Why Ethereum Might Be a Good Investment in 2021?

Last Updated July 23rd 2021
11 Min Read

With the price of Bitcoin (BTC) skyrocketing at the end of 2020 and hitting new highs in 2021, the second cryptocurrency by market cap is many investors' primary pick as the next big thing in the investment space. 

Ethereum (ETH) has the second-largest market cap in the world as of February 17, 2021 standing at $208.87bn. Ethereum is referred to as smart contracts or DAPPS (Decentralized Digital Applications). It is an open-source blockchain for conducting transactions and it is more than just digital money. Ethereum’s secure blockchain technology could help in revolutionizing industries in the education, e-commerce, social media, and telecommunications, legal and healthcare industries.

Ethereum has played second fiddle to Bitcoin for several years but it is gradually making waves into not only the crypto limelight but the whole investment landscape. Currently, its popularity means that novice crypto investors may not primarily use BTC as their first test experiment in the crypto market since BTCs price is above the trial price several novice investors are used to.

The biggest drivers of Ethereum are its fans who feel that this blockchain technology would form the basis of the internet in the not-so-distant future. It is therefore not surprising that there are several Bitcoins that have been wrapped up on Ethereum’s blockchain network.

By making even its primary competitor Bitcoin compatible with smart contracts, users would find it easy to unlock and create traditional instruments such as insurance and loans. Many future applications would run on Ethereum’s blockchain so any investor who would want to see enormous gains should consider adding the crypto asset onto their portfolios.

Unlike other cryptocurrencies which offer just digital money, Ethereum is open to creating a system that allows others to use their blockchain and more importantly, ensure the human side of individuals can be fully expressed online.

 Will Ethereum Go Up in 2021?

ethereum price

Ethereum has recently seen an extremely bullish run. It was only in September 2020, when Ethereum was extensively researched about and at the time its market capitalization was a paltry $43.9bn with a price of $390.30 and 112,450,000 in circulation.

The current price the crypto is enjoying comes in the wake of what Bitcoin has done in recent months and as a result has gained the special attention of several individuals (novice and experienced traders) who feel it may become the next safe haven for investors.

Inasmuch as this statement holds strong, there are other factors behind the rally which certifies that Ethereum could potentially go up in 2021 and cross several price boundaries just as its crypto sibling has done.

Factors Could increase the Ethereum price further in 2021:

  1. Innovation on Its Platform

  2. The Launch of Ethereum 2.0

The Pace of Innovation on Its Platform is Massive

Ethereum’s technology is the future of the internet and plans are being made so that it will take the current web from 2.0 to new heights in Web 3.0 Almost all activities which take place in the space of cryptocurrencies happen on Ethereum. According to Dharma co-founder Brendan Forster, there was a meeting at the polychain offices in San Francisco in 2018 to discuss the future of digital currency. Astonishingly, all 150 people who turned up for the meeting agreed to one common theme, “decentralized finance (DeFi)”.

In 2020, when the pandemic brought the stock market to its knees, numerous startups started cropping up using the DeFi model and this has certified Ethereum’s course as not only the second-largest blockchain by market cap but the crypto which has so far been persistent enough to survive and be fully accepted.

Decentralized Finance aims to cut off the middle man (banks) and introduce a peer-to-peer finance system which is enabled by decentralized technologies built on the Ethereum blockchain. With this, users can invest, lend and borrow through smart contracts via protocols and financial instruments such as Yearn Finance, Compound and Aave. DeFi like all forms of startups is extremely risky to trust but this has in no way stopped investors.

According to Forbes, approximately $20.5bn has been invested in DeFi projects as at January 2021. Additionally, users can also purchase insurance coverage to help protect their holdings. Nexul Mutual provides cover for smart contracts and this protects users against any unintended use of their smart contract codes. Users can also generate additional income on their crypto holdings through their “ether tokens''.

The Launch of Ethereum 2.0 Has Added Security and Scalability to the Blockchain

The upgrade went up in the fall of 2020 and has made the platform extremely enjoyable to use. Its primary aim is to enhance the speed, efficiency and scalability of the Ethereum network by easing bottlenecks and processing more transactions.

Ethereum 2.0 employs a proof of stake (PoS) mechanism whereas Ethereum 1.0 used a proof of work (PoW) mechanism.

The network in Ethereum 2.0 supports 100,000 transactions per second whereas the network in Ethereum 1.0 supported up to 30 transactions per second. Additionally, most PoS networks have decreased network security because it has a small set of validators which makes it more centralized. But the new upgrade is secured because it is decentralized and requires a minimum of 16,384 validators.

Ethereum is not only a digital currency but it offers a platform which is going to host the world’s finance. Considering the fact that many people are tired of being controlled psychologically and denied freedom to do whatever they want with their money, decentralized finance will gradually become the new norm or as Global Fintech Co-Head Lex Sokolin puts it “We are a stone’s throw away from the global financial industry running on a common software infrastructure.” Ethereum has a bright future and will rally based on its own achievement and not on the exploits of its elder sibling (BTC).

Read Also: What Will Drive The Ethereum Price In 2021?

Is Ethereum a Good Investment?

Ethereum’s price has rallied in the last few months and will continue to soar in the coming months. Prices of coins like stocks, commodities and metals thrive on the laws of demand and supply. As more people are educated on the financial possibilities of blockchain and crypto, more investments will go into Decentralized Finance through market exchanges.

As Ethereum is the second-largest blockchain platform, Crypto experts believe that ETH is a good investment compared to other cryptos and assets. analysts believe that the price of Ethereum could grow further in the long-term.

One of the factors that will influence Ethereum's price is the increasing use of blockchain technology, which attracts more and more successful crypto investors.

Another reason makes Ethereum a good investment is Ethereum 2.0, the second iteration of Ethereum. Ethereum 2.0 will focus on energy efficiency and staking instead of mining.

A great example of this can be attributed to Uniswap, an Ethereum-based protocol which empowers traders, developers and liquidity providers in a financial marketplace which is accessible and open to all. Uniswap’s decentralized exchange hit $100 billion dollars in trade volume on Monday, February 15.  This is the first Decentralized Exchange (DEX) to reach this whopping number. In January 2021, Uniswap hit $20 billion in monthly volume for the first time.

This is extremely important for investors who are considering investing in Ethereum in the long term. This is because trade volume is one of the important trading elements you cannot miss. While trading volume is not the only tool, it adds invaluable insights into your investment decision. As Dan Moskowitz of Investopedia puts it “logically, when more money is moving a stock, crypto, commodity or metal, it means there is more demand for that asset”.

Ethereum Price Prediction in 2021

The current price of Ethereum has been ranging from $1,700 to $1, 842.88. In February 2021, the biggest news or statement has so far been made by Tesla CEO Elon Musk who walked the talk and in a filing on Monday, February 8, 2021 bought $1.5 billion in Bitcoin which was reported by the Wall Street Journal.

Mr. Musk has been one of the keen advocates of the use of cryptocurrencies. The Company (TESLA) went on to state that it was “moving towards allowing customers to pay for its products with the cryptocurrency”. Considering almost all cryptos have some form of association with Ethereum as a result of its advanced software, it means that any investment made in one crypto directly affects the price of Ethereum positively.

Just as a major name in the technology sector has made a bold statement in one crypto, several investors will follow suit and since Ethereum is the second most popular crypto as well as holds the second largest market cap, it is the next in line to become the safe haven for investors.

In the following months, Ethereum will carry on with its enormous promise of being an investment as well as technology. Many experts such as Blocktown Capital’s James Todaro is of the view that “Ethereum could be worth as much as $9,000.”

His views are based on fundamental analysis which sees Ethereum making strong gains through its Decentralized Finance (DeFi) trend and could be the second crypto to hit the $1 trillion market cap milestone since Bitcoin (BTC) rally means it will surely be the first. This notion is also shared by Managing Partner at Moonrock Capital and Co-Founder of Blockfyre Simon Dedic who also estimates Ethereum being worth $9,000 per coin in 2021.    

Read More: Ethereum Price Predictions 2021-2025

How to Invest in Ethereum?

As cryptocurrencies become popular, there are several exchanges where you can make investments. Based on experience and ease of use, eToro provides a great platform where you can buy and invest in Ethereum.

The first step as always in having an account online is to SIGN UP. Ensure the details you provide are authentic.

The second step is ACCOUNT VERIFICATION. To ensure security of your account and as part of KYC (Knowing Your Customer), you will be required to upload your driver’s license or passport) and proof of address (internet bill and bank or credit card statements) to help prove your identity.

The third step is DEPOSIT FIAT CURRENCY. Upon successfully going through the verification process, you can follow the instructions and deposit fiat currency (USD, GBP, or EURO) which is a necessary step to make purchase of ETH possible.

The last step is MAKE YOUR FIRST ETHEREUM PURCHASE. With funds in your account, simply navigate the “Ethereum” page and your first purchase is on its way.

eToro – The Best Platform to Buy Ethereum 

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Virtual currencies are highly volatile. Your capital is at risk.

Conclusion

Ethereum would be able to expand and cement its status in second place in terms of popularity and market cap when many investors are educated on the extensive service it serves the internet. Ethereum is not only a digital currency but its technology is the future of the internet where it would move the current Web 2.0 to new heights in Web 3.0.

With radical crypto such as yearn. Finance (YFI) going from under $1000 in the middle of July 2020 to over $30,000 in August 2020 and $42, 700 in February 2021 boosted by the release of yInsure Finance, hype from industry executives and the growth of the decentralized financed sector, the price of Ethereum is predicted to rally in a big way which would increase its price and market cap by the end of 2021.

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