Ethereum Coin: A Smart Investment Decision?

Ethereum is a global computer that runs decentralised apps (dApps) and its native cryptocurrency is Ether (ETH). It is one of the leading cryptocurrencies in terms of market capitalisation and technological advancements. However, with the volatile nature of the cryptocurrency market, many investors are unsure about the investment potential of Ethereum.

Ethereum has a strong community and a wide range of use cases beyond just digital currency. Its smart contract functionality has enabled the development of decentralised finance applications and other blockchain innovations.

In 2023, Ethereum experienced significant growth in its value and market capitalisation. The implementation of Ethereum 2.0 brought about scalability improvements and lower transaction fees, making the platform more efficient and attractive to investors and developers.

However, there are also some disadvantages to investing in Ethereum. The cryptocurrency market is highly volatile, and Ethereum's price has fluctuated significantly since its launch in 2015. Additionally, high transaction fees, new regulations, the threat of online hacking, and competition from other smart contract platforms are some of the concerns surrounding Ethereum as an investment option.

Overall, investing in Ethereum can be a risky but potentially rewarding venture. It is important for investors to do their research and understand the risks and potential pitfalls before deciding to invest in Ethereum.

Ethereum's performance since its launch

Ethereum's performance has been mixed since its launch in 2015.

From its creation in 2015 until March 2016, Ethereum's value remained under $1. However, by March 2016, it had briefly surpassed the $10 mark, reaching $10.03. The cryptocurrency continued to gain popularity and, by May 2017, it had reached the $100 mark.

Ethereum's value continued to increase, and by the end of 2017, it was worth $774.69. This upward trend continued into 2018, with Ethereum crossing the $1000 mark within the first week of the year. However, the cryptocurrency crash in 2018, also known as the bitcoin crash, caused Ethereum's value to plummet, and by the end of that year, it was worth less than $100.

Ethereum made a comeback between 2019 and 2021, reaching its highest price of $4,815 on November 9, 2021. The coin's value then decreased in the first half of 2022 and was further impacted by the collapse of FTX in late 2022. As of August 24, 2024, Ethereum's value was $2,769.39, significantly less than its 2021 high.

Ethereum's performance has been influenced by various factors, including technological developments, updates, and the collapse of cryptocurrency exchanges. Its future is closely tied to the world of Decentralized Finance (DeFi), and it remains to be seen how the industry will impact its value.

The pros and cons of investing in Ethereum

Ethereum is a global computer that runs decentralised apps (dApps). Its cryptocurrency, Ether (ETH), is the second-largest by market capitalisation and is required to run your app or process transactions on the Ethereum blockchain.

Pros of Investing in Ethereum

• Volatility: Smart investors have learned to capitalise on market cycle patterns and parabolic gains produced by market bubbles.
• Liquidity: Ethereum is highly liquid due to the worldwide establishment of trading platforms, exchanges, and online brokerages. It can be easily traded for cash or assets like gold with low fees.
• Lower inflation risk: Ethereum has a transparent inflation plan that is less prone to interference than government-regulated currencies. There is also no need to worry about deflation as the blockchain system is infinite.
• Decentralised finance: Ethereum and DeFi are relatively young, and non-fungible tokens (NFTs) and other new applications are becoming more mainstream daily. This newness brings unpredictable price swings and volatility, which may create opportunities for massive gains.
• Finality: Ethereum offers customisable consensus methods such as RAFT and IBFT for enterprise networks, providing quick transaction finality and requiring less infrastructure than the Proof of Work algorithm.
• Tokenisation: Ethereum allows businesses to represent any digitally registered asset as a token, enabling companies to diversify their product offerings, develop new incentive models, and fractionalise previously large assets.

Cons of Investing in Ethereum

• Volatility: Cryptocurrencies are highly volatile, and prices can fluctuate due to market speculation, technological developments, regulatory news, and overall market sentiment.
• High transaction fees: Ethereum's high transaction fees prevent it from reaching mainstream adoption.
• New regulation: The government is unlikely to leave cryptocurrencies unregulated, and new regulations could interfere with business models, causing crashes beyond investors' control.
• Threat of online hacking: Hacks are a significant threat, and if exchanges get hacked, investors can lose their private keys and investments.
• Competition: Several emerging smart contract platforms, such as Binance Smart Chain, Cardano, and Polkadot, offer better scalability than Ethereum.
• Proof of Work consensus: Ethereum's Proof of Work consensus is more expensive and slower than the Proof of Stake method used by many competitors.

Ethereum has established itself as a leading blockchain platform with strong utility and growth potential. However, like any investment, there are risks involved, including market volatility and regulatory uncertainties. It is important for investors to do their research and understand their risk tolerance before deciding to invest in Ethereum.

How to store Ethereum safely

There are several types of Ethereum wallets to choose from, including hot wallets and cold wallets. Hot wallets are stored on devices connected to the internet, such as desktop or mobile wallets, and are more user-friendly. On the other hand, cold wallets store the user's private keys offline, eliminating several attack vectors for hackers. Examples of cold wallets include paper wallets, hardware wallets, and titanium wallets.

• Be careful who you tell about your Ethereum holdings, both online and offline.
• Look out for phishing attacks, such as emails pretending to be from a cryptocurrency exchange or social media giveaway scams.
• Consider purchasing a hardware wallet, which securely stores your private keys offline and often requires manual acceptance of outgoing transactions.
• Never leave your Ethereum on exchanges, as they are vulnerable to hacks and you do not control the private keys.
• Always triple-check everything, including the recipient address and the applications you interact with.
• Bookmark your web wallet and regularly used decentralised application websites to avoid phishing schemes.
• Use multisignature accounts, which require more than one signature to move funds.
• Choose wallets that let you set addresses to move your funds.
• Use a password manager to secure your private keys.
• Back up your private keys and seed phrases in multiple physical locations.

Ethereum vs. other investment options

Ethereum is a blockchain platform with a native cryptocurrency called Ether. It is a leading cryptocurrency alongside Bitcoin, and both are known for their bullish momentum. Ethereum is a smart contract and digital certification platform that also provides decentralised apps (dApps) and facilitates secure financial transactions.

Ethereum's value comes from its utilitarian nature, offering more than just a digital currency. Its market cap is more than three times larger than any other cryptocurrency except for Bitcoin, which dwarfs Ethereum's market cap. However, Ethereum's market cap is still impressive at $420 billion.

When considering Ethereum as an investment option, it is worth comparing it to other investment avenues, such as stocks, and other cryptocurrencies.

Ethereum vs. Stocks

Stocks are regulated financial products, and as such, a governing body verifies their credentials. In contrast, cryptocurrencies are not regulated, so investors need to be aware of the inner dynamics of the crypto and the developers working on it.

Stocks are also less volatile than cryptocurrencies. Stocks are directly linked to companies and generally rise and fall based on company performance. Cryptocurrency prices are more speculative and can be affected by something as small as a celebrity tweet.

Ethereum vs. Other Cryptocurrencies

Ethereum, as a cryptocurrency, can be compared to other cryptos such as Bitcoin, Solana, and Radix.

Bitcoin is the original cryptocurrency and the current market leader. Its value comes from its status as the first crypto and its alternative nature to fiat currency. It is also secured by cryptography and has a finite supply capped at 21 million.

Solana is another smart contract platform that is known for its scalability and rapid transaction finality. It is used for decentralised finance services, minting NFTs, and more. It is also much faster than Ethereum, with 1,504 average daily transactions compared to Ethereum's maximum of 65,000.

Radix provides network solutions for Web3 and decentralised finance and offers a cryptocurrency wallet.

Ethereum has a lot going for it as an investment option. It has first-mover advantage, having offered smart contracts before any other blockchain. It has also transitioned to a proof-of-stake system, improving its energy efficiency.

However, there are other investment options available, each with its pros and cons. Stocks, for example, are less volatile and more regulated than cryptos. And other cryptos, like Solana, offer faster transactions and lower fees.

Therefore, when considering Ethereum as an investment, it is essential to weigh its advantages against those of other investment avenues to make an informed decision.

How to invest in Ethereum

Ethereum is a popular cryptocurrency, second only to Bitcoin in terms of market value. It has multiple applications, including creating digital apps, minting non-fungible tokens (NFTs), and using self-executing smart contracts.

• Determine your risk level: Cryptocurrencies are extremely volatile and vulnerable to price fluctuations. Therefore, it is essential to assess your risk tolerance and ensure that your investment portfolio is diverse and stable before investing in Ethereum.
• Choose a crypto exchange: You need to create an account on a crypto exchange to buy Ethereum. Examples of popular exchanges include Coinbase, Kraken, Gemini, and Binance. When choosing an exchange, consider factors such as security, fees, and whether it offers a crypto wallet.
• Set up your account: Provide the necessary personal and financial information to open an account. You may also need to verify your identity. Then, connect your bank account and deposit funds into your crypto account.
• Make your purchase: Once your account is funded, you can buy Ethereum. Enter the ticker symbol (ETH) and specify the amount you want to buy. You can purchase a whole Ethereum token or a fraction of one.
• Store your Ethereum: You can choose to store your Ethereum on the exchange or in a third-party wallet. There are two types of wallets: hot wallets, which are connected to the internet and more convenient, and cold wallets, which are offline and considered safer but less accessible.

It is important to remember that investing in cryptocurrencies like Ethereum is risky, and you should only invest what you can afford to lose.

Frequently asked questions