Ethereum by partnering up with start-ups that are built on the Ethereum network.
For example, in April 2021, Mastercard, UBS and JPMorgan (they definitely seem to like Ethereum more than they care to admit!) collectively invested $65 into ConsenSys, as reported by Fortune’s David Z. Morris.
You can also see a list of associate and organisational members of the Enterprise Ethereum Alliance here.
What Benefits Are There To Running A Full Ethereum Node?
The primary benefit of running a full Ethereum node is that it stores the entire Ethereum blockchain and allows you to ‘trustlessly and privately’ use Ethereum and support it at the same time, according to Ethereum.
By operating a full node on the Ethereum network, you can help keep the network secure, speed up transaction times, and improve privacy, according to More Than Finances.
It should also be noted that aside from a ‘full node’ there are also ‘light nodes’ and ‘archive nodes’.
How Risky Is Ethereum?
Investing in Ethereum is still considered very risky by a variety of analysts. Microaxis considers Ethereum “unreasonably risky”.
From their research, they conclude that 90 days market risk is ‘unreasonably risky’, the chance of distress is ‘quite high’, and 90 days economic sensitivity ‘almost neglects market trends’.
But this is the nature of cryptocurrency, at least for the time being. As the market matures and adoption grows, we will likely see risk deteriorate.
Why Are Ethereum Private Keys Risky?
In 2019, it was uncovered by security consultant Adrian Bednarek that some hackers were able to get hold of users’ private keys by simply guessing a random string of numbers, as revealed by WIRED’s Andy Greenberg.
Bednarek assumed that the issue was a result of a mixture of factors, such as coding errors (on Ethereum’s side), inexperienced users choosing their own keys, or that malicious code had corrupted the randomisation process.
All the more reason to make sure that your keys are super safe, and no one can get hold (or guess) them!
Why Ethereum Is A Bad Investment?
Ethereum’s proof-of-work mechanism could be said to be one of the biggest reasons to turn off investors. Proof-of-work is very energy-intensive and expensive for users.
And in a world where most new crypto projects are a variation of proof-of-stake, Ethereum is starting to look a little outdated.
With proof-of-stake implemented in 2022, the primary concern will fall back to regulation. While it is not discussed too much with Ethereum (more so with Bitcoin), it is still a potential future obstacle.