Beginner’s Guide To Ethereum Investing
Are you interested in Ethereum? Anticipating the year 2023 in hopes that the impact of the ongoing coronavirus pandemic on the financial sector would subside? Then keep on reading to find out what Ethereum is and if investing in Ethereum today is worth it.
Ethereum is a popular investment choice among cryptocurrency traders and blockchain enthusiasts, so we at Trading Education are here to help you understand the complexities of cryptocurrency investing and the secrets to crypto success.
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Key Points
- Ethereum is the second most popular crypto platform after Bitcoin. It is more than a cryptocurrency, it is a platform for dApps and smart contracts, paving the future of decentralized finance and NFTs.
- Ethereum’s native crypto ETH is one of the most traded assets. On the 16th of November 2021, it reached its all-time high of $4,891.
- One of the most anticipated events of 2023 is the full release of Ethereum 2.0. Ethereum will move to proof-of-stake from the less efficient proof-of-work.
- Despite the high competition and volatility, experts are positive about ETH prices and growth in the future. Some even believe that Ethereum could reach $100k in a few years.
- Do your research. Make sure you carefully consider all the factors that affect the price of Ethereum before deciding whether to invest in Ethereum (ETH).
Ethereum Explained, What Is It?
Even if you’re a newbie to cryptocurrency investing, you’ve probably heard of Ethereum and its native coin ether (ETH). It is the second most popular cryptocurrency project worldwide and one of the main competitors of Bitcoin.
Like other cryptocurrencies, it uses blockchain technology, has a public ledger, and decentralization (cutting out the middleman) is at the heart of its ideology.
It uses a proof-of-work algorithm which means mining is required for block validation. (However, it is moving to proof-of-stake – more on that soon.)
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What Is Special About Ethereum?
Ethereum is much more than a cryptocurrency. It’s an open-source blockchain platform that supports the development of smart contracts, decentralized apps (dApps), decentralized finance (DeFi) projects, and an impressive number of tokens.
ERC-20 tokens are created on the Ethereum blockchain, we should mention that many well-known cryptos such as Tron have started on the Ethereum platform.
Ethereum has embraced not only an impressive number of innovative investment opportunities but has the potential to improve different sectors beyond finance.
Some of the areas where Ethereum can lead to tech advancements are gaming, medicine, music, and personal data verification.
Do you remember the craze around CryptoKitties? Well, did you know this iconic blockchain-based game was developed on Ethereum? How cool is that!
So, what is Ethereum in simple words? Ethereum is many things, true! But there’s one main thing to remember: Ethereum is a blockchain project that has transformed the whole investment sector, so ETH will keep attracting investors long after 2023.
How Does Ethereum Work?
While you don’t have to be an IT genius or a Solidity expert to start investing in Ethereum in 2023, it’s good to know the basic principles behind Ethereum.
Let’s see how it works!
Ethereum, like any other crypto platform, is decentralized with nodes being spread across the globe.
This means there are no authorities, no dependence on central banks, and no third parties imposing skyrocketing transaction costs.
In other words, Ethereum allows users to make agreements with each other without using third parties.
Do you want to transfer money or sell goods? Do you want to launch a fundraising project? Ethereum enables all these processes at low costs and fast processing times.
It’s no wonder that Ethereum is considered the king of smart contracts, which are self-executing programmes that reduce the risks of fraud. Because data is stored on the blockchain, users can easily see transactions and manage their data.
Ethereum’s developer team is expanding and setting clear goals to help the system deal with scalability issues, volatile transaction fees, energy efficiency, and bugs.
If things go as planned, Ethereum 2.0 will be fully released in 2023 and Ethereum will transition to proof-of-stake (which is largely seen as a more efficient algorithm for cryptocurrency).
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What Is Ether?
If you find the technology behind Ethereum tempting and think that Ethereum is worth investing in 2023, let’s learn more about Ethereum’s native currency: ether!
What is Ether then? Ether or ETH was created to help programmers support the platform and cover all power costs involved in the process. Ether also acts as the gas used to run smart contracts.
One thing we should note is that ether is not capped, which is one of the pros of investing in Ethereum. In contrast, Bitcoin has a supply limited to 21 million coins.
Interestingly, ETH can be divided up to 18 decimal places. The smallest denomination of Ether is 0.000000000000000001.
Ether was just $0.04 when it was introduced to the crypto community and managed to hit its all-time high of $4,891 on the 16th of November 2021.
Is It Worth Investing In Ethereum Today?
Ethereum is the second-largest and most popular crypto after Bitcoin. It has a market cap of $210 billion, at the time of writing, which makes ETH the second largest cryptocurrency.
2021 was a great year for many crypto investors with cryptocurrencies hitting their new all-time high prices. Ethereum was one of the coins on the rise. Some of the reasons for its upswing were Ethereum blockchain upgrades and the rise of the Defi and NFT projects.
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How Has Ethereum Been Developing Recently?
To understand if Ethereum is worth investing in 2023, we have to stay up-to-date with the latest innovations and crypto news – factors that may turn the cryptocurrency community upside down.
As stated earlier, one of the most anticipated events is Ethereum 2.0.
And guess what: Ethereum transactions have increased to over one million per day!
While there are hundreds of competitors trying to replace Ethereum, with EOS, Tron, and Cardano being among the main rivals of Ethereum, Ethereum is still one of the leading cryptos when it comes to mass adoption.
According to data captured by Bitinfocharts, the number of active Ethereum addresses may be eclipsing the number of active Bitcoin addresses.
Suggesting that soon Ethereum may have more active users than Bitcoin. And at certain points, Ethereum has breached Bitcoin’s numbers.
We can’t ignore the impact of the pandemic. Initially, it looked like it was going to plummet the price of Ether and other cryptos back in March 2020, but it may have actually played a significant role in boosting its popularity.
While stocks and other assets were shaken hard, cryptocurrency became a highly appealing alternative. All in all, the pandemic likely played a big role in cryptocurrency’s 2021 bull run.
Besides, in places where economies are shrinking and inflation is increasing, the trading volume of ETH and other cryptos has jumped up to new highs.
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How Much Will Ethereum Be Worth?
Now when you know more about Ethereum and Ethereum investing in 2023, you might also ask how much it will be worth.
The truth is that nobody can make accurate predictions about cryptocurrency investing as the market is marked by high volatility and uncertainty.
The best thing one can do is to analyze past performance and consider factors, such as demand and supply, market sentiment, crypto news, and anticipated tech innovations.
For instance, the increasing importance of DeFi, as well as the anticipated Ethereum 2.0, may make ETH prices go up – despite the implications of the coronavirus pandemic on global trade and economy.
Can Ethereum Reach $100k?
It is very early to make such predictions, but there are countless experts out there who believe that Ethereum really could reach past $100k. However, when this could happen is hard to say. According to Forbes’s Billy Bambrough, BitBull Capital COO Sarah Bergstrand believes that Ethereum will reach $100,000 by 2025. And in another Forbes article by Billy Bambrough, it was revealed that a leaked Goldman Sachs report suggested that Ethereum has a “high chance” of overtaking Bitcoin as a dominant store of value.
Elsewhere, other experts believe that Ethereum may reach a trillion-dollar market cap.
According to Ark Invest, Ethereum can hit a $20 trillion market cap by 2030, at that target, ETH would be priced around $170,000-$180,000. However, while such predictions are exciting, you should not base anything serious on them. This is primarily because they are so far away and in the years it would take for Ether to reach such a price who knows what could happen.
It is much more sensible to aim for more grounded goals to avoid disappointment.
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Should I Invest In Ethereum?
So, if you are willing to invest in Ethereum, then you should acquire in-depth knowledge about the cryptocurrency market and all the factors that may affect Ethereum’s future and prices.
Additionally, you should do your research and decide if the possible rewards may outweigh the risks. And believe us: cryptocurrency investing can be a risky venture when not done correctly.
Alarmingly, figures show that 90% of traders lose money and quit for good in their first year due to ineffective training and poor decision-making.
But you can be one of the top 10% investors out there. Investing in cryptocurrency can lead to high profits if you know how to play your cards and embrace losses.
What Do I Need To Know Before Investing In Ethereum?
Getting straight to the point, the most important factors to consider before investing in Ethereum are:
- Ethereum does more than transact value, it supports a digital, decentralized ecosystem.
- There is no cap on the amount of Eth that can be made (so it lacks scarcity).
- Ethereum’s transition to proof-of-stake will make it more efficient.
- It is the second-most popular cryptocurrency and second-largest by market capitalisation.
Of course, though, this is a very simplistic way of looking at Ethereum and you need to dig deeper before investing.
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How To Make Money Investing In Ethereum?
Invest sensibly in Ethereum. While it is seen as a killer asset, it is still highly volatile, and many risks could eliminate it.
Firstly, regulation is slowly catching up with Ethereum and all other cryptos and Ethereum has a lot of competition from Cardano, the Binance Smart Chain, and EOS, just to name a few.
So, if you choose to invest in Ethereum, it would be a good idea to hedge your investments and ensure you are nicely diversified.
A wise way to invest in Ethereum is by following the 1% rule, which is to never invest more than 1% of your funds for investing per trade.
Don’t invest 100% of what you have in Ethereum. It will likely stress you out as you might end up watching the price non-stop, stressing over every up and down the price makes. It’s not healthy.
Long-term investing could pay off the best and many traders plan to hold on for the next few years or even decades. But short-term trading could also work out nicely because of Ethereum’s price volatility.
Should You Invest In Ethereum?
Why should you consider including Ethereum in your cryptocurrency portfolio?
Ethereum is considered a strong investment relative to other cryptos. Despite the fluctuations in Ethereum’s history, crypto analysts and experts agree that the price of Ethereum will rise further in 2023 and beyond.
Ethereum 2.0, Ethereum’s second version, is one of the main reasons why crypto analysts are overwhelmingly positive about the future of ethereum and its price performance.
Ethereum is one of the oldest and most established coins in the market. It is the second-largest cryptocurrency and has maintained its rank. The purpose of cryptocurrency is to provide a platform for smart contracts. Ethereum, through its development platform, also created decentralized apps and decentralized finance. Although new cryptocurrencies similar to Ethereum now support smart contracts, DeFi, and dApps, Ethereum remains the pioneer of these innovations. More than 250,000 cryptocurrencies are based on Ethereum’s platform, with some of them being the top in terms of market capitalization.
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So, Is Ethereum A Good Buy Right Now?
Arguably the only thing standing in the way of Ethereum becoming the world’s premiere crypto is the amount of success it is experiencing at present. While that might sound like a paradox, allow us to explain:
As adoption rates leap and prices and transaction fees increase, Ethereum’s competitors are forced to react and capture the market share being squeezed from ETH as a result of these increases. At present, none of these competitors has managed to gain any real traction. However, should ETH experience any setbacks while scaling up, alternatives will be ready and waiting for adoption.
For those who can overlook the current market volatility, the medium and long-term increase in the value of Ethereum simply cannot be ignored. DeFi represents huge upward potential for Ethereum, with notable uptake in recent months from some of the world’s largest multinational corporations, including Coca-Cola and Visa.
At present, the sum total local in DeFi transactions hovers closely towards $5 billion USD, which is approximately 4% of the total value of ETH. The continued interest shown by large corporations suggests that this amount is likely to skyrocket over the next year.
It’s also worth noting that ETH passed the $1 trillion milestone in total transactions at the beginning of 2021. As the volume of transactions increases, so too does wider acceptance of ETH as a legitimate investment – and if Bitcoin taught us anything, legitimacy is great news for any cryptocurrency.
As of now, crypto by its very nature remains a risky investment – but for those who can ride the waves of risk and volatility, the rewards to be gleaned from Ethereum investment are huge.
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Conclusion: What Is Ethereum And Is It Worth Investing In?
With its innovative technology and ideology, there’s no doubt that Ethereum has reshaped the world of altcoin investing. Though Ethereum has had numerous ups and downs, including its notorious split into Ethereum (ETH) and Ethereum Classic (ETC), Ethereum has proven that it’s here to stay. While it’s up to you to decide if you should invest in Ethereum , let’s not forget that many experts are very excited about what might be heading our way before the end of the year.
FAQs
Still have questions on investing in Ethereum? Maybe these frequently asked questions will help.
What Am I Investing In When I Buy Ethereum?
You are not just investing in a cryptocurrency, you are investing in a decentralized blockchain ecosystem for applications, financial services, and tokenizing assets.
Ethereum has many more use cases than Bitcoin and is more about leveraging blockchain technology than replacing our current financial system.
How Does Ethereum Make Money?
Ethereum is worked on as a decentralized platform and so several different groups are working on the project.
As a project, Ethereum doesn’t make money for those involved, though some may have significant holdings of Ether.
One of the most important organizations that works on Ethereum is the Ethereum Foundation, a non-profit organization set up in Switzerland
According to Crunchbase, the Ethereum Foundation’s total funding is approximately $18.4 million which was raised over seven investment rounds from 14 investors, including Winklevoss Capital.
It should also be noted that when developers create a new token on the Ethereum network or a new dApp, they need to pay the network in Ether.
The creators of Ethereum do not profit from you owning Ether or when you make transactions. Miners make profits from transactions.
What Cryptos To Invest In T?
Many investors are bullish in hopes in 2023 that things will start going back to normal despite the ongoing coronavirus pandemic.
Some of the top cryptos to invest in 2023 include Ethereum, Bitcoin, Ripple, Litecoin, Tezos, and Cardano. Always do your research and consider risks before you invest in cryptocurrency.
Does Elon Musk Own Ethereum?
Elon Musk said that he owns Ethereum at The B World conference in July 2021. Following the event, Ethereum rose approximately 12%, CNBC reports.
But that doesn’t mean that it’s a good thing. Just because a billionaire can afford to take the risk with Ethereum, doesn’t mean it’s a perfect investment.
And his ability to easily pump up the price of Ethereum goes two ways (just look at Tesla and Bitcoin!) – we could easily see him dump it too.
Will Investing In Ethereum And Cryptocurrency Make You Rich?
Cryptocurrency investing is a risky financial venture that can, however, help you increase your wealth over time.
To make money trading ETH or other cryptos, one should clarify their financial goals, educate themselves on how cryptocurrency works, and invest money they can afford to lose.
What To Do After Investing In Ethereum?
After investing in Ethereum, you may want to diversify your portfolio by investing in similar cryptos, such as Cardano.
You may also want to invest in some hedges or coins that are vastly different from Ethereum.
Once you invest in Ethereum, make sure you keep up to date with what the different organizations involved are doing and how well things are moving along.
Is It Better To Buy Bitcoin Or Ethereum?
Both Bitcoin and Ethereum are excellent investments, and many crypto investors hold them both as they are seen as having the most potential to succeed.
Bitcoin might have more potential to replace gold with many saying it already is digital gold. Because of this, it has the potential to be valued at a much higher price.
On the other hand, Ethereum has more potential and could be used for many more things, which could make it more valuable. On top of that, Ethereum may soon be more efficient than Bitcoin too.
One thing they have in common is popularity, which makes them both secure in both a technological and financial sense.
How Many Ethereum Are Left?
Ethereum has an unlimited supply with no maximum. At the time of writing, there are 122 million ETH in circulation.
As blocks are validated, more Ether is added to the ecosystem. This is the opposite of Bitcoin, which has a maximum supply of 21 million.
Will Ethereum Run Out?
Theoretically, Ethereum should never run out because new Ether tokens are constantly being created and added to the network.
To some, this is a major drawback because it means the value of Ether will rarely be impacted by supply or scarcity. It relies on demand to increase the price, not supply. Meanwhile, Bitcoin has both factors working in its favor.
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