Why Ethereum Is Surging – and Could Surpass Bitcoin
Everybody’s talking about Ethereum. Here’s why.
Ethereum has already surged about 330% this year. On Jan. 1, Ethereum was worth about $735, and as of this writing, it is worth roughly $3,130, according to data from CoinMarketCap.
It hit a high of over $4,300 on May 12 but has fallen in recent days. Indeed, we’ve seen cryptocurrency price drops across the board this week. This was driven by Tesla CEO Elon Musk’s announcement that Tesla would stop taking Bitcoin payments because of environmental concerns. In addition, banks in India are cracking down on crypto, and the IRS is investigating well-known international cryptocurrency exchange, Binance.
Ethereum hasn’t come through the drop unscathed, although it’s still up 30% month on month.
What is Ethereum and why is it surging?
Ethereum is the second biggest cryptocurrency by market capitalization. Unlike big brother Bitcoin, Ethereum is a programmable digital currency. It’s faster and more flexible than Bitcoin
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Here are some of the reasons Ethereum is surging:
It runs smart contracts: These self-executing contracts are why investors like Mark Cuban love Ethereum. It’s a coded contract that can execute itself automatically when certain conditions are met. Imagine an insurance policy that paid out without you needing to even make a claim. That’s just one potential use of this code. Smart contracts also drive non-fungible tokens (NFTs). Sales of NFTs – digital collectibles – have soared this year, as they give digital artists and other creators a way to profit from their artwork. The smart contracts in NFTs contain copyright and royalty information.
These self-executing contracts are why investors like Mark Cuban love Ethereum. It’s a coded contract that can execute itself automatically when certain conditions are met. Imagine an insurance policy that paid out without you needing to even make a claim. That’s just one potential use of this code. Smart contracts also drive non-fungible tokens (NFTs). Sales of NFTs – digital collectibles – have soared this year, as they give digital artists and other creators a way to profit from their artwork. The smart contracts in NFTs contain copyright and royalty information. It’s a DeFi platform: Ethereum is a programmable blockchain, so other currencies and applications can be built on its network. Decentralized Finance (DeFi) is another blockchain application that’s taken off this year. It means you no longer need a bank account to borrow, lend, or earn interest on your money. According to State of the DApps, a directory of decentralized applications, about 80% of the available apps are currently on the Ethereum network.
Ethereum is a programmable blockchain, so other currencies and applications can be built on its network. Decentralized Finance (DeFi) is another blockchain application that’s taken off this year. It means you no longer need a bank account to borrow, lend, or earn interest on your money. According to State of the DApps, a directory of decentralized applications, about 80% of the available apps are currently on the Ethereum network. Eth 2 is on the way: Eth 2 is a long-awaited upgrade to Ethereum that’s being rolled out in phases. It promises to make Ethereum more secure, more scalable, and more environmentally friendly. The hope is that the move to a more sustainable model of mining will happen this year.
Could Ethereum surpass Bitcoin?
That’s a good question. After Bitcoin’s extraordinary growth story, everybody’s looking for the next Bitcoin, and Ethereum is a solid candidate. Ethereum is only six years old – Bitcoin is now 12.
It’s not entirely fair to look at Bitcoin’s price when it was at the same stage because the market has changed so much since then. Plus, when Bitcoin soars, so does the rest of the market – including Ethereum. But back in 2015 when Bitcoin was also six years old, it was worth around $250. Ethereum is currently priced at over $3,000.
However, in recent weeks, Bitcoin has been falling while Ethereum has reached new highs. That’s because the market is starting to recognize that Bitcoin and Ethereum do very different things.
First mover Bitcoin is a decentralized digital currency that people are starting to see as a form of digital gold. It is extremely secure, but it can’t do much more than it already does. Plus, there are concerns about Bitcoin’s carbon footprint – mining the coin currently uses as much energy as a large country like Egypt.
In contrast, Ethereum still has room to grow. We’re only just beginning to see the business applications of smart contracts and DeFi. Eth 2 will help the platform to meet increasing demand and move to a more sustainable mining model.
The bigger question is what will happen to the cryptocurrency industry as a whole. These are highly volatile and unpredictable investments. For every expert that predicts the price of Ethereum or Bitcoin will continue to rise, there’s another who says this is a bubble that could collapse completely.
That’s why it’s advisable to only invest money you can afford to lose and to invest for the long term. If you buy Ethereum today and the market drops, you want to be able to hold until the price rises again. If you’ve tied up money you need to pay your rent or cover an unexpected emergency you might be forced to sell at a loss.
Ethereum may not be the next Bitcoin, but it may be a strong choice in its own right – it all depends on your personal investment goals and risk tolerance. Just remember, a lot could happen, especially if Eth 2 doesn’t deliver as expected or the U.S. brings in strict cryptocurrency regulation.
The billionaire creator of Ethereum already expected the collapse of cryptocurrencies
May 21, 2021 3 min read
This article was translated from our Spanish edition using AI technologies. Errors may exist due to this process.
This week, the world of cryptocurrencies experienced a severe collapse, losing about 35% of its total capitalization in one day . Although this took investors and markets by surprise, Vitalik Buterin , the billionaire creator of Ethereum , revealed that he already expected the bubble to burst.
In an interview with CNN Business , the 27-year-old mogul said that cryptocurrencies are “in a bubble,” but it is difficult to predict when it will burst. “It could be over by now … It could be over in months ,” Buterin said.
According to the specialized cryptocurrency portal CoinMarketCap, on Wednesday morning the price of Ethereum fell to $ 2,092 . This is 41% less than the $ 3,559 it cost a day earlier. Although it managed to recover to exceed $ 2,900 on Thursday, today it is trading at $ 2,283 per unit with a downward trend.
Source: CoinMarketCap.
These figures are still a long way from the all-time record price of $ 4,337 that it reached on May 12, according to data from Coindesk .
Of course, the fall of Ethereum impacted the public portfolio of Vitalik Buterin , who just three weeks ago was crowned the youngest billionaire in the world . His account went from $ 1.1 billion to $ 870 million in a single day.
However, the crash of digital currencies did not surprise the Russian-Canadian programmer.
“We’ve had at least three of these big crypto bubbles so far (…) And quite often, the reason the bubbles end up stopping is because some event happens that just makes it clear that the technology isn’t there yet,” said the founder of Ethereum.
Currently, Ethereum is the second currency by market capitalization, only behind Bitcoin . One of the reasons for its growing popularity is that it is used in NFT transactions or non-fungible tokens , the new ‘crypto’ sensation .
The abrupt collapse of cryptocurrencies can be explained by two crucial events that occurred this week. First, on Sunday May 16, Elon Musk stated on Twitter that Tesla would no longer accept Bitcoin as payment . Second, the announcement that China would prohibit transactions with cryptocurrencies to the country’s financial institutions.
Bitcoin, Ethereum prices in free fall as China plans crackdown on mining and trading
Getty Images
Bitcoin, Dogecoin, Ethereum and every cryptocurrency available had a terrible week. Prices began falling Wednesday following the news of China reaffirming its ban on the crypto services for its financial institutions. Then, after a brief rebound Thursday, prices fell again Friday when a statement from a meeting among top Chinese officials called for what could be disastrous actions against cryptocurrency.
“We should be more alert and look for potential risks,” a statement from the meeting said, according to Coindesk. “We should crack down on bitcoin mining and trading activities and prevent individual risks from being passed to the whole society.”
The value of Bitcoin fell sharply after the news from the meeting came out Friday morning, reaching a low of $33,590. It was at a little over $41,000 just hours before. Dogecoin and Ethereum also saw their values slip, by 10% and 12%, respectively.
The cryptocurrency industry had its first gut punch come Tuesday, as the China Internet Finance Association said it won’t allow the country’s financial institutions to partake in any business related to cryptocurrency, due to the volatile nature of the digital coins, according to a Chinese media report spotted by Coindesk on Wednesday. This position isn’t new. China took a similar stance back in 2017, which also resulted in a massive Bitcoin selloff.
“The price of virtual currency has soared and plummeted, and virtual currency trading speculation has rebounded, which has seriously violated the safety of the people’s property and disrupted the normal economic and financial order,” the report said (via Google Translate).
Coindesk
Bitcoin’s price dropped Wednesday morning to a low of just above $30,000, then rebounded to $37,000, according to Coindesk – a loss of 12% for the day. Ethererum and Dogecoin also saw drops at about the same time.
Since the start of the pandemic, Bitcoin, along with other cryptocurrencies, saw its value climb, reaching a peak of almost $65,000 in April. Since then, the price has been coming down because of growing concern about the large energy consumption required for Bitcoin. Last week, Tesla CEO Elon Musk said his company would no longer accept Bitcoin as payment because its use is increasing the burning of coal for power.
The popularity of Bitcoin and other cryptocurrencies attracted the attention of President Joe Biden. The US Treasury proposed a requirement for individuals to report any cryptocurrency transfers over $10,000 to the IRS. The proposal is also included in the president’s American Family Plan. A similar rule is already in place in banks for any deposits over that same amount.