Interests in Ethereum have soared to new heights. On Google, the keyword “Ethereum” has increased by more than 150% in terms of online search by internet users. This comes at the back of the crypto assets great run in the third week of February where it hit a new all-time high.
With more than 37 billion locked in DeFi and the crypto’s blockchain dominating that space, will ETH’s price double in 2021 due to the future of Decentralized Finance?
Ethereum could double in price and is poised to cross several milestones in 2021. According to Shivam Thakral who is the Chief Executive Officer of BuyUcoin, “Bitcoin is consolidating and this is the main reason Ether is touching record valuation. Investors are looking to ETH as the second most popular crypto as well as second by market cap to make great returns on their investments in the long term”.
What has brought so much hype and anticipation in the eyes of traders of crypto when it comes to Ethereum is its dominance in where many people feel the global economy is heading, Decentralized Finance.
Unlike Satoshi Nakamoto’s Bitcoin (BTC) which had its fans as its biggest driver before the pandemic and gained new investors from the huge influx of pension schemes, investment trusts and university endowment funds after the financial markets recovery from the public health crisis, Ethereum relies on the strength of the number of successful protocols which runs on its platform.
David Grider works as a strategist for Fundstrat Global Advisors Limited Liability Company and believes “The best risk/reward investment play in crypto is Ethereum because it does not depend on a single protocol whether yield assets, decentralized insurance or its novel token, ether, to determine the assets price”.
Mr. Grider further added that “Ethereum will climb more than sevenfold to $10,500” and if we are to go by what this crypto strategist has said then ETH will more than double and make huge gains for investors which could be used as profit or serve as a hedge for other risky assets.
Moving forward Decentralized Finance is going to take over. Chief Executive Officer (CEO) of $2.6 billion-asset Silvergate Bank which is located in San Diego, Alan Lane is a huge proponent of Decentralized Finance. Lane is of the opinion that “DeFi could enable a more resilient, efficient and democratic financial system”.
Many people feel few financial executives on Wall Street and their European Central Bank alliances control all the decisions with regards to the future of money which denies the common man a chance to do whatever he or she wants with their hard earned fiat currency.
Mr. Lane further added that “When traditional financial services are made available over a public, permissionless blockchain such as the BTC blockchain or Ethereum 2.0 platform, anyone with access to the internet and a smartphone can send, receive and store money through a digital wallet”.
As we all know too well, there are millions of people who are “underbanked” (a distinct group of individuals who have no banking facilities and rely on alternative financial services) and DeFi can go a long way to provide access to financial services to such group to help them contribute to the global financial economy.
Ethereum: What is it?
Ethereum is an open-source blockchain platform which can be used by developers to build their own decentralized applications (DAPPS) which ranges from decentralized exchanges, decentralized insurance and yield aggregators.
It features smart contracts, which allows users to set conditions for a transaction to be fulfilled. Ethereum’s native token is called ether (ETH) and it’s highly used for transactions on the blockchain’s network.
Ethereum’s secure blockchain technology could help in revolutionizing industries in the education, e-commerce, social media, and telecommunications, legal and healthcare industries.
What is Decentralized Finance?
For about a three month period, DeFi has been trending across social media and search engines which have led many people to research about it. Unfortunately, articles found online do not go in-depth as to the essence of “DeFi” and how it is about to give centralized banks a much stronger competition than they have ever witnessed before.
Decentralized Finance (DeFi) is a term that encompasses the vision of having a financial system which functions without banks, clearinghouses or insurance companies (intermediaries) and is operated by smart contracts.
DeFi applications or protocols strive to provide the same services of Centralized Finance (CeFi) (traditional financial systems such as banks) but in a transparent, global and permissionless manner.
Ethereum’s Decentralized Finance Protocols In Comparison to Traditional Banks (Centralized Finance)
Traditional Banks are centralized (CeFi) and Digital Apps and Protocols are decentralized (DeFi). A clear case study can be attributed to the functions of Commercial Banks (Centralized Organization) and the functions of DAPPS (Decentralized Applications).
Commercial Banks thrive on a single business model which is to accept deposits from customers and use some of these deposits as loans to other customers.
The elementary cornerstone of all financial systems which are known to function efficiently is through borrowing and lending. Through this, account holders are subjected to incentives as they provide some form of capital (liquidity) to the financial markets and in exchange get a return on their investment (interest) on an asset which would have otherwise remained dormant.
On the other hand, DeFi applications make it possible for unknown participants to lend and borrow money on a large scale without any banks, clearinghouses or insurance agencies (intermediaries). In accordance with demand and supply, DAPPS brings borrowers and lenders together to set up interest rates automatically.
Anybody in the world no matter where you find yourself at any point in time can interact with those applications with any amount as it is truly inclusive.
Chief Executive Officer and founder of de novo Avanti Bank which is located in Cheyenne, Wyoming, Caitlyn Long is of the view that traditional financial institutions understand there is something important going on in the financial sector through DeFi. She stated clearly that “The typical cross-border system we are used to goes through six different institutions; two central banks, two correspondents, an originator and a receiver bank”.
As can clearly be seen from the eyes of experts who have been in the financial game for a long period of time, there can never be a straightforward process. This comes as a result of having so many intermediaries and passing through those sites means extensive regulation and compliance which delays the process and makes lending and borrowing relatively stressful.
Compound, a decentralized lending platform on Ethereum, is leading the hype of DeFi applications which is driving not only the advancement of lending and borrowing applications but its adoption as well.
Compound currently has $8,844,942,231 of assets currently earning interest across 9 markets. Out of this, $1,889,703,328 ETH is earning interest of 0.23%. COMP at the time of writing was trading at $400.94 having shed 4.96% in the last 24 hours with a current circulation supply of 4,639,119 COMP, trade volume of $280,254,619 and a market capitalization of $1.86 billion.
In contrast to financial transactions which deal with intermediaries, decentralized finance loans are normally secured by what is called “over collateralization” (this is the provision of collateral which is worth more than enough to cover any potential losses in case of defaults in repayment of the loan by the borrower).
Aave, another decentralized lending platform on Ethereum, which helps traders borrow assets and earn interest on deposits is working on allowing traders to get uncollateralized loans. Aave is currently trading at $338.19.
Would you consider investing in Ethereum ETH?
Investment Banks (Centralized) and Yield Aggregators (Decentralized)
Investment Banks play a lot of roles in decisions centered on money. It is a known fact that investment banks thrive on the business model which involves advisory services based on financial transactions. Investment Banks also help with the management of assets as well as the creation and trading of complex financial products. In a nutshell, the bridge between investors and large organizations is Investment Banks.
Investment Banks help advice government and business organizations about how to conquer the challenges of their finances and as well help them with procuring finance whether it will come from bond issues, derivative products or stock offerings.
A great example can be attributed to investment financial institutions such as Goldman Sachs and JP Morgan which manage enormous portfolios of insurance organizations, pension funds and other enterprises through their asset management department. The investment banks experts select the right mix of stocks, real estate trusts and other positive yielding investments for their customers.
On the other hand, Decentralized Finance (DeFi) has protocols such as Yearn Finance and Harvest. Yearn Finance (an autonomous protocol is a yield aggregator on Ethereum which searches the DeFi space for the best yields and automatically places investments for its users).
This frees investors the burden of having to research through numerous applications (DAPPS) online or do a fundamental analysis of corporations physically and digitally to be able to know which organization offers the best products which offers the best return on their investment.
As at the time of writing, Yearn Finance was trading at a price of $31,127.86, had a market capitalization of $1.1 billion and a trade volume of $276 million in the last 24 hours.
Centralized and Decentralized Exchanges
Exchanges have a primary function of organizing the trading of different assets between two or more participants such as foreign currencies, stocks and crypto. Cryptocurrency Exchanges are online platforms where traders can buy, sell or exchange cryptocurrencies for traditional (fiat) or digital currency.
The exchanges can convert cryptocurrencies into other cryptocurrencies as well as cryptocurrencies into major government-backed currencies.
The exchange of cryptocurrencies against fiat currencies such as USD, EUR or GBP has a direct attribution to Centralized Finance. This is because cryptocurrency holders will need to use Binance or Coinbase (which are centralized exchanges) to swap cryptocurrencies among one another.
On the other hand, the emergence of decentralized exchanges (DEX) with Uniswap leading the way has made it possible for cryptocurrency holders to swap their tokens without having to leave the crypto space.
Uniswap, a decentralized exchange on Ethereum, is an automated fully decentralized token exchange and has several smart contracts running on its DEX. In the last 24 hours, UNI has a market capitalization of $6,879,527,995 with 301,612,659 UNI in circulation. It is currently trading at a price of $22.74 and recorded a trade volume of $1.047, 947,217 within the last 24 hours.
Uniswap as a liquidity protocol plays an integral role in a new financial world which will work without any intermediaries (Centralized Organizations) and in the process develop a free and independent decentralized ecosystem.
So, Is Ethereum a Good Investment with its DeFi Protocols?
Ethereum is a good investment because it thrives on the same principles of investing which is to diversify a portfolio.
Ethereum thrives on diversification and thus does not rely on “ether” but projects which have a strong user base and also help solve several problems in the central finance system in a decentralized manner.
Blocktown Capital founder, James Todaro sees Ethereum more than doubling. In a statement he said that “Ethereum will be worth more than $9,000 in the near future”.
Ark Capital’s Brian Schuster sees Ethereum as the first cryptocurrency which will cross the $100,000 price milestone by 2024 due to its potential revolution of the whole digital world as it aims to take the current Web 2.0 to Web 3.0. In the process, Mr. Schuster predicts that Ethereum will then surpass BTC as the crypto with the largest market capitalization as well as price.
Moonrock Capital’s Managing Partner who is also the co-founder of Blockfyre, Simon Dedic also sees Ethereum more than doubling this year and will soon surpass the $9,000 mark.
Dedic's analysis primarily centers on fundamentals which could see the smart contracts blockchain become the second cryptocurrency to surpass the $1 trillion market capitalization.
According to Prime XBT, Ethereum’s price for the year ended 2021 will be $25,000.
Check Out: Is Ethereum Worth Buying in 2021?
Ethereum Price Prediction in 2021 through the lens of DeFi Protocols
Ethereum’s price is based on a collection of DeFi assets. Yield Aggregator (Yearn Finance) could trade at $241,198 by the end of 2025 according to Wallet Investor.
Trading Beasts forecasts Yearn Finance trading as at the year ended 2021 at $66,111 and has a potential of growing up to $126,259 by 2025.
According to Gov. Capital, Yearn. Finance will surpass $76,065 by the end of 2021 and has a growth potential of crossing $115,000 by the end of 2025.
Coinpedia also believes Yearn Finance will maintain its bullish form and finish 2021 with a trading price of $85,000 and may cross the $100,000 price milestone in the following years to come.
Digital Coin Price has also forecasted the future of the yield aggregator on Ethereum and sees it trading at $89,623 at the start of 2024.
Coin Arbitrage Bot on the other hand feels Yearn Finance will increase substantially but will experience a bearish period along the way. It believes “Yearn Finance will fall in 2021 and end the year trading at $29,986 and with such a price, more investors will purchase the asset and see the price soar to $59,313 in 2022, $95,968 in 2023 and $155,278 in 2024.
Decentralized Exchange (Uniswap), according to Long Forecast, will finish 2021 on a high with a trading price of $29.41.
It’s just a matter of time before UNI price rises to $25, are the sentiments shared by Investing Cube.
Experts at Digital Coin Price predict UNI will end 2021 trading at $30 per asset, maintain its bullish run and close 2024 with $52.47 and end 2025 with a trading price of $62.
Uniswap’s price will double to $40 in 2021, a little over $100 in 2023, $135 in 2024 and finally trade at a price of $166 in 2025 is the price forecast of Wallet Investor.
Coinpedia expects UNI to see out 2021 with a price of about $35 and $75 in the future. Overall, Coinpedia analyzes UNI as a very good investment for growth investors (long term).
Compound as per data provided by Digital Coin Price forecasts a substantial growth in price which stands at $577.85 in 2021, $671.29 in 2022, $825.62 in 2023, $980.23 in 2024 and $1,169 in 2025.
According to Crypto Price Prediction (CPP), COMP may touch a new high of $1,500 in 2025.
Zephyrnet.com foresees prices touching around $1,000 in 2021 and highs of $5,000 in 2025.
Such strong applications (protocols) which have a great future is the primary drive that has made Brian Schuster of Ark believe that Ethereum will surpass $100,000 in price and become the largest cryptocurrency by far.
Read More: Ethereum Price Predictions 2021-2025
How do I invest in Ethereum?
There are numerous individuals who are too conventional to embrace change and feel crypto investing can only be viewed in Incognito Mode or on an Internet Protocol address which cannot be traced. Unfortunately, that statement does not hold any water as crypto can be traded on several online brokerages which have received business certificates and license of operations by governments in the United States, United Kingdom among others.
One such brokerage we at Trading Education will recommend for you is eToro. Creating an account and making your first Ethereum purchase on eToro is a relatively easier process when compared to other platforms.
First and foremost, “SIGNING UP” is the term used online when creating a profile.
The next step is to provide your full name, email address and telephone number which are the REQUIRED DETAILS needed to set up your account. Please ensure that the information you provide confirms your identity since several anonymous individuals try to compromise high-frequency trading platforms in the form of hacking. You will be verified thoroughly.
As part of company policy, after you have provided the appropriate details, you will be directed to upload documentation which proves the information you input into the company’s system. This process is called “Knowing Your Customer” (KYC) and all brokerages as well as betting sites rely on this process.
This is to ensure that there are no credit card frauds or compromise of accounts of customers who used online payment systems such as PayPal, Skrill, Neteller and Rapid Transfer to upload funds. As part of the VERIFICATION PROCESS, you will be required to upload government issued identification cards (passport, national IDs and driving license) as well as credit card, bank statements or internet bills to help confirm the person and the billing address.
After going through a successful verification phase, the next step is to DEPOSIT MONEY (fiat currency) into your account. The preferred payment methods are Credit/Debit Cards, PayPal, Neteller, Skrill, Rapid Transfer, iDeal, Klarna / Sofort Banking, Bank Transfer and Local Online Banking.
Once the deposit has been successfully completed, simply navigate to Ethereum’s page and MAKE YOUR FIRST ETH PURCHASE which will be processed and deposited into your account.
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.
There are many business analysts who have made several forecasts into the future and hold a strong assertion that blockchain technology in the long-term will have a great impact on several businesses worldwide as a result of smart contracts.
Deloitte, one of the big four accounting organizations, through its study of multinational corporations has found out that “If blockchain technology fixes all of its problems primarily interoperability and scalability, it has the potential to improve the efficiency and effectiveness of corporations”.
With more than $37 billion locked in Decentralized Finance and Ethereum upgrading its protocol from Ethereum 1.0 to Ethereum 2.0, there is a huge potential and market for the blockchain technology to thrive and bring huge returns to investors.
Of the 222 applications locked in, a whopping 210 are running on Ethereum and this takes digital assets trade volume to billions of dollars daily which indicates high frequency of trades by its users, signaling an interest in the applications it has supported on its platform so far.
With the launch of Ethereum Futures on the Chicago Mercantile Exchange (CME) in February 2021, traders now 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. Blockchain technology in general can help business organizations increase revenue through cost cutting.
In the long-term, it can also help businesses create new business services, models and products.
Ethereum will more than double in 2021. According to XBT, investors will be looking at a price of $25,000 in 2021, which has the potential of increasing to $27,000 by 2022 due to the several protocols which is powering the blockchain to new heights in the finance space.
Read More: What Will Ethereum (ETH) Be Worth in 2030?