Ethereum Prices Are a Runaway Train, So Grab Your Ticket

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Cryptocurrency is a hot topic everywhere. It elicits passionate discussions from both sides of the aisle. Today we will discuss the opportunity that Ethereum (CCC:ETH-USD) has as a successful cryptocurrency.

A concept image of mining an Ethereum (ETH) token.

Source: Shutterstock

There are extremes lovers of crypto and even more haters.

And then there’s a giant mass of people who don’t want to even try and understand it. The concept is too foreign still. They are be apathetic about it, but therein lies the potential upside in value. They constitute an ocean of new buyers eventually.

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Almost everybody on the planet recognizes gold is because it was already there when they were born. For whatever reason, the whole world now accepts that gold is a thing to covet.

I would have loved to see the first gold transaction go down. One person trying to convince another that this yellowish inert rock is valuable. Now, most of us understand that it is rare, therefore it has high value.

Why ETH Has Value

Ethereum (ETH) Chart Showing Its Catch-up Speed to BTC and GLD

Source: Charts by YahooFinance

When people want something and there’s not enough of it to go around, its value explodes. The Bitcoin (CCC:BTC-USD) and ETH concepts are exactly the same. It doesn’t matter how they work or what they do – if anything. All we need to know is that they exist and millions love them. Therefore, they are expensive, really expensive. ETH is now worth twice as much as gold.

Bitcoin is the best performing asset by far for over a decade. Nothing even comes close, yet some still call it fake. If they don’t believe in Bitcoin, they definitely won’t believe in ETH. Experts argued that Bitcoin needed to catch up to the market cap of gold. That was a big part of the bullish argument. While it is still far, it is closing in fast. I want to apply that logic to ETH catching up to BTC.

I made this argument in early March and that trade served us well. ETH rallied 200% from low to high. But this is not the end of the story because these are volatile assets. The opportunity then was clear as day to me and the logic has staying power. This is not a one-and-done scenario. Many wrote off BTC after its first crash from $19,000. It has since silenced most of the critics. The ones still squawking are being too rigid for their own good.

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We Absolutely Need Crypto in Our Future

The 2020 pandemic and ensuing lockdowns were proof that we need crypto. The world has to evolve with how it stores and transacts wealth. In addition, these long-term loose monetary rules from central banks destroyed cash. Diverting some to crypto is a way of seeking shelter from QE infinity. The Fed actions are contributing to the grab for e-coins.

This fact could be the cause for the next crash in ETH. Yes, there will be many of them and they will be buying opportunities. Investing in crypto is an ongoing process. This is not the case of waiting for a perfect opportunity because it might never come.

This week we finally saw some inflation in the CPI reports. This may force the Fed to reconsider its QE levels sooner than 2023. If so, it may relieve some buying pressure off crypto.

An Investment Vehicle

In conclusion, I don’t really care what ETH does, or how I can use it as a coin. I want it as an investment vehicle, and I only need to know that it is riding the Bitcoin coattails. Just like it’s big brother, I expect extreme volatility along the way. Therefore, I should invest in small tranches and over time.

Trying to time it is difficult even for people like me who can read charts. Most retail investors lack the skills necessary to play that game.

Recently, prices soared to $4,400 then quickly faded in just a few hours. A 20% drop sounds like a major crash but this only took it back to levels of three days ago. ETH could fall to $2,800, which is an additional 25% drop and not change anything. Just last month it was under $2,000, so clearly this one moves fast and either direction.

The bulls are in charge and the critics are on the defense.

On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Nicolas Chahine is the managing director of SellSpreads.com.

Should You (or Anyone) Buy Ethereum?

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Bitcoin’s younger sibling is giving it a run for its money.

Ethereum is a digital currency that claims to be “the world’s programmable blockchain.” It is more nimble than Bitcoin, and chances are you won’t move far into the world of cryptocurrencies before you come across it.

But what does it do? And should you buy it? Read on to find out.

What is Ethereum?

Ethereum, the world’s second-biggest cryptocurrency by market capitalization, is like Bitcoin’s agile little sibling. It uses less energy and has faster transactions and more business applications.

Many digital currencies run on Ethereum’s platform, which launched in 2015. A new, improved, version called “Eth 2” is being rolled out in stages. It will support more transactions per second, consume less energy, and have enhanced security.

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One big difference between Ethereum and Bitcoin is that its blockchain ledger has smart contract capabilities. Smart contracts are self-executing pieces of code that allow an action to be performed when certain conditions are met.

For example, a smart contract in a digital book might set out what royalties should be paid when the book is sold. Or it might mean an insurer automatically pays out in specific situations, without any need for the client to file a claim. Payments could also be set up to transfer automatically as goods move along stages in a supply chain.

Should you buy it?

Like every investment – but especially crypto investments – there are risks involved with buying Ethereum.

For one, its price is volatile. You might see dramatic gains, but you might also see heavy falls. Also, since cryptocurrencies are a new type of investment, it’s difficult to judge which coins will perform well in the long term.

I put a small amount of money into crypto each month. But before I started, I first built up my emergency fund. I also made sure my new crypto investing didn’t come at the cost of my retirement contributions.

These moves ensure I’m only investing money I can reasonably afford to lose. That way, if the price of cryptos collapses tomorrow, I can wait for it to rise again. And if it doesn’t, I can stomach the losses.

Where you choose to invest should depend on your own priorities and strategy, but here are the reasons Ethereum could be interesting.

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Many things run on Ethereum

Ethereum underpins a lot of the exciting applications of blockchain technology. It’s designed to be used to create new coins and run smart contracts. Plus, right now, you need to own Ethereum if you want to do other things – such as trade on some platforms or buy NFTs. If the crypto world continues to grow, so should Ethereum.

Eth 2 will be more environmentally friendly

One concern I have about crypto is the environmental cost. To validate and confirm transactions, a number of cryptocurrencies use a proof-of-work (PoW) model, which uses a lot of energy.

Right now, Bitcoin uses about 130 terawatt hours (TWh) of energy each year, which is about the same amount of energy as countries like Ukraine or Argentina. Ethereum uses about a fifth of that amount, but it’s still as much as a small country like Ecuador.

Eth 2 will move from the carbon-costly PoW model to the more energy-efficient proof-of-stake (PoS) model. I won’t go into the technical details here, but estimates suggest the new mining model could cut its energy consumption by 99%.

Eth 2 will also be easier to scale and more secure, which is a bonus.

I can stake my Ethereum

One way to earn interest on your crypto is through staking.

Staking involves tying up your coins for a set amount of time so that they can be used to mine more coins. One challenge is that there are limited staking windows. Once they are full, you have to wait for another window.

I don’t have that problem with Ethereum. Right now, many top cryptocurrency exchanges will let you stake until the Eth 2 limits are reached. In doing so, you’ll also be part of the Eth 2 development.

The downside? Your Ethereum will be tied up for an undefined amount of time, which could be as long as two years. Since I plan to hold my Ethereum long term, I’m comfortable with this – especially as I’m earning about 8% interest on my staked coins.

What are the risks?

We’ve already touched on the general risks of cryptocurrencies. There are also some Ethereum-specific risks to be aware of.

First, Ethereum is not the only cryptocurrency to offer smart contracts. Currently, several coins are operating in this market. They include:

Neo

Cardano

VeChain

EOS

And if these coins can do it better, there’s a chance they could knock Ethereum off the top spot.

There’s also the ever-present danger of hacking. Not only could the exchange or hot wallet where you store your currencies be hacked, but so could the Ethereum network itself.

That’s why it’s better to be safe than sorry. As with any investment, don’t just take my advice – or the advice of anyone on social media. Do your research and try to understand what the cryptocurrency you’re interested in actually does, and what its long-term potential is.

The 4 Biggest Mistakes You Can Make When Buying Ethereum

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Ethereum is on the rise. If you’re planning to buy some of your own, here are the mistakes to avoid.

Like many cryptocurrencies, Ethereum has been growing in value since last year. But in the last few weeks, its price has gone through the roof. It recently set a new all-time high by trading at over $3,500.

Ethereum has consistently ranked as the second-largest cryptocurrency after Bitcoin. With the recent price increases, you may have decided that now is the time to buy Ethereum. Before you do, learn about a few common mistakes that some new buyers make.

Not buying through a reputable crypto exchange

There are more ways than ever to buy Ethereum. Cryptocurrency exchanges, such as Coinbase, are the traditional option. There are also apps and online stock brokers where you can get Ethereum and other cryptocurrencies.

Not every option is a good one, though. Fake cryptocurrency exchanges pop up with the sole purpose of stealing people’s money. And even legitimate ways to buy crypto may have excessive fees or restrictions. PayPal and Venmo are notable examples: Although you can buy some cryptocurrencies through these apps, fees are high, and you’ll be unable to move your crypto out of the app after you buy it.

If you’re new to buying crypto, the simplest way to stay safe is by sticking to the best cryptocurrency exchanges. In particular, look for an exchange that offers insurance and keeps most of its crypto in cold storage, meaning it’s offline.

Not researching Ethereum first

Before you commit your hard-earned money to Ethereum, take some time to learn about it. This is a smart rule of thumb for any investment. You don’t need to be an expert in Ethereum, but it helps to know how it works and what makes it unique.

Knowledge of Ethereum is especially important because of how volatile it is. Odds are that there will continue to be significant price movements in the future. When you understand Ethereum and you believe in its value, you’re less likely to be influenced by the trends or the current price.

Trying to time the market

Considering Ethereum is near an all-time high, it’s tempting to wait until the price drops before you buy. You may find yourself thinking that you’ll wait until it drops below a certain amount, and then make your investment.

The problem is that no one can accurately time the market. There’s no guarantee that Ethereum will drop to your target price. Maybe it keeps increasing, which could leave you regretting that you didn’t buy right now. Or, imagine that the price does drop significantly. That would give you the opportunity to buy low – unless you start second guessing your decision because you’re worried the price will decrease even more.

If you’re going to buy Ethereum, look at it as a long-term investment. Buy because you believe the price will rise in the years to come, not in the hope of getting rich in a matter of weeks.

Putting all your money into it

Most cryptocurrencies are volatile, higher-risk assets, and that includes Ethereum. The returns have been fantastic so far, but that can change quickly. After Ethereum peaked at over $1,200 in 2018, the price sank to under $100. It took over three years before Ethereum broke the $1,200 mark again.

To minimize your risk, make sure you diversify your investments. A good guideline is to reserve 5% to 10% of your portfolio for crypto. You could use that entirely for Ethereum, or you could include multiple cryptocurrencies. For the rest of your portfolio, stick to investments with less volatility and a longer track record of success, such as mutual funds.

This is an exciting time in the history of Ethereum. The price is rocketing upwards, and Ethereum’s blockchain technology is being used more and more. Ethereum could turn out to be a sound investment – as long as you avoid costly mistakes.

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