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May 07

Why I’m putting more money into Ethereum right now

As you know, Ether is the coin that works on the Ethereum network. It is the second most valuable, and most popular cryptocurrency after Bitcoin. In fact, it’s often referred to as the ‘silver’ to Bitcoin’s gold.

But it is a lot less valuable than Bitcoin. Around 6-7% as valuable in fact. But recently it has jumped in price (as has Bitcoin) and it’s quite possible that this ‘bull run’ will continue. However, nothing is certain with any cryptocurrency, so don’t rush to buy just because I’m adding to my holdings.

However, I consider that Ether’s value will continue to increase, which is why I’m buying some more right now. Here are the reasons why.

 

Why is Ethereum popular?

I’m going to talk about Ethereum (the platform) primarily as that is what makes Ether (ETH), the coin, particularly popular.

Ethereum is an open-source software platform that any developer can use to create cryptocurrencies and other digital products (it can be used for business transactions, voting, records and all sorts of applications). It’s a blockchain technology – a decentralised distributed ledger that records all transactions.

Ether is the currency (or the token) that runs on the Ethereum blockchain.  As with Bitcoin (which operates on the Bitcoin blockchain), the Ether currency is “mined” through powerful computers solving very difficult puzzles, or cryptography

It’s the  Ethereum technology’s ability to run clever applications that makes it particularly popular with investors who see it as having more of a future than Bitcoin. It is particularly well known for what are called ‘smart contracts’ which enable applications to be built that have particular functions. So, for example, developers can create currency that can only be used in certain places or for certain things and within a particular time-frame.

Over the past year, Ethereum has grown in popularity with individual and institutional investors. It can also be used at a growing number of online and offline businesses. Transaction times are faster than for Bitcoin too.

 

What is happening with Ethereum at the moment?

It is getting even more popular! Its price surged to a record high of $3,400 at the beginning of May 2021. This represented a quadrupling in its value since the start of the year.

Also, a recent proposal by the Ethereum leaders called Proposal EIP1559 has indicated that they are planning on reducing the emissions created by mining Ether (this is a criticism that has been levelled at cryptocurrencies generally – that they use too much energy and produce high emissions). They will also reduce the rewards offered to the miners and, crucially, will reduce the supply of Ether. This could make it more valuable as the supply will be more limited, like Bitcoin.

Currently its ‘market capitalisation’ is around $350 billion which puts it on a par with huge, multinational companies such as PayPal and Bank of America. To put it into context, Barclays has a market capitalisation of just $44.32. So already Ethereum is about seven times as valuable as that!

Some crypto enthusiasts say that it could become the dominant cryptocurrency in the world, outstripping Bitcoin.

 

What does the near future look like for Ethereum?

Not only is there the prospect of limiting the supply, but Ethereum is already proving its use-cases in real-world transactions.

  • At the end of April 2021 the European Investment Bank issued its first ever €100 million two-year digital bond via the Ethereum blockchain.
  • At the beginning of May, the S&P Dow Jones launched several cryptocurrency indexes, including one for Ethereum, aimed at measuring the activity of digital assets.
  • In March 2021 Christie’s accepted Ether as payment for a Non-Fungible Token of a work of art by Beeple. Called ‘Everydays: The First 5000 Days’, In dollars it cost around $69.3million.

Not everyone believes it has a future, though.

Charlie Munger, business partner of Warren Buffett at Berkshire Hathaway has described cryptocurrencies generally as “disgusting and contrary to the interests of civilisation.” Pretty strong words from a very wise man!

AJ Bell’s Laith Khalaf agrees that Ether is currently strong but he is very cautious: “Ether, or Ethereum, is more flexible than Bitcoin because it is programmable according to use, so it can be used to verify business transactions or contracts as well as make payments” he says. “However, the value of that asset is still only what someone else will pay for it, and while that might be quite a lot right now, once crypto fever has died down, it may not be worth the code it’s written in.”

 

How and where to buy Ethereum

Ethereum is easy to buy on one of the main cryptocurrency exchanges.

As i’ve said before, it’s important to use a well-established, secure exchange. There are a number of new ones around and I would avoid them. Some are simply not secure enough and could be hacked at any time. Others are just criminal and will steal your money. Sorry, but that’s the crypto space right now!

So sign up to one of the following, if you haven’t already…

  • Coinbase Probably the best-known of the trading platforms, Coinbase isn’t the cheapest platform but it is secure and very easy to use. limited range but a good gateway. Fees are around 49% – 3.99%.
  • Binance Another well-established exchange. This one has an even greater selection of cryptocurrencies and charges just 1% on trades. Not quite as easy as Coinbase but pretty good. (Please note that Binance has been told by the FCA that it can’t carry out any regulated activity in the UK, but Binance have said it won’t have a direct impact on the services it currently provides.)
  • Bitfinex Rather more complicated and aimed at the regular crypto traders. Fees range from 0%-0.2%. I was a bit put off when I looked at this one – lots of charts and numbers!
  • Kraken Claims to be the largest Bitcoin exchange. Its fees range from 0%-0.36%

Once you have got through the ID process, transfer money from your bank account, or debit card, into the exchange, click the ‘buy/sell’ button and make sure that you are buying Ether (you should see ETH in the list). Click buy and it should appear in your account.

be cautious

Although it’s delightful to see cryptocurrency holdings going up so quickly, they can crash down just as fast.

So make sure that you only put a small percentage of your cash into Ethereum or any other cryptocurrencies. I personally think that cryptocurrencies are the future of money, but I could be wrong. It could be nothing more than a flash in the pan, so don’t put any money in that you can’t afford to lose.

 

None of the above should be taken as investment advice. It is information only. Do your own research before investing in any of the products mentioned in this article.

WHAT DO YOU THINK?

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Joanne
Joanne
5 months ago

Some good information here.

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