Should You Buy Ethereum?

Will DeFi Dominance Make Ethereum a Good Investment in the Future?

Last Updated March 11th 2022
20 Min Read

Ethereum (ETH) is not only the second most popular cryptocurrency but the second largest digital asset in the world with a market capitalization of $312 billion.

This article takes an overview of Ethereum, the second most valuable digital asset, its core areas of business, and most importantly for prospective investors – the pros and cons which can help answer the question: Should I buy Ethereum?

Ethereum (ETH) performed extremely well in 2021 having returned more than 400% from the start to the end of the year, and crossed several milestones in the process ($1000, $1500, $2000, $3000, $4000).

Investors who bought Ethereum at the beginning of 2021 and sold it at its high of $4,891 in November saw more than 560% return on their investment in less than a year.

Ethereum (ETH), unlike Bitcoin, Litecoin and Dash, thrives on its blockchain technology to provide new innovative solutions to individuals and business organizations that want to venture into finance without the help of intermediaries (traditional banking institutions, clearing houses and insurance companies).

Through smart contracts, Ethereum (ETH) has been providing protocols or decentralized applications (dAPPS) in all kinds of platforms such as borrowing, lending, prediction markets, coverage, synthetics and trading.

But Ethereum is facing strong competition in some of the new altcoins, due to Ethereum’s high gas fees and low transaction speed.

Cardano and Tron (TRX)’s transaction fees are close to $0 which make many crypto analysts ask questions as to whether Ethereum (ETHs) advantage as the first mover of smart contracts will soon be challenged.

Is Ethereum (ETH) a great investment and will the crypto trading asset continue to soar in 2022 and beyond? Will the smart contract blockchain succumb to the pressures of other competing blockchains which will see the cryptocurrency’s run as the king of DeFi come to an unfortunate end? 

Most importantly for prospective investors – what are the pros and cons which can help answer the question: Should You buy Ethereum?

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

Contents: 

Ethereum (ETH) Cryptocurrency At A Glance

Vitalik Buterin and Gavin Wood are widely known as the founders of Ethereum (ETH) together with six others which include the co-founder of Cardano (ADA), Charles Hoskinson.

Programmer Vitalik Buterin proposed Ethereum in 2013 and development was crowdfunded in 2014 and the network went live on 30th July 2015. 

Ethereum (ETH) was created to serve the purpose of enabling smart contracts and distributed applications (dAPPS) to be built and run without any downtime, control, fraud or third-party interferences.

Ethereum does not only serve as a platform but also as a software network that allows developers to build and power new tools, apps, and NFTs.

Ethereum's native token is called Ether (ETH) and it is used inside Ethereum to monetize work and run applications and as well can be traded as a digital currency exchange like other cryptocurrencies.

The supply of Ethereum (ETH) is finite with a current circulation supply of over $119 million ETH.

Ethereum started trading in August 2015 at a price of $1 to reach above $4,800 at its highest in November 2021. The cryptocurrency saw plenty of volatility along the way.

Investors have had a great time in terms of awesome rides of bullishness and unforeseen plunges (bearishness) on the part of the cryptocurrency.

Such unpredictability saw several investors make gains one minute and the next minute, losses will follow, all within short amounts of time (minutes, hours, days and weeks).

Despite these pullbacks and an uncertain future ahead for cryptocurrencies in general in a strictly regulated financial world, Ethereum has exceeded expectations in terms of performance and has so far gone overboard the price of several analysis and experts resulting in great gains for growth investors.

Although Ethereum's price has recently dropped back to $2,600 levels, its lifetime return on investment (ROI) is about 91,000%, at the time of writing.

In 2016, Ethereum was split into two separate blockchains which are Ethereum Classic and Ethereum. This happened after a malicious actor (hacker) stole more than $50 million worth of funds which had earlier on been raised on the Decentralized Autonomous Organization (DAO) (a set of smart contracts which originated from the software of Ethereum). 

The new Ethereum which was unplanned became a hard fork of the original software which had a primary purpose of protecting against further malware attacks.

The year 2017 was extremely important for Ethereum (ETH) as it released a major upgrade called METROPOLIS. This upgrade is considered the most significant for the smart contract network and was designed to make the network of Ethereum lighter, faster and more secure.

It embedded transaction status code in receipts, enhanced cryptography, reduced and did away with rewards and overall set the stage for widespread use of Ethereum and its smart contracts.

After the pandemic swept the financial markets in March and April 2020, low prices brought renewed interests in cryptocurrencies and its related products such as decentralized finance (DeFi) applications and protocols. This renewed interest saw ETH soar to new highs to close the year trading above $700.

This time the price was not solely determined by speculation in the form of demand and supply but by tradable tokens (DAPPS) which performed extremely well. Aside from this, the launch of Ethereum 2.0 and institutional investment from the likes of Grayscale (the largest digital asset management firm) helped increase the market valuation of the asset.

The year 2021 was extremely different with several assets which run on the blockchain leading Ethereum on to reach an all-time high of $4,362 in May 2021, and later exceeded this to over $4,800 in November.

Ethereum (ETH) has performed exceedingly well and whatever happens, a fall in price of one of the top-performing applications would be made up for by other DAPPS on the platform.

As a result, Strategist for Fundstrat Global Advisors LLC, David Grider has opined that “Ethereum is the best risk/reward investment play in crypto”.

Let us take a look into the Pros and Cons that makes Ethereum an asset that could be considered for addition to any investor's portfolio.

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

Pros Of Buying Ethereum (ETH)

There are several pros of purchasing Ethereum and most oftentimes, the drivers or advantages of the asset makes a case for it.  

✅ Ethereum Thrives on Diversity and NOT Speculation 

Litecoin (LTC), Bitcoin (BTC) and Dogecoin (DOGE) do not have any technology which can provide solutions to businesses and organizations aside from being used for checkouts on various retailers globally.

Ethereum (ETH) saw several possibilities in cryptography which was not only limited to sending and receiving digital money over the internet without any centralized authority. 

As a result, it became the first mover in the decentralized finance space to introduce decentralized finance (DeFi) applications or protocols which can play an extensive role in bringing great returns to individual users and business organizations.

According to data retrieved from DeFi Pulse (the online portal which provides the latest rankings and analytics of decentralized finance protocols), there is currently $75 billion locked-in DeFi. 

Not too surprising, the assets with the most amount of money locked-in runs on Ethereum.

Maker (is a decentralized credit platform on Ethereum that supports Dai, a stablecoin that has a value pegged to USD) and it’s extremely dominant with $15.24 billion. 

Compound (COMP) is an algorithmic, autonomous interest rate protocol built for developers to unlock a universe of open financial applications that has $6.59 billion locked-in DeFi. 

Uniswap (UNI) is a cryptocurrency exchange system which operates on the blockchain of Ethereum (ETH) and has $7.04 billion locked in DeFi. 

AAVE (is an open-source and non-custodial protocol to earn interest on deposits and borrow assets) has $8.85 billion locked in DeFi. 

Yearn Finance (is an aggregator service for DeFi investors, using automation to allow them to maximize profits from yield farming) has $2.67 billion locked in DeFi. 

Data retrieved from DAPP Review on the performance of decentralized applications in the 2nd quarter (Q2) of 2020 saw Ethereum (ETH) led the way with 85.3% of the market share in terms of volume. 

At the time, there were 2,403 DAPPS on the chain, with 768 active DAPPS, 195 new DAPPS, with 1.51 million active users and $14.27 billion in volume.

This gives Ethereum (ETH) a competitive edge in DAPPS not primarily as a first mover but as a smart contracts blockchain which has achieved several milestones which are reaping results for creators and investors.

With the price of Yearn Finance and Maker surpassing ETHs current trading price, if all the other applications rally in the near future, it will reflect in the price of Ethereum and bring huge gains to the cryptocurrency in terms of market valuation.

✅ Ethereum Has Partnered With and Has Numerous Real World Use Cases

Inasmuch as Cardano and Tron are doing well trying to bring competition which would lead to creativity and innovation in the DeFi space, Ethereum (ETH) is miles ahead and are gaining the trust of regular citizens and the centralized finance world.

VISA has accepted a cryptocurrency payment in lieu for cash for its services. Jack Forestell, Chief Product Officer of VISA pointed out in a press release, “Crypto-native FinTechs want partners [that] understand their business and the complexities of digital currency form factors”.

On March 30, 2021, PAYPAL posted on social media platform (Twitter) using its handle, @PayPal and excerpts of the tweet go, “Today, we are announcing the launch of Checkout with Crypto, a new way for PayPal customers to checkout with #Cryptocurrency to pay for select online purchases”.

In 2020, PayPal made it possible for users across the United States to buy and sell cryptocurrencies directly from their account and this news took adoption and mainstream acceptance of cryptocurrencies with Ethereum (ETH) featuring strongly to a new level.

PayPal has introduced a new feature called CHECKOUT WITH CRYPTO and this allows users to instantly convert BTC, LTC, BCH or Ethereum (ETH) to United States dollars at no additional transaction fees.

This exposes Ethereum (ETH) to over 377 million active accounts PayPal has control of and this will go a long way to reflect in the price of the crypto trading asset as a result of new use cases.

Non-Fungible Tokens (NFTs) have taken over the crypto finance world. BNP Paribas, the eighth largest bank in terms of assets under management, is seeing Non-Fungible Tokens (NFTs) as one of the areas that can provide opportunities in the financial market to make money.

Most NFTs are running on Ethereum (the world’s most used blockchain). The biggest NFTs using Ethereum in terms of trade volume and market capitalization are Decentraland (MANA) and Enjin (ENJ).

With real-world usage and patronage by BNP Paribas and other artists, with Lionel Richie and Snoop Dogg reportedly showing great interest in terms of investment, NFTs will grow and impact Ethereum’s price.

As a result of real-world use cases, Ethereum has leverage over other smart contract blockchains since several developers as per the usage experience of other developers will love to opt for Ethereum so that they can reach a huge audience, make gains for themselves which will reflect in the gains of investors.

✅ Ethereum Constantly Upgrades its Blockchain

Ethereum’s last upgrade LONDON HARD FORK (EIP-1559) approved a major change with regards to how its network was going to run. It will help limit the number of ETHs in supply by doing a great overhaul in the way transactions work.

When a base transaction fee is sent to the network, Ether (ETH) coins will be destroyed.

When ETHs are destroyed, automatically, there will be relatively lesser coins on the market which will lead to scarcity and trigger the basic laws of demand and supply.

Many traders and analysts like Ethereum (ETH) aside BTC not only because of its DeFi dominance but because it has a finite supply. Having a finite supply means scarcity will set in one day. This would make altcoin more valuable than competing digital assets.

If Ethereum (ETH) is able to see all its upgrades through and Ethereum 2.0 become extremely efficient in processing transactions in a fast manner (100,000 transactions per second), the gas fees will decrease substantially which will prevent more developers from leaving the platform and opting for other blockchains.

More developers will be added as well and every activity and gains accumulated will bring awesome returns to patrons of the digital trading asset.

✅ Ethereum Futures Partnership Is Essential for Managing Risks and Losses

Futures are an essential part of the trading of assets as it allows an investor to speculate on the direction of a commodity, security or financial instrument. 

On 8th February 2021, it was announced by the Chicago Mercantile Exchange (CME) Group that “As an institutional demand for transparent, exchange-listed crypto derivatives continues to increase, we are pleased to launch our new Ether future contract”.

Traders and investors are now entitled to have an equal ability to use leverage to increase capital, profit from future movements of assets and be able to lessen their losses during bearish seasons.

Experts believe that Ethereum’s technology (Ethereum 2.0) is currently far ahead of the networks of competing altcoins because it has been tried and tested.

Check Out: 26 Reasons Why You Should Invest in Ethereum Today

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

Cons Of Buying Ethereum (ETH)

Inasmuch as Ethereum (ETH) is a great investment which is worth any trader or investors consideration, it also has its pitfalls which may see its lose most of its developers to Cardano (ADA) and TRON (TRX) in the near future and in the process may get dethroned as the first mover and king of decentralized finance (DeFi).

There are many cons but among others are:

❌ Ethereum Faces Strong Competition in the Future from Other Altcoins

After Satoshi Nakamoto created Bitcoin (BTC), several others such as Litecoin (LTC) and Dash (DASH) joined the market. 

In the same way, after Ethereum (ETH) brought about new possibilities in cryptocurrency and blockchain technology as a whole, Cardano (ADA), Polkadot (DOT), EOS.IO (EOS), Tron (TRX) and Kusama (KSM) have joined the market which has brought saturation.

Ethereum competitors, such as Polkadot, Solana and Binance Smart Chain (BSC), are growing faster in terms of development activity.

Additionally, Ethereum initially controlled the whole decentralized finance (DeFi) space. Currently, the digital asset controls 70% of the space. 

With developer activity not on ETHs side, this means any report released on DeFi in the future will gradually see the first mover lose further ground in terms of dominance of the space. 

This is because TRON (TRX) continues to announce more partnerships and Cardano (ADA) continues to accomplish its roadmaps. This will see ADA become fully functional in the near future and have enough real-world use cases which will give strong competition to Vitalik Buterin’s innovative creation.

Read Also: Best 5 Ethereum Killers To Buy

❌ Ethereum 2.0 Has Not Reached Full Potential

When Ethereum was first launched, it made use of the longstanding SHA-256 proof-of-work algorithm since Bitcoin (BTCs) blockchain became the template the other altcoins thrived on to build their innovations

Every crypto enthusiast knows the frailties of proof-of-work such as slow processing of transactions which ranges from 5 to 30 per second which does not bode well for a technology solution that aims to be adopted by several individuals and business organizations.

With the launch of Ethereum 2.0 on 1st December 2020, the network was supposed to move away from the old algorithm to a new and improved proof-of-stake (POS) algorithm which introduced a new feature called Sharding

According to Jake Frankenfield of Investopedia, Sharding is a database partitioning technology which is used by blockchain companies such as Ethereum with the purpose of scalability which enables them to process more transactions per second (TPS). 

In addition to this, sharding helps with the reduction of the slowness or latency of a network since it plays a primary role of splitting a blockchain into separate shards.

This upgrade in algorithm is supposed to see Ethereum (ETH) process 100,000 transactions per second (TPS) but this has so far been far from the reality on the network. 

With millions of users trying to use decentralized applications (yield aggregator, lending platforms and exchanges), there has been high congestion on the network. Having a congested network leads to a slower pace in the processing of transactions and this directly has an effect on the transaction fees on a blockchain. As per data retrieved from Coindesk, Ethereum (ETH) has an average transaction fee of $13 which once reached as high as $23.37 in the month of February 2021.

Such a slow network and transaction fee has brought about a review of the usage of the technology by the founders of decentralized applications CELSIUS and SINGULARITY NET.

Ben Goertzel, AI expert and founder of SINGULARITY NET has pointed out that “The current cost and speed issues associated with the blockchain of Ethereum have increased the urgency of exploring alternatives for SingularityNETs blockchain underpinning”.

The expert further added that there is great promise associated with Ethereum 2.0 but its full functionality remains unclear.

❌ Heavy Government Regulation May Set In

Charles Hoskinson (founder of Cardano) left Ethereum in 2014 after several disagreements with Vitalik Buterin on how the organization should be run. 

Hoskinson may have seen a future where cryptography, in general, would gain grounds that would bring forth strong regulation against crypto organizations

This is the main reason why he wanted some form of centralization with regards to how the whole project would be managed.

Unfortunately, Vitalik Buterin won the battle to maintain the blockchain and its novel token, Ether, as a decentralized organization. If strong regulation sets in, Ethereum (ETH) may not be in a position to have the needed requirements to fully operate since DeFi poses a strong challenge to the duly regulated centralized finance corporations worldwide.

This is an area that may come in to devalue the overall market of all cryptocurrencies which may include Ethereum and this is a factor traders and investors should not ignore when making decisions with your hard-earned fiat currency.

What Are Analysts And Experts Advising On Ethereum (ETH)?

There have been several price forecasts for Ethereum (ETH) over the years but the second-largest crypto found ways to surpass expectations.

CoinPedia forecasts that Ethereum will be traded between $6,500 and $7,500 by the end of 2022 and will increase to $15000 in 5 years.

Gov Capital sees huge gains ahead for Ethereum, forecasting a price of $4,100 for ETH at the end of 2022, and a new milestone of $10,000 in 2025.

Ark Capital’s Brian Schuster believes the digital asset’s dominance of DeFi will see it revolutionize the financial world and by 2024, expect the crypto trading asset to exchange hands for $100,000.

Bloomberg's Mike McGlone sees Ethereum rising to between $4,000 and $5,000 per token by the time 2022 comes to a close.

Ian Balina, the founder of Token Metrics, believes that Ethereum could rise as high as $8,000 this year.

FXLeaders analyst Skerdian Meta forecasts a price range of $6,000 to $8,000 in 1 year, which is backed by Ethereum's safe haven status, Ethereum 2.0 success and hawkish central banks.

Skerdian Meta further sees huge gains for growth investors (long term) as a result of global politics, crypto market sentiment and Ethereum upgrades which will take the price of Ethereum (ETH) to $10,000-$20,000 in the next 3 years.

Experts at Coin Price Forecast are of the opinion that "According to the latest long-term forecast, Ethereum price will hit $5,000 by the middle of 2023 and then $10,000 by the end of 2026."

Previsioni Bitcoin foresees ETH at $4,800 at the end of 2022.

Don't Miss: Ethereum Price Prediction

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

The Bottom Line: Should You Buy Ethereum (ETH)?

Ethereum is likely a good buy. In fact, ETH is more than a good investment. Ethereum’s low entry-level makes it an attractive investment for traders and beginners, as well as long-term investors. ETH is also the right choice for people who simply want to diversify their portfolios.

Remember: There is no crypto asset which is perfect and Ethereum is no different. 

As a result of being a first mover in the decentralized finance (DeFi) space, Ethereum has an incredible competitive advantage in terms of investments and usage as the blockchain of choice for decentralized applications or protocols (DAPPS) by developers.

Ethereum promises a great future with more applications to be added, with Ethereum 2.0 to reach full functionality. As a result, there is nothing wrong in purchasing more ETHs now and holding the coins for a very long time to reap the returns on your investment.

Currently, Terra, Binance Smart Chain (BSC), Avalanche, Solana, Fantom and Tron are the primary competitors for DeFi, but they still have to prove that they can dethrone ETH as the king of the space.

This is why those altcoins are currently trading for a fraction of the market price of Ethereum (ETH). 

Several analysts believe Ethereum is the key to revolutionizing the current WEB 2.0 and take it to a new level in WEB 3.0 which makes it a BUY in the future. As per fundamental and technical analysis, Ethereum is poised to hit a minimum of $10,000 in the near future.

Put simply, Ethereum is a low-risk investment with lots of potential rewards. It’s something you should definitely do some research on before you consider adding ETH to your portfolio.

The real Ethereum investing question then, does it really work? If you’re willing to invest the time and energy, then for you, it could well do.

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Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

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