Is Ethereum a good investment right now?
19:37, 20 August 2020
Ethereum has strongly held the position as the second largest cryptocurrency since its inception and traders are beginning to ask “Is Ethereum the next Bitcoin?”
ETH was a bit slow out of the gate but 2020 is proving to be a year to remember for the coin. Ethereum market capitalisation has soared to more than $31bn and it is on the cusp of powering the deregulated finance (DeFi) revolution.
Bulls believe it is now gaining the traction needed to become a contender for the top spot. Designed for decentralised applications, Ethereum has started to infiltrate major industries, dragging the investors’ attention to Ether.
Major Ethereum news
Economic volatility caused by the pandemic has elevated the status of crypto across the world and many people have been asking themselves questions such as: is Ethereum worth investing in? Or how to invest in Ethereum?
This has led to an all-time high in investors looking to learn how to trade Ethereum and increased the number of new active wallets by more than 50 per cent year over year.
Active wallets have fallen to an almost two-month low in recent news, but this could be attributed to some early investors cashing out or simply to people returning to work after being forced into lockdown. Either way the bulls do not seem worried as short to medium-term fundamentals remain solid.
The most relevant Ethereum investment news is that it now seems that Ethereum 2.0 is imminent.
This is a shift in the premise of the crypto from the current proof of work model to a proof of stake model. This will have a profound impact on the usability and therefore the price of Ethereum, by increasing the speed and quantity of transactions.
This is critical as the revolution in the DeFi model is underway and so the number of Ethereum transactions is set to explode. While DeFi in itself can be quite dull, used for things like managing logistics and inventory levels, there is a shift towards liquidity in the model. Meaning that the capital utilised in DeFi transactions will be able to be lent out as credit and the owner will receive a “risk free” interest return on their capital that is being used in these systems.
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Ethereum: invest or not – price movements
Many traders can be a little put off by the volatility of Ethereum price movements. This can influence them when they are deciding if Ethereum is worth investing into. While it can take some adjusting, volatility should not be the only factor when considering an Ethereum investment. While there have been some sharp contractions, looking at annual lows can provide some insight on whether investing in Ethereum is a good idea right now.
The above table illustrates that, while there has been plenty of volatility and massive drops in value, year over year the price continues to climb.
In more recent news, Ethereum entered 2020 with a value of $127.41 USD. As the world locked down in March 2020 the price dipped below the 2019 to $110.61 USD, on March 15.
In the past couple of weeks ETH has pushed towards the resistance level of $400 multiple times, before finally breaking through on August 13. As expected, it has catapulted to where it is today at $426.90 after breaking through the resistance level, an almost 230 per cent increase year to date.
There were some characteristic dips along the way, but questions such as “is Ether a good investment” or “should I buy Ethereum” for the most part have been silenced.
Is Ethereum a good investment?
One of the only things standing in the way of Ethereum’s continued meteoric rise is the amount of success it is currently experiencing. As “gas” prices or transaction fees continue to increase and adoption rates skyrocket, competitors are pivoting to try and quickly capture the portion of the market that is being squeezed out of Ethereum due to these increases.
As of now, none of these competitors has gained any serious traction, however if Ethereum is to experience any serious setbacks as it scales up there will be alternatives at the ready.
Today the rapid increase in value, for those who can overlook the notorious volatility, is something that can not be ignored. The DeFi space holds the most upward potential for Ethereum and there has been notable uptake in the past months, with interest coming from major corporations like Visa and Coca-Cola.
The total value locked in DeFi transactions is currently over $4.75bn USD, around 4 per cent of ETH value, and this is up from $1bn just over two months ago. The interest shown by major corporations holds the potential for this value to skyrocket in the coming months.
ETH has also recently reached a significant milestone, surpassing $1trn in total transactions early this month. As transaction volumes increase, so too does wider acceptance, as we learned with Bitcoin legitimacy can only be positive news for a cryptocurrency.
Traders looking for short to medium term opportunities do not have to think about investing in Ethereum, they already are. Crypto is by nature a risky investment but for those able to tolerate the risk and volatility, the upside on Ethereum is huge.
Is Ether a good investment? Stay tuned to the latest cryptomarket news, which can drive Ethereum price movement.
Read more: Cardano vs Ethereum: which coin should you invest in right now?
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