Things move fast in the crypto sphere, owing to the market’s newness and high volatility. The industry is characterized by dramatic turns of events that can change prices, trends and destinies in a matter of seconds. So, trying to keep up with all the developments in the field and forecast price movements is definitely not for the faint of heart.
While the rapid pace of events coupled with the market’s unpredictability is what makes crypto investing both exciting and profitable, many current investors and people who are thinking about joining the crypto craze in the future might not be so enthusiastic about it. Confusion and uncertainty often surround even the most established cryptocurrency assets, such as Ethereum, which has a track history of success behind it and a large following supporting it.
We all know that Ethereum is one of the most popular cryptos to grace the digital currency realm and the second-largest token in existence by market capitalization. However, since nothing ever stays the same in the cryptocurrency landscape, as we’ve already mentioned, the king of altcoins is not immune to the changes that occur around or within it either.
A lot of things have happened since the first version of Ethereum was launched back in 2015, with many interesting developments taking place over the past couple of years. The coin has weathered many storms, as Ethereum price experienced numerous fluctuations that led to great gains and equally great losses for those who decided to buy Ethereum. Recently, the Ethereum network has completed its biggest overhaul to date by switching from its former proof-of-work protocol to a proof-of-stake consensus mechanism. That has got many people wondering how these events have impacted the coin and whether it’s a good idea to invest in it.
So, is Ethereum still a worthwhile investment option, or has it lost its shine? We’d like to offer a simple yes or no answer, but unfortunately, nothing is ever that easy or clear when it comes to digital currencies. There’s a lot to unpack here, so let’s take a look at some of the aspects that could help us clarify this dilemma.
Ethereum has the upper hand over many other crypto projects
One can say there’s more to Ethereum than meets the eye. While many people think of Ethereum as just another crypto from the altcoin pack, albeit the one that holds the most value, this is not an accurate description of it. Despite popular belief, Ethereum is not a cryptocurrency at all – it’s, in fact, a decentralized open-source blockchain platform on top of which numerous projects have been developed. Ethereum is powered by its own native currency, called Ether (ETH), which is the coin people refer to when they talk about buying or selling Ethereum.
Therefore, Ethereum differentiates itself from other players in the field through its very nature. Bitcoin and many other crypto projects only serve as a method of payment or a store of value. By comparison, Ethereum ticks both these boxes but also has several other use cases that provide a significant advantage over its competitors. Beyond supporting one of the largest digital coins on the market and offering a great alternative to traditional financial transactions, Ethereum technology also facilitates the creation of smart contracts, non-fungible tokens (NFTs), as well as decentralized exchanges and other DeFi projects.
Although investing in cryptocurrencies is a speculative activity, and a wide variety of factors influence their value, real-world utility remains one of the most important predictors of success in the crypto sphere. Therefore, Ethereum’s numerous applications prove there’s always going to be a use for it, reinforcing its reliability and relevance.
The merge has made Ethereum a more attractive asset
The long-awaited merge has created a lot of buzz around Ethereum, being the most important upgrade that the network has undergone since its inception. So, what has changed and what stayed the same? The main purpose of the merge was to replace the proof-of-work mechanism that it relied upon with a proof-of-stake protocol in order to reduce the network’s energy consumption.
Cryptocurrencies have been widely criticized in recent years due to the vast amount of energy that’s being used in the mining process, most of it coming from fossil fuels. Once the merge was completed, Ethereum managed to dramatically reduce energy usage by up to 99%, thus addressing one of the most pressing issues it was facing. Needless to say, the newer, greener version of Ethereum, also known as Ethereum 2.0, has become much more appealing to potential investors, given its increased sustainability.
The other side of the coin
Ethereum has risen as one of the strongest and most powerful digital currencies in the market and the only crypto ever to challenge Bitcoin’s position as a leader. However, one should not get carried away by the advantages it offers and turn a blind eye to the shortcomings. Because as appealing as it may be, investing in Ethereum also has its drawbacks. That’s why it’s necessary to look at both sides of the coin and take both the pros and the cons into consideration.
The disadvantages of investing in Ethereum are not specific to it, as they apply to all other cryptocurrencies in the market. Although Ethereum falls in the high-end crypto category and, as a consequence, provides many perks for its users, one shouldn’t forget that it’s still a pawn in the cryptocurrency market and follows the unwritten rules of the industry, which means it remains a highly volatile asset. So, even though Ethereum has been around for longer compared to other cryptos and has a higher market value, this doesn’t necessarily guarantee a successful outcome if you decide to invest in it.
If you’re planning to enter the crypto market, there are plenty of reasons to include Ethereum in your investment portfolio. However, while doing so, you need to be aware of the risks you expose yourself to. No matter how promising a digital currency might be, proper research and a deep understanding of the market are always necessary if you want to make sound investment decisions.