Is It The Right Time To Invest In ethereum
Ethereum is the most well-known altcoin, and it’s much more than just another cryptocurrency for many investors and enthusiasts alike. And experts say it could grow in value by as much as 400% in 2022.
Ethereum is more than just a cryptocurrency. For people using the blockchain ecosystem, it is a global computer for running decentralized applications. ETH is the official digital token that powers the Ethereum network. Although Bitcoin is the foremost cryptocurrency that is seen as a ‘store of value’, over time, Ethereum has emerged as a major resource for advanced features like NFTs, smart contracts, DApps, etc. In a nutshell, Ethereum is the direct competitor of Bitcoin that is fighting to take over the top spot since its debut in 2015. On yearly growth rate, ETH already outperformed Bitcoin in 2020 and 2021. It is the diamond of the cryptocurrency market that has intrinsic and industrial value. However, all is not well for ETH. Ever since it reached an all-time high in November last year, Ethereum has faced constant falls that pushed the digital token below the US$2,500 resistance level.
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While Ether has recently dropped back down to as low as $2,200, that still represents a lifetime return on investment (ROI) of about 707,296%. A differentiating feature for Ethereum — unlike Bitcoin and other cryptocurrencies — is its utility as a software network that allows developers to build and power new tools, apps, and NFTs.
The blockchain-based software network has many uses and applications across the tech world, especially for gaming, music, entertainment, and decentralized finance (DeFi) — making it one of the most popular and widely-used cryptos this past year.
At an annualized rate, Ether’s ROI is nearly 300%. That means early investors have nearly quadrupled their investment every year since the summer of 2014. Crypto prices are notoriously volatile, however, so financial experts say to only invest what you can afford to lose, and never at the expense of foundational goals like emergency savings and high-interest debt payoff.
So how high do experts expect Ether’s price to climb? Here’s a look at the factors contributing to Ethereum’s volatile, yet upward-climbing, price projections, and what experts predict for this year.
Ethereum Price Predictions
We asked three experts how high they see Ethereum going this year, and each qualified their predictions by saying it is nearly impossible to predict the future price of Ethereum. And other experts have said ETH’s price will be even more volatile than Bitcoin in the coming months, mainly because Ethereum is transitioning its technology to a less energy-intensive version that insiders colloquially refer to as “Ethereum 2.0.” Ethereum’s upgrades could make it more appealing and sustainable for widespread use, but until that happens, experts are waiting to see how investors and companies building their tech on Ethereum’s platform respond to the changes.
Why ETH is Losing Ground Now?
Ethereum is the second-largest cryptocurrency by market capitalization and the epicenter of smart contracts, DeFi, DApps, etc. Over the past seven years since its inception, ETH has faced many challenges. Although it emerged as a major competitor for Bitcoin initially with advanced features and a better working system, Ethereum competitors like Solana and Polkadot are more capable now. Over time, cryptocurrency investors who hailed the feature seem to have realized the downsides. Developers have noted some key advantages like the high gas fees, slow transaction speed, and hard-to-code nature of ETH.
Who is the biggest benefiter of Ethereum’s loss? Solana and Polkadot have emerged as the greatest winners of ETH’s loss. The disadvantages in the Ethereum ecosystem have exposed developers to look for ‘next ETH’. As a result, they embraced Solana and Polkadot, the direct competitors of Ethereum, as a substitute. Besides, these altcoins are specifically built to address the challenges of Ethereum, making it extremely competitive.
What Influences Ethereum’s Price
Ethereum earned its reputation as the first blockchain to use smart contracts, which are basically coded instructions on the blockchain that execute financial transactions through algorithms.
Now new Ethereum alternatives with similar capabilities are hitting the market and changing the demand for ETH in both favorable and unfavorable ways. Here are a few variables that impact Ethereum’s price.
High Traffic and Utilization
Smart contracts make it possible for artists and creators to mint (make) and sell the digital artwork now known as non-fungible tokens (NFTs). That was both a blessing and a curse for Ethereum, as the blockchain’s popularity led to what some call a “bottleneck” on the blockchain. Think of the mall parking lot on Black Friday — only digitally.
Now, with so many users, it’s become increasingly expensive to transact on Ethereum. The Ethereum team in response has developed new upgrades to its infrastructure, but it’s taken a few years to develop the technology.
In the meantime, a number of new companies have created add-on solutions (known as “Layer 2s”) that operate on the existing Ethereum blockchain. Additionally, entirely new blockchain networks, (known as “Layer 1s”) have also been released as and marketed as potential Ethereum alternatives, driving traffic away from the Ethereum blockchain and adding new competition — which can both increase or dampen any product’s popularity in the market.
For investors, more people using the Ethereum network means more support for the value of your investment, so competitors pulling users away could hinder Ethereum’s value over time.
First Mover Advantage
Despite the new competition, experts often suggest Ethereum’s “first-mover advantage” has positioned it for long-term success, even though newer and more environmentally-friendly technologies have been developed. However, because cryptocurrencies are only valuable due to community buy-in, the commitment of users is more important than being first.
Thankfully, Ethereum has both: “I think the first-mover advantage is real,” says John Zannos, a partner at Inflection VC, an early-stage venture firm investing in the open economy and blockchain companies. “But what’s more important to me is the health and the size of the community, and how many developers are coming into that community because that’s what’s going to drive innovation.”
New blockchains like Solana and Cardano also provide similar functionality to Ethereum and have their own native cryptocurrencies. Still, experts say Ethereum is well-positioned to grow with its users and meet evolving demand in the future.
Competition From ‘Ethereum-Killers’
If “cryptocurrency” and “NFT” became household terms in 2021, “Web3” could make a run of it for 2022. Web3 refers to an open-access version of the internet built on blockchain technology, where financial transactions are more transparent, individuals have more ownership over their data, and, through cryptocurrency, users own most of the infrastructure.
Companies like Ethereum and similar blockchains like Solana, Cardano, and Tezos are working to develop the infrastructure on which the future vision of Web3 can be built. Investors see these new developments as similar to the dot com boom when Google, Facebook, and Apple were first coming into public awareness.
How Ethereum 2.0 Upgrade will Help ETH Gain its Position?
As mentioned above, developers have become familiar with the vulnerabilities of Ethereum, making them choose other networks over it. However, the targeted shift from proof-of-work to a proof-of-stake model is expected to make many positive changes. For example, the upgrade is aimed to address the high transaction fees, increase coins burned and improve congestion. The upgraded features in Ethereum 2.0 are expected to increase the demand and lift activity drastically, which will eventually trigger its price.
Experts also say that the move to proof-of-stake will have a positive impact on the cryptocurrency’s price and trigger more people to buy Ethereum. The biggest drawback of ETH right now is its gas fees and if the network is willing to reduce it, then investors won’t have a problem availing themselves of ETH services.
Is Ethereum a good buy?
If you look at these developments, many of them are being felt across markets and not just on cryptocurrencies or Ethereum specifically.
In fact, Ethereum is up about 20% since the Fed raised interest rates on March 16, reflecting a larger market rally. Typically, rising interest rates hurt growth stocks, but in this case, the declines had already been priced in since January and the market saw rising rates as a good thing for the economy to reduce inflation.
However, the threat from faster, more efficient competitors eating into its market share is real. Ethereum is working on addressing that with the development of Ethereum 2.0. This new platform will replace the current proof-of-work consensus mechanism with a proof-of-stake mechanism.
This will make the network faster, increase transactions capacity, lower costs, bolster security, and cut energy use. It will help close the gap between some of its chief rivals, like Avalanche and Solana, to name a couple
This upgrade will begin later this year and conclude in 2023. It should provide a boost for Ethereum when it launches and helps the cryptocurrency maintain its dominance in dApps. Ethereum, given its reduced price, impending technology upgrades, brand, and market dominance look to be a good long-term investment.
But there is certainly a lot happening right now, from potential regulations to uncertainty surrounding world events and the economy. Markets are indeed volatile, so investors should be cautious, do their research, have a long-term view, and not invest more than they can reasonably stand to lose.
The Future of Ethereum
Despite Ethereum’s competition, and other factors contributing to its ongoing volatility, there’s a general sense of optimism that the original smart contract blockchain will make it through this era of trials.
“Ethereum has over 90% of the NFT market,” said Arslanian. “This is going to be a very important year for Ethereum, a kind of a make-or-break year.” There is good reason to expect a quick rebound from the current slump Ethereum is experiencing