After the emergence of Bitcoin, several cryptocurrency projects were designed in its honor, either to carve out its own niche in the finance space, or improve upon what Bitcoin already had to offer in one way or another. Among the first coins to take after Bitcoin were Litecoin, XRP, and others. But once Ethereum appeared, the crypto market has never been the same since. That’s because Ethereum isn’t just a payment cryptocurrency, much like the first assets to come onto the scene, it is a full-fledged supercomputer that enables smart contracts for developers to take advantage of and build decentralized applications on top of.
This eventually led to the initial coin offering boom in 2017 that saw the creation of thousands of new ERC-20 tokens built on the Ethereum blockchain. Many of these projects are worthless today, but the explosion of interest helped propel Ethereum to prices of $1,400 per token and to the top of the high volatility cryptocurrency market.
And while the ICO boom has since fizzled out, Ethereum is once again skyrocketing due to the decentralized finance craze and the growth of decentralized exchanges and liquidity swap platforms. Could lightning strike twice and Ethereum surge to new highs once again? This guide will walk you through all the reasons why Ethereum is a good investment, how to invest in it, explain all the pros and cons of Ethereum investing, and much more.
Ethereum Investing: What Is It?
Ethereum investment is an investment in the future of finance. The smart contract platform has been positioned to replace Wall Street’s aging archaic back end and has already begun replacing company shares and bonds with tokens bound to smart contracts as part of certain business transactions.
Ethereum’s potential is possibly even more remarkable than Bitcoin’s, due to it acting as a platform for developers to continue to build and innovate on. Case and point is the recent DeFi trend. Nearly every new day, an exciting new project and addition to the world of finance breaks new ground and forever changes the industry. It’s led to the introduction of new crypto buzzwords like “yield farming” and “liquidity pooling.”
Just like before, many of these DeFi projects are scams or lack real-world use cases, but there are also plenty of diamonds in the rough. For example, a new ERC-20 token called Yearn.Finance or YFI was built on Ethereum, and it is now more expensive than even Bitcoin itself. The smart contract was designed to give the asset digital scarcity and only 30,000 tokens. Others have variable supplies and utterly different use cases.
Whatever these projects end up being or whatever shape they take next, Ethereum and investors are the beneficiaries. The recent DeFi bandwagon has led Ethereum to outperform Bitcoin and nearly all other altcoins, making it one of the best investments in 2020.
Ethereum’s new uptrend may only be beginning just now, meaning that investing in Ethereum now could lead to maximum financial reward and return on investment.
Is Ethereum A Good Investment? How It Performed In 2019
2019 was not the most fantastic year for Ethereum compared to the rest of the market. Sentiment surrounding the token leftover from the initial coin offering fallout kept the second-ranked crypto asset at bay. At the low, the cryptocurrency reached prices of $80 per ETH token.
At one point in 2019, even XRP was able to take over as the top-ranked altcoin. From low to high, Ethereum rallied over 250% but failed to hold at resistance and eventually retested its bear market bottom in 2020, plummeting to just $90. At the peak that year, Ethereum topped out at a price of $360 per token.
Investing In Ethereum In 2021? Is It A Good Idea?
2020 kicked off an entirely new year for Ethereum, fueled primarily by the growing decentralized finance trend. Ethereum is usually swapped in exchange for these hot new tokens, raising demand for the altcoin king. Furthermore, Ethereum transaction fees have been soaring, further helping ramp up demand for the number one altcoin.
The total amount of Ethereum locked up in DeFi applications has grown to nearly 7 million ETH and billions of dollars in value. This alone will help keep demand for Ethereum high due to supply being parked in these applications. Ethereum 2.0, when it eventually arrives, will also let Ethereum holders stake the cryptocurrency to earn more tokens, but only those with a large amount of the supply can enable staking.
Ethereum Fundamental Analysis
In addition to the decentralized finance trend helping to build upon Ethereum’s strong foundation of fundamentals, data shows that nearly all other metrics have grown. Active addresses are nearing 500,000, and total transaction volume daily has exceeded $2.5 billion, with over 1 million transactions per 24 hours period.
Developers are also extremely active on the platform, drawing attention to the token as their tool of choice to build on. New projects are launched regularly, giving Ethereum investment incredible long term potential.
Ethereum Technical Analysis
Technicals also point to significant growth in the crypto asset. Bitcoin was the first-ever cryptocurrency and took the world by storm when it reached $20,000. Ethereum has thus far followed almost exactly in its footsteps. According to a fractal in ETHUSD price charts that closely mimics price patterns and market structure during the 2015 transition into a bull market in 2016 and 2017, Ethereum could be confirming bear market resistance as support.
These critical support and resistance flips often require a retest to confirm the change in market sentiment and order flow.
Removing the Bitcoin chart from ETHUSD and focusing on only Ethereum, things look just as bullish. The Average Directional Index, a trend strength measuring tool, shows the start of a new uptrend forming. Not only is the Directional Movement Index showing the bullish green line crossed above the red bear line, but the ADX itself is also finally rising over a reading of 20, signaling a new uptrend is here.
Ethereum Sentiment Analysis
Because of the DeFi explosion, Ethereum sentiment hasn’t been this strong since the ICO boom in 2017 when Ethereum prices followed and ballooned to $1,400 per token. This time around, not only is the DeFi trend healthier and more sustainable, because the movement is decentralized, unlike the ICO trend dying out due to regulations, DeFi is here to stay.
Social volume, sentiment, and engagement rose significantly over the last year when shorting Ethereum was among the most profitable strategies.
Expert Expectations and Ethereum Price Predictions
Due to Ethereum’s enormous promise and potential as a technology and as an investment, experts regularly weigh in on what they expect for the asset’s performance.
For example, Simon Dedic, Co-Founder of Blockfyre and Managing Partner at Moonrock Capital, estimates Ethereum could someday be worth as much as $9,000 per coin.
James Todaro, Managing Partner at Blocktown Capital, has similar expectations, but they’re all based on Ethereum reaching a $1 trillion market cap due to the DeFi trend. Based on the current Ethereum supply, a $1 trillion market cap would put each ETH token at roughly $9,000. Ethereum Price Prediction
Ways To Invest In Ethereum
Although no one will ever have the chance to buy Ethereum during its token sale ever again and get in on such enormous ROI, that doesn’t mean Ethereum can’t still be an excellent investment. Back then, it was challenging to get Ethereum that early, but today it can be bought in just a few clicks online. Here are some of the most common ways to invest in Ethereum.
Buy and Hold
The buy and hold strategy is a sound, simple one, but one of the riskiest strategies for one reason: volatility. The crypto world is known for its explosive price action. For example, Ethereum at one pointed trading at $1,400 per token, but eventually dropped to just $80 each.
In the 2019 example, Ethereum rallied from $80 to $380. In 2020, it fell back to $90. Those who held through the downtrend would have watched all profits disappear and a year later end up where they started.
Trading
Rather than holding through powerful downtrends, spot traders can sell their Ethereum for cash and prevent loss. But there’s no way to profit from these downtrends on a spot platform.
Traders who bought Ethereum at the 2019 low and sold at the high would have $300 in profit. At the 2020 Black Thursday bottom, spot traders could have purchased Ethereum back for $90, with $290 leftover in profit to spare.
Derivatives trading lets traders profit from drawdowns, much like they can during uptrends. By opening a long or short position, traders can profit no matter which way the market turns.
In the derivatives example, using CFDs offered by advanced cryptocurrency trading platforms like PrimeXBT, the same $290 profit with leverage could have resulted in $29,000 earned instead. It is quite clear why relying on CFDs beats holding or spot trading any day in terms of total capital gained. Trading, however, comes with risks, so risk management strategies are a must.
Pros And Cons of Ethereum
Ethereum is a highly volatile crypto asset and a polarizing technology. The market is continuously grooming what is claimed to be the next Ethereum killer, but no other project has ever been able to come close to Ethereum in terms of utility and usage.
Pros
- The hottest token in the crypto market currently due to DeFi.
- Ethereum still has over $1,000 to go to revisit its all-time high, suggesting far more upside than other coins.
- The smart contract platform could replace Wall Street’s back end.
- ETH 2.0 is coming eventually.
Cons
- Ethereum has recently struggled with scaling due to how strong the demand for DeFi is.
- There is still a lot of Ethereum held by ICO treasuries that could dump their tokens.
- Tons of competitors exist, all vying to become the Ethereum killer.
- Fees have been rising and discouraging investors from transacting in the token.
How Much To Invest In Ethereum?
Ethereum is currently priced at roughly $380 after a fall from the current 2020 high of over $490. However, even just a fraction of Ethereum can be purchased starting on most exchanges or trading platforms at a very low minimum. This means there is no real floor in terms of Ethereum investing. However, it is wise never to invest more than you can comfortably afford to lose.
FAQ: Frequently Asked Questions About Ethereum Investing
Is It Worth It To Invest In Ethereum?
Investing in Ethereum has just about always been worth it, except for those who bought the top of the bubble. Even then, if they hold on long enough, however, they will eventually be in profit. But they are an example as to why trading is the best method.
Is It Smart To Invest In Ethereum?
Ethereum investing is smart if you are careful with how much you invest, employ strict risk management strategies, and trade instead of hold, you can make a lot of money.
Is Ethereum A Good Investment?
Ethereum makes an excellent investment due both to its easy accessibility for retail traders and its long term growth potential.
How To Invest In Ethereum?
Investing in Ethereum is easy and takes just a few clicks on most exchanges. Users can also buy Bitcoin on PrimeXBT and trade Ethereum CFDs with leverage for the greatest possible profit.
Is Day Trading Crypto Profitable?
Day trading crypto can be extremely profitable when utilizing CFDs, long and short positions, and leverage to amplify profits and earn from both directions the market heads.
Why Choose Crypto Over Traditional Investments?
Crypto assets are incredibly volatile, causing enormous price swings that enable massive profit opportunities in between.
What Is The Minimum To Invest In Ethereum?
There is no minimum to invest in Ethereum, but some platforms may require a minimum purchase.
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