Ethereum Cryptocurrency: A Smart Investment Decision?

Ethereum is a global computer that runs decentralised apps (dApps) and its cryptocurrency, Ether (ETH), is one of the most popular in the world. As of July 2024, Ethereum was priced at $3,406.85.

Ethereum has been a volatile investment since its launch in 2015, reaching an all-time high of $4,891.70 in November 2017. However, it has also been an attractive investment option due to its overwhelming performance, which has attracted traditional and institutional investors.

Some of the advantages of investing in Ethereum include its volatility, which allows smart investors to capitalise on market bubbles; its liquidity, which is one of the highest among investment assets; and its lower inflation risk compared to world currencies.

However, there are also several disadvantages and concerns surrounding Ethereum as an investment option. These include its high transaction fees, the threat of new regulation, the possibility of online hacking, and competition from other smart contract platforms.

Overall, 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 applications and other blockchain innovations. However, like any investment, there are risks involved, including market volatility and regulatory uncertainties. Therefore, it is important for investors to do thorough research and understand their risk tolerance before deciding to invest in Ethereum.

Ethereum's performance since its launch

Ethereum has been performing well since its launch in 2014, with its price increasing by millions of percent. The price of ETH was just $0.31 during its initial coin offering (ICO), and it is now worth around $2,300, a discount of 99.97% compared to today's figure.

Ethereum's performance has been characterised by sharp increases and decreases in its value. After its ICO, Ethereum was under $1 for most of 2015, but by March 2016, Ether had crossed the $10 mark. By 2017, Ether had gained significant popularity, and it reached the $100 mark in May 2017. This was followed by a massive boom, with Ether's value reaching $774.69 by the end of 2017 and crossing the $1000 mark within the first week of 2018.

However, Ether was also affected by the 2018 cryptocurrency crash, and its value dropped to under $100 by the end of that year. From 2019 to 2021, Ether rallied again, and it reached its highest price of $4,815 on November 9, 2021. Since then, Ethereum has been on a steady decline, and it suffered along with the wider market during the prolonged bear market of 2022.

In 2023, Ethereum showed better performance, with the coin reaching a yearly high of $2,120 in April. As of September 2023, ETH was about 40% up from its price in January. The year 2024 has been strong for Ethereum so far, and in March, it came close to beating its all-time high when it hit $4,067.

Despite the volatility, Ethereum has generally shown an upward trend in its price since its launch, and it remains one of the most popular cryptocurrencies in the market.

Ethereum's current price

As of 25 September 2024, the price of Ethereum is $2,622.00. The cryptocurrency is down 0.77% in the last 24 hours, with a 24-hour trading volume of $15,878,945,524. Ethereum currently has a circulating supply of 120,362,414 ETH coins and a market cap of $315,590,676,359.

Ethereum's price has been bearish since March 2024, and its chart looks discouraging. The crypto experienced a "death cross" in August, which is when an asset's 50-day simple moving average crosses below its 200-day SMA. This is considered a bearish indicator.

Ethereum's price rally in early 2024 has stalled in recent months, and the first SEC-approved spot Ethereum ETFs haven't generated the market enthusiasm investors had hoped for. There are no clear catalysts for another rally in Ethereum prices in the near term, and the popularity of the blockchain will likely drive long-term price action.

The ongoing interest in Spot Bitcoin ETFs has spurred anticipation for Ethereum ETFs, and soon, Ether ETFs started trading in the U.S. on 23 July 2024. However, the Dencun upgrade launched on 13 March 2024 did not bolster the surge that the market had anticipated.

Advantages of investing in Ethereum

• Volatility: Ethereum's volatile nature can be advantageous for investors who understand market cycle patterns and can capitalise on the parabolic gains produced by market bubbles.
• Liquidity: Ethereum is highly liquid, making it easy to convert to cash or other assets like gold, with low fees. This liquidity also makes it a great investment vessel for short-term profits.
• Lower inflation risk: Ethereum has a transparent inflation plan that is less susceptible to government interference. There is also no need to worry about deflation as the blockchain system is infinite.
• Decentralised finance: The youth of Ethereum and DeFi, as well as the increasing mainstream adoption of NFTs and other new applications, bring unpredictable price swings and volatility, which may create opportunities for massive gains.
• Finality: Ethereum offers customisable consensus methods such as RAFT and IBFT, 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 them to diversify their product offerings, develop new incentive models, fractionalise large assets, and allow for crowdsourced data management.

Disadvantages of investing in Ethereum

Ethereum is a global computer that runs decentralised apps (dApps) and is much more than just a cryptocurrency. However, there are several disadvantages to investing in Ethereum.

Volatility

Ethereum's value has fluctuated significantly since its launch in 2015. While this can be an advantage for astute investors who recognise market cycle patterns, it can also result in painful short-term losses. For example, if you bought Bitcoin in December 2017, the price was $20,000. However, within weeks, the price dropped to $7,051.

High Transaction Fees

Ethereum's high transaction fees are a significant drawback, preventing the network from achieving mainstream adoption. Using the Ethereum blockchain can cost hundreds of dollars, pricing out smaller investors.

Regulatory Uncertainty

The government is unlikely to leave cryptocurrencies unregulated for an extended period. New regulations could interfere with business models and cause crashes beyond your control.

Threat of Online Hacking

Hacks are a common threat in the cryptocurrency space. While most exchanges allow you to buy and sell cryptos via mobile apps or websites, many users also store their crypto on exchange wallets. This practice leaves their investments vulnerable to loss if the exchange is hacked and private keys are stolen.

Competition

Several emerging smart contract platforms, such as Binance Smart Chain, Cardano, and Polkadot, are giving Ethereum stiff competition. While these competitors offer better scalability, they lack Ethereum's decentralisation and robust DeFi ecosystem.

Proof of Work Consensus

Ethereum's use of proof of work consensus is more expensive and slower than the proof of stake method used by many of its competitors. This is a notable disadvantage as Ethereum's network is used for various functions beyond simply transferring crypto.

Complicated Programming Language

Learning Solidity, the native language of Ethereum, can be challenging due to the scarcity of beginner-friendly classes. This may be a barrier for developers looking to build on the Ethereum platform.

Ethereum vs. other investment options

Ethereum is a blockchain platform that supports smart contracts and secures financial transactions. Its native cryptocurrency is Ether. Ethereum's blockchain is the largest in the cryptocurrency market, excluding Bitcoin. It is highly decentralised, which prevents control over the entire blockchain and significantly harms the project or disables it.

Ethereum's popularity is also due to its reliability. It is considered one of the most secure networks globally, commonly used for sensitive applications.

Ethereum's smart contract capabilities are widely used. Developers can build decentralised applications, or dApps, directly on the Ethereum network.

Ethereum is also the dominant blockchain in the NFT market.

Ethereum vs. Bitcoin

Bitcoin and Ethereum are the two leading cryptocurrencies on the market. They make up about 70% of the entire global cryptocurrency market.

Bitcoin's value comes from its status as the first cryptocurrency and an alternative to fiat currency. On the other hand, Ethereum offers utilitarian value through its ecosystem of decentralised apps.

Bitcoin operates on a proof-of-work verification system, while Ethereum uses a less energy-intensive proof-of-stake verification system.

Bitcoin has a finite supply capped at 21 million, while Ether has a theoretically infinite supply.

Bitcoin is secured by cryptography, with transactions verified by a process known as mining. This process involves users competing to verify transactions by solving complex mathematical puzzles using powerful computers.

Ethereum vs. Other Cryptocurrencies

Ethereum has thousands of competitors, with hundreds of popular altcoins.

Ethereum's biggest challenge may be fending off competition from so-called 'Ethereum-killer' blockchains that often have faster transaction speeds and lower gas fees, such as:

• Solana (SOL)
• Avalanche (AVAX)
• Polygon (formerly known as Matic Network)
• Radix
• Solv Protocol
• R3
• CasperLabs
• Trigan
• Fluency
• Arcology
• Chain4Travel

Ethereum vs. Traditional Investments

Compared to traditional investments, such as stocks, bonds, mutual funds, etc., Ethereum and other cryptocurrencies are considered high-risk and highly volatile.

However, they can also provide exceptional long-term returns.

Final Thoughts

Ethereum is a good investment option, especially for long-term investors. Its high demand, strong use case, constant development, and improvements to its network make it a reliable cryptocurrency.

However, it is essential to remember that the crypto market is strongly volatile and unstable, and even digital assets with multi-billion-dollar market capitalisations cannot be called reliable. Therefore, investors must familiarise themselves with macroeconomic indicators and research the market before investing.

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