On Friday, February 05, 2021, Ethereum reached a new all-time high at $1,743 per coin. Making it the first time that the cryptocurrency will pass the $1,700 mark. According to CoinDesk data, this happened around 10:30 a.m. ET.
With this new high, the idea of buying Ethereum has suddenly become appealing. It is the second most valuable virtual currency, second only to bitcoin.
Since 2020, the price of Bitcoin has risen by almost 300%. With about a 29% increase this year alone. On the other hand, Ether has increased by about 129% since this time last year.
The steady rise in the price of Ethereum in the past week is due to several reasons. Ether futures trading was launched on 7th Feb 2021. The Chicago Mercantile Exchange (CME) has now traded 77 ETH contracts after going live on Sunday. It is similar to what happened with bitcoin in 2017 when the Chicago Mercantile Exchange launched it at the peak of its rally at that time.
The February contract registered an opening price of $1,669.75. At the time, the spot price stood at around $1,600.In the view of some investors, derivative products focused on crypto, such as futures, is a good initiative because it will improve the confidence of institutional investors. Thus, more investors were encouraged in the marketplace.
This is what an Avon Ventures partner, Sachin Patodia, thinks. According to him, an abundance of financial instruments will encourage higher participation in the marketplace.
However, he believes the major factor for the rise in ether prices and that of other digital currencies is bitcoin momentum. With the rise in Bitcoin prices, other altcoins follow too. A cycle that has happened multiple times.
A crypto-asset analyst at eToro, Simon Peters, also shares the same opinion. According to him, the launch of ether futures will increase market participation. Investors now have a way to hedge their risk better.
However, he doesn’t expect this to affect spot prices significantly. Because the ether futures will like that of bitcoin; cash-settled.
Crypto experts, investors, and analysts also believe there is another factor boosting ether prices. This, they claim, is the Ethereum blockchain upgrade to Ethereum 2.0. Ether enthusiasts expect the upgrade to make the network more secure and faster.
With cryptocurrencies total market value reaching $1 trillion in January 2021, a future surge is almost a certainty. Crypto experts attribute this surge to institutional demand. And the perception that bitcoin resembles gold in store of value.
Given these recent developments, to buy Ethereum or not has become a major question for investors. This article looks at Ethereum as a whole. And why buying it might be the best decision you make this year.
What is Ethereum (ETH)
Ethereum is an open-source, decentralized blockchain network with a smart contract feature. ETH or Either is the platform’s native cryptocurrency. Currently, it is the second biggest cryptocurrency based on market capitalization. Ethereum is also the most used blockchain.
The proposal that led to Ethereum came in 2013 in a white paper by Vitalik Buterin. In 2014, crowdfunding was organized for the development of Ethereum. Ethereum was completed and launched in 2015.
The Ethereum blockchain is similar to bitcoin, except it can be used for decentralized applications. Ethereum Virtual Machine can also execute Turing-complete scripts. Due to these features, several initial coin offerings were on the Ethereum blockchain network.
Ethereum network has had to deal with various security issues since its creation. A notable one is the 2016 hack through the DAO flaw in which $50 million worth of Ether was stolen.
This led to the decision to hard fork the network, resulting in Ethereum with the theft reversed and Ethereum Classic, which is the original chain.
The Ethereum blockchain network has had to hard fork on two other occasions. Both in the closing months of 2016 and necessary to deal with attacks on the network.
Ethereum Network has also upgraded its network to Ethereum 2.0. This upgrade is calculated to improve the speed of transaction from the current 15 per second to over 10000 per second.
Sparding helps achieve the needed speed, which process involves splitting the workload into parallel multiple blockchains. All the blockchains will have the same consensus proof of stake blockchain.
Making an attack on one chain requires attacking the common consensus. This is not economically viable and will cost more money than the attacker could ever gain.
Thus, Ethereum becomes more secure than that ever in consideration of expenses. The launch of Ethereum 2.0 is in three stages, from Phase 0 to Phase 2. Phase 0 has already launched in December 2020.
Difference between Ethereum and Bitcoin
Bitcoin is the pioneer cryptocurrency and the largest by market cap; thus, one can’t help compare all others with it. While every cryptocurrency was influenced by Bitcoin, many have established themselves as different.
Two cryptocurrencies differ primarily by their purpose. Bitcoin’s goal is to be a digital store of wealth like gold. BTC also serves as an alternative to fiat currencies, replacing conventional money.
Ethereum seeks to be a platform hosting smart contracts and decentralized applications. Thus, it seeks to become a world computer.
While they are both designed with the same underlying technology and principle, BTC seeks to be a currency facilitating monetary transactions.
On the other hand, Ethereum facilitates software processing through the Ether token system. Thus, when people say they buy Ethereum, it is actually the Ether or ETH that they are buying. The increase in Ether price is due to the interest in the Ethereum technology.
But beyond Investing in Ether, the Ethereum blockchain serves an even greater purpose. At present, many companies are developing their app on the Ethereum software. This includes fortune 500 companies that now use Ethereum.
The application of Ethereum is varied and seen in multiple areas. From the finance sector to real estate to games, the Ethereum software is used.
The maximum supply of BTC and ETH also differs. For BTC, supply cannot go beyond 21 million BTC. However, Ethereum does not have a maximum quantity. Thus supply is not limited at all.
At present, the production process for Bitcoin and Ethereum is through mining. However, Ethereum is making plans to adopt a proof of stake model for its production.
This is expected to be more eco friendly than mining.
Another significant difference between BTC and Ethereum is the price. Even at its peak price of more than $1,700 per ETH, the amount is still much cheaper than BTC. Bitcoin’s all-time record high is above $41,000, and its current price exceeds $38,000.
This is one of the reasons buying ETH represents a good investment.
It is hard to tell all the differences between Bitcoin and Ethereum at the moment. This is because both are still in their early stages. It is their growth and development trajectories that will further show the differences between them.
Ethereum Price History and Predictions
When ETH launched in 2015, it was well under a dollar and was extremely cheap during its crowd sale. But this changed within a year as it reached $1,448. The first ETH price boom was mostly due to the fact that it was used for several Initial Coin Offerings.
However, this boom did not last due to regulations on ICOs. Government authorities regarded ICOs as sales of unregistered securities, leading to the crackdown. This affected ETH price significantly, cutting short its price potential for some time.
Despite this, ETH has always been viewed positively by crypto analysts and experts. Many of them view ETH as an investment asset for a long-term purpose.
However, it is not Ether that has the biggest potential for the Ethereum network. Rather, it is the growth and development of decentralized finance. It is what has pushed the demand in recent months as Ethereum continues to break the new all-time high.
This has dramatically increased the demand for Ethereum in recent months and has helped the altcoin set a new all-time high at above $1478.
The Ethereum Virtual Machine has the potential to be the first world computer operating entirely on blockchain. It is unique in design and has multiple applications. All these have a positive effect on the price prediction.
The projected growth of the Ethereum network in the next couple of years is also high.
For several crypto analysts and experts, the growth of Ethereum is unavoidable. One of those who believe this is Simon Dedic, Co-Founder of Blockfyre and Managing Partner at Moonrock Capital. According to the venture capitalist, Ethereum could go as high as $9000 per ETH by the time Bitcoin reaches $150000.
Another investor, James Todaro, Managing Partner at Blocktown Capital, also has similar views. In his opinion, the growth of decentralized finance can push Ethereum to reach $1 trillion in market capitalization. By calculation, ETH will be worth $9000 by the time this happens.
In the past, many people have forecast the price of Ethereum, and there are instances where they were very right.
A good example is when ConsenSys director of communities, Andrew Keys, predicted the price. He forecast the price to reach $1.15 by the end of February 2016, and this happened in the early January of that year.
Crypto expert and hedge fund manager Mike Novogratz also Ethereum ETH price to rise by 25% before the end of 2017. Ethereum ETH surpassed this by rising by more than 50% within that year and continuing the run into the New Year.
This shows that ETH has a track record of surpassing all the predictions and expectations in terms of its future prices.
Ethereum Prediction for the next five years
2021 has been good to Ethereum already with a new all-time high price and finally crossing the $1,700 mark. With this, crypto experts are expecting that the price of Ethereum will double soon.
Currently, the base structure targets a 1300% increase from the breakout point, which means that Ethereum ETH price can go as high as $25000 in 2021. This is according to Prime XBT.
If this forecast seems a little too optimistic, analysts have observed that Ethereum has a similar price pattern and investor with BTC. If such trajectory should continue, Prime XBT believes that Ethereum could go as high as $70,000 at its peak by 2023.
Use cases of Ethereum
What makes Ethereum fantastic is how its numerous applications in different fields due to the smart contract feature that it has, here are areas where Ethereum can be effectively applied.
This is one of the best use cases of Ethereum. Its smart contract feature is already being applied in the banking and financial industry. From mortgages to bonds to stocks to insurance settlements.
A unique aspect of the financial sector where it is now applied is in Decentralized finance. Also known as Defi, this form of finance leverage on smart contracts to create a financial system without middlemen. Where no one has a significantly major influence or control on transactions.
The smart contract feature which Ethereum posses can be used buy individual to create digital identity contracts. These contracts will contain every essential information about the individual and the individual controls what part they reveal.
This is marketplace where individuals trade on outcome of events. Smart contracts will be used to implement the trade and it execute transactions seamless based on the outcomes. Platforms like this already exist on Ethereum blockchain, they include Augur and Gnosis.
Instead of using crowdfunding platforms that charges money, a free smart contract can be developed on Ethereum blockchain for the same purpose. And the only fees charged will be gas fees which is fees for transactions.
DAICOs or ICOs
Initial Coin Offerings is one of the first applications of Ethereum. DAICOs are similar but merges DAO with ICO. A smart contract on Ethereum blockchain can serve the same purpose.
Online lottery and casino
Ethereum gambling is a growing application with smart contracts devoid of all the cheating, lottery fees, and extra charges of conventional online casinos. The events are truly random, finally settling the issue of trust.
Why you should buy ETH
There are crypto experts who believe that Ethereum might catch up with BTC in terms of value. This is premised on the analysis of the price history in recent times. For instance, while Bitcoin has only been up by 19.6% in 2021 by January 30, Ethereum ETH has been up 87.7% within the same period. Here is why buying Ethereum is a good investment.
In the past six months till January 30, 2021, analysis of price history shows something exceptional. BTC has been up by 205%, while ETH has been up by 300%. Thus, Ethereum ETH currently has superior performance.
This outperformance is not just about recent times. It holds up for more than two years. In the past two years, ETH has been up 11.72 times while BTC has been up about nine times.
Thus, Ethereum has been doing better than BTC in both the short term and long term.
The cheap cost of Ethereum, when compared to Bitcoin, is another reason you should buy it. Given their current prices, you can get more than 20 ETH tokens for one BTC. Thus, buying ETH right now represents a better investment.
The fact that ETH is compounding faster at the moment means if it continues at this rate, it may catch up with BTC. According to Mark Hake, CFA, this can happen between 8 to 11 years. Therefore, spending money on Ethereum now represents a better financial decision.
How to buy ETH and payment method
If you want to buy Ethereum ETH, it is quite easy. All the cryptocurrency trading platforms have ETH for trading, and you can buy ETH on them. Most times, all you need is your debit card or credit card to complete the transaction.
Where can I buy Ethereum?
Platforms such Coinbase, Kraken, Bitstamp, Gemini, Binance, eToro, and Bitfinex are secure cryptocurrency exchanges to buy and sell Ether. Kraken is one of the most secure crypto exchanges in the marketplace.
You can pay through various means on this exchange platform such as wire transfer, credit card or debit card, Apple Pay, transfer from your bank account, etc. All you have to do is select your payment method, and you’re good to go.
Another way you can buy ETH is through peer to peer trading. This means you are exchange ETH with some who has it and pay the person. This form of cryptocurrency exchange can be cheaper in some cases than buying from a cryptocurrency exchange site.
Ethereum ETH represents a great investment. It has proven itself as having superior performance to BTC in both the Short and Long term, so it is recommended that you buy ETH. However, you may want to study the marketplace when you’re buying.
Buyers must also note that ETH is a currency and not a stock. Thus, there are no dividends accruing to it. The only benefit is an increase in value, which allows you to sell for more than you bought.