Ethereum Price Surge — All You Need To Know To Decide If It’s Worth the Investment

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Cryptocurrencies have skyrocketed in popularity recently and this trend shows no signs of slowing. Given all the talk around these digital assets, you might be wondering whether now is the time to invest. But before pulling the trigger, it’s always a good idea to have an understanding of the underlying asset. Cryptocurrency is no exception and it is quite different than investing in stocks or bonds.

Read: Dogecoin’s Major Price Increase: Is It a Worthwhile Investment?

Therefore, we will cover a popular blockchain technology called Ethereum (ETH). Like many blockchains, Ethereum has a native coin called ether. Let’s take a closer look at what Ethereum is and whether you should consider investing.

What Is Ethereum?

Ethereum is an open-source, decentralized blockchain technology. Ethereum’s native coin is called ether. This coin is one of the largest cryptocurrencies by market capitalization, second only to Bitcoin (BTC). Although ether has a smaller market cap than Bitcoin, Ethereum is the most widely-used blockchain.

See: What Is Chainlink and Why Is It Important in the World of Cryptocurrency?

One thing that is important to understand about Ethereum is that it is not the same as Bitcoin. Whereas Bitcoin’s purpose is primarily to be a digital currency, Ethereum is much broader. In fact, Ethereum is an open-source operating system and computing platform. It also supports distributed applications (dApps) and smart contracts.

Another key aspect of Ethereum is that it enables decentralized finance, which is an important part of how the system works. Because the system is inherently decentralized, there is not a single entity controlling it or the value of ether.

More: How the IRS Taxes Cryptocurrency – and the Loophole That Can Lower Your Tax Bill

What Is Ethereum Worth?

Like many cryptocurrencies, the price of ether has fluctuated greatly since it launched in 2015. Back then, its price was around $1 and stayed there for several months. The price reached $1,358 in January 2018, its highest price ever at the time. The price began to fall, as did the price of many cryptocurrencies; ether bottomed out at $83 in December 2018.

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The price has ebbed and flowed since then but has risen overall. At the beginning of April 2020, the price was around $140; and as of April 29, it is at around $2,746, according to Coindesk. In other words, the price increased by almost 2,000% in just over one year.

Read: Breaking Down the Basics of Cryptocurrency

Should You Invest In Ethereum?

If you decide to invest in ether (and therefore, in Ethereum), you should first ask yourself why you are investing. Although the price of the coin has risen substantially over the past year, it can be extremely volatile. Thus, if you buy ether simply hoping the price will rise, you may end up frustrated.

On the other hand, the Etherum blockchain can be used for many different applications, said Tally Greenberg, head of business development at Allnodes. “Ether is the cryptocurrency required for any transaction made on Ethereum, a blockchain network of applications. A blockchain, on the other hand, is a technology with limitless potential. It doesn’t rest on Ethereum alone and can be used to make a difference in our future with or without cryptocurrencies.”

See: 10 Best Cryptocurrencies To Invest in for 2021

Sam Bretzmann, the owner of Blocklink, agrees with this sentiment. “The difference here is that instead of investing in individual projects which may or may not make it, you can invest in the infrastructure. You can think about it like this, go back to 1999, and instead of having to try and pick which up and coming businesses will survive, you get to just pick ‘the internet’ and invest in that.”

This article is part of GOBankingRates’ ‘Economy Explained’ series to help readers navigate the complexities of our financial system.

What is Ethereum? How to buy, price and latest news

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You may have heard a lot about Ethereum, a form of cryptocurrency that’s been around since 2015 and was created as an alternative to Bitcoin. Here’s what you need to know about it in a nutshell.

First, Ethereum is not actually the name of the cryptocurrency. Rather, it’s the name of a specific blockchain, a decentralized distributed electronic ledger that keeps track of all transactions in a public manner, as well as the name of a programming language to run and develop upon that blockchain.

Bitcoin uses blockchain too, of course, but the Ethereum blockchain is more sophisticated and can be used to run applications.

Ether, also known by the ticker symbol ETH, is the cryptocurrency “token” derived from the Ethereum blockchain. It’s just one of hundreds of possible applications for the Ethereum blockchain, which is also used to verify NFTs, business contracts and other financial instruments.

What is Ether, and how does it differ from Ethereum?

Because we assume that most readers are here to learn about how to get rich using cryptocurrencies, Ether is what this piece will focus on.

Ether is the second-largest cryptocurrency by market capitalization after Bitcoin. According to Investopedia, the two are the only cryptocurrencies in whose futures you can trade on the Chicago Mercantile Exchange. As of this writing on April 30, 2021, one Ether token was worth about $2,750.

Ether is not only a cryptocurrency token that can be bought and sold, but it’s also how you pay for transactions and for running applications on the Ethereum blockchain network. The price of a transaction in Ether is called “gas.” The more computational power an Ethereum transaction uses, the higher the price of “gas.”

Right now, Ether tokens are “mined” like Bitcoin, through “work” performed by computers solving mathematical problems. But the operators of Ethereum are working on shifting the entire process to a “proof of stake” instead of a “proof of work” model. (No, we don’t understand how that’s going to work either.)

That change, which will be called Ethereum 2.0, is expected to be done by 2024, and you can already track its future cryptocurrency tokens, ETH2, on Coinbase.

Unlike Bitcoin, which caps out at 21 million possible tokens (not to be reached for more than a century), the supply of Ether tokens is indefinite. That creates less of a crisis of supply; while ETH tokens cost a lot less than Bitcoin, they’re easier to mine. New blocks on the Ethereum blockchain are created several times each minute, as opposed to several times each hour with the Bitcoin blockchain.

There’s also a related cryptocurrency token, Ether Classic (ETC). It’s derived from Ethereum Classic, a “fork” of the original Ethereum blockchain that was created in 2016 after $50 million in Ether was stolen from a smart-contract platform based on Ethereum.

The operators of Ethereum chose to “reverse” the theft and wipe it from the blockchain ledger; the operators of Ethereum Classic acknowledged the theft and carried on. Just don’t get ETH and ETC mixed up; the latter was worth only $34 USD per token as of this writing.

How can I buy Ethereum and Ether tokens?

To purchase Ether tokens, you can go to a cryptocurrency exchange such as Binance, Bitfinex, Coinbase or Gemini, among others. (The Ethereum website has a few tips .) You’ll need to create an account, which includes verifying your identity (a process that might take a couple of days), on the exchange that you choose.

Then you add real money — dollars, pounds, euros, etc. — to the account, which creates a reserve from which you can draw to purchase cryptocurrency tokens. If you already hold some cryptocurrencies, you can add those too. Once that process is completed, you can purchase Ether or other cryptocurrency tokens and watch your holdings grow or shrink, as the case may be.

After you’ve accumulated enough Ether to be satisfied, you can withdraw it into a cryptocurrency savings account maintained by a third party, or a cryptocurrency “wallet” that you maintain yourself on your computer or in a specialized hardware device. Alternately, you can cash out your Ether holdings by selling them for U.S. dollars, other nationally backed currencies, or other cryptocurrencies.

How is Ethereum performing?

Right now Ether is on an upward trajectory, having risen from about $1,900 USD to about $2,750 USD in the past month, although there were a couple of dips in the past 10 days. Its current USD exchange rate is about 10 times what it was in July 2020, so there’s definitely money to be made.

Be careful, though. Ether’s previous peak was at about $1,400 USD in January 2018. Within three months, it had slid to about $400 USD, then recovered a bit before bottoming out again at about $80 USD in December 2018. Someone who had bought Ether at its peak would have lost nearly 95% of their stake — unless they held onto it until now.

Because the Ethereum blockchain and programming language can be used for a whole lot of other things than getting rich quickly, several top-shelf companies and financial firms, including Microsoft, JPMorgan Chase, Intel and MasterCard, have significant stakes in it.

That indicates the underpinnings of the Ether currency will be around for quite a while, unlike some other cryptocurrencies (cough, Dogecoin!) that may be riskier investments.

Opinion: Ethereum - The Beginning Of A Long Journey

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This column does not necessarily reflect the opinion of the editorial board of Benzinga.

Digital currencies have reached an inflection point. In the last few months alone, the industry had some major wins: PayPal and Venmo enabled US consumers to buy, sell, and store cryptocurrency on its platform; last year, the Office of the Comptroller of the Currency (OCC) granted banks custody over cryptocurrency; and crypto startup Anchorage became the first crypto custodian to receive a federal bank charter.

And of course, there’s Elon Musk’s Tesla, who announced in an SEC filing that the company was holding $1.5 billion in bitcoin on its balance sheet. Indeed, recent events have made it absolutely clear that cryptocurrency is now a household name.

Bitcoin (BTC) is the best known among them, famous throughout the world, especially since it hit a new all-time high (ATH) of over $60,000 in March.

Yet, while Bitcoin may be the face of the crypto industry at the moment, it is important to understand that it does have its limitations and that there are other blockchains creating value for investors to explore.

Here’s where Ethereum comes in. Ethereum’s token, Ether (ETH) has the second-largest market cryptocurrency after Bitcoin.

In addition to seeing a sharp rise in demand, the Ethereum market has fostered smart contracts (automated contracting programs with seller/buyer terms written into the code) and decentralized applications (dApps) (programs running on a decentralized network and using smart contracts for their app logic).

Here are a few key reasons why I think Ethereum is here to stay and why we all need to start paying attention to this burgeoning ecosystem.

What’s Happening?

As Bitcoin’s price hits new all-time highs, the number one cryptocurrency by market capitalization is now more expensive and thus potentially a riskier bet for new retail investors.

The price of Ether (ETH), Ethereum’s native cryptocurrency, isn’t nearly so volatile or expensive, therefore it presents an attractive opportunity for new investors.

What’s more, the Ethereum 2.0 upgrade that will increase the network’s scalability, security, and energy efficiency, is generating a lot of hype. With Berlin Hard Fork last week, which improves fee structure and security, Ethereum is actively moving down on the road to upgrading its consensus protocol from Proof-of-Work to more energy-efficient Proof-of-Stake.

Also, decentralized finance applications built on Ethereum offer better interest rates than most traditional banks, so it can potentially break people’s dependence on services like checking, savings, and loans.

Last October, the SEC declared that Ethereum was not a security, thereby strengthening the decentralized finance (DeFi) sector and boosting Ethereum’s potential.

With the explosion of the DeFi ecosystem on Ethereum, Ether is rapidly gaining relevance, and it can offer a lot more than BTC itself, from smart contracts (programs that run on top of the blockchain) to a variety of digital collectibles (NFTs), and tokens project-to-project.

Consequently, the benefits, stability, and potential scalability of Ethereum make it a viable digital asset, one whose nuances people should understand as they become more ingrained in everyday technology.

Ether is Filling In The Gaps For Bitcoin

Bitcoin is the first and largest cryptocurrency in the world. It has the highest price, the largest market cap, and the name known around the globe.

However, people often have the wrong idea about it, which is shown in the fact that they look towards Bitcoin to solve all problems, from efficient cross-border payments to financial inclusion, to money printing and inflation.

Twelve years after the advent of Bitcoin, many new digital currencies have rapidly emerged, most filling in the gaps left by their predecessor.

It’s not surprising, either. After all, a rising tide lifts all boats — all those, at least, that can float. Indeed, many of the altcoins today will not survive for a variety of reasons. But Ethereum is unique among them.

If 2020 was any indication, Ethereum is likely to become the first public blockchain ever to settle $1 trillion in a year.

It’s hard to ignore six-year-old technologies that process more than $1 trillion in real value transfers per year, a figure that has already eclipsed PayPal’s.

Regulators, financial institutions, and central banks are realizing the power, potential, and inevitability of cryptocurrency.

They have even stopped trying to block it at every turn, as seen in the OCC’s recent move to allow banks to offer crypto custody.

Here’s How You Can Use ETH Today

The first thing that you need to understand about Ethereum is that it is not like Bitcoin. Bitcoin is an asset. Ethereum, on the other hand, is an ecosystem.

An ecosystem that consists of multiple assets, such as tokens, stablecoins and NFTs, and its signature one — ETH.

Ethereum is much larger than just its coin.

From various Ethereum-based tokens – tokens built on Ethereum to satisfy specific use cases – to decentralized exchanges, oracles, and dApps, its ecosystem is thriving and constantly evolving.

For example, smart contract usage on Bitcoin is minimal — Bitcoin’s network was designed specifically to send and receive bitcoin, not to enable complex, automated financial systems.

The Ethereum community addressed this deficiency by launching a Bitcoin-pegged asset named Wrapped Bitcoin (wBTC) in early 2019.

Since then, other assets pegged to bitcoin such as RENbtc, pBTC, and BTC++ have entered the market.

These assets have the identical price as BTC but operate within Ethereum’s network, and as such, they can be used for dApps and smart contracts.

This unique financial instrument provides traders, institutions, and dApps a bridge to the Ethereum network while maintaining exposure to Bitcoin, opening never before seen DeFi and arbitrage opportunities.

The goal is to bring Bitcoin’s price value into play and combine it with Ethereum’s programmability.

These solutions go outside the crypto industry itself. For example, people are frustrated with low interest rates traditional banking places on savings accounts.

The crypto industry came up with a solution in the form of DeFi and specifically yield farming, which offers much higher interest rates and the ability to earn greater amounts of crypto.

DeFi saw a major boom in 2020, first hitting $1B in Total Value Locked in February 2020, and is now $45 billion only one year later.

This tremendous growth has attracted new users seeking yields that are not possible with Bitcoin or traditional finance because of intermediaries.

The upgrade to Ethereum 2.0 started in December 2020, will make investing much faster, more reliable, and more lucrative, with lower trading fees.

And with over five times the number of active developers as Bitcoin, Ethereum is growing at a faster clip. Developer activity on Ethereum indicates that new and better use cases are on the horizon, which will increase demand for ETH.

Ethereum Is Here To Stay

Ethereum’s potential is enormous, and the project is here to stay. More than that, it has a bright future ahead, with traditional companies from PayPal to Microstrategy getting some skin in the game.

You do not have to understand smart contracts or know their workings inside-out. There are projects, like MEW, that are working to make a simple interface so that anyone can interact with smart contracts because their infrastructure is complex, but their application is so important for the ecosystem.

These things will come in time, as that is how evolution works. This technology has the ability to become integrated with so many aspects of our everyday lives that it is extremely hard to predict its limits at this time.

And, with the blockchain industry having such a massive future impact on our lives, you might as well get familiarized with it now.

By Brian Norton, COO of MEW

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