6 Things To Consider Before Investing In Ethereum

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Ethereum (ETH) is likely on your radar if you’re looking to diversify your cryptocurrency investment portfolio beyond Bitcoin. Ethereum is technically a programmable blockchain, and its coin is called Ether. It’s one of the most promising cryptocurrencies, offering many features that Bitcoin lacks, such as Smart Contracts, Decentralized Finance (DeFi) applications, and non-fungible tokens (NFTs). 

Investors use Ethereum wallets that allow them to access their Ethereum accounts and do transactions. They’re able to check their balance, send and receive payments, and connect to applications using the web wallet. If you’re interested in investing in Ethereum, discover this list of web wallets you can use to manage your ETH.

Due to Ethereum’s enormous potential, it’s currently one of the most widely preferred investment options. However, there are a few factors to consider before investing in it. 


  1. The Power Of Versatility

Ether’s value has never experienced a spectacular rise due to all the projects developed on its network. Nonetheless, this has made the blockchain the most reliable on the market.

Its greatest strength is its versatility and constant significance. Additionally, consistent value appreciation can be viewed as more valuable in light of its long-term growth.

While Bitcoin is the dominant player in the digital asset market, Ethereum may completely alter the game.

  1. The 2022 Update: The Merge

Ethereum will switch to proof-of-stake in 2022. ‘The Merge’ reconfigures how Ethereum works.

The Merge is designed to transition the Ethereum blockchain from the existing proof-of-work (PoW) consensus process to a faster, more secure, and energy-efficient proof-of-stake (PoS) model. Changing the second-largest blockchain is a multi-step procedure.

Ethereum will employ large stakeholders to validate transactions instead of miners. Validators ‘stake’ their cash to validate transactions and gain ether. ‘Stakers’ could lose their money if they confirm illegal transactions. Smaller investors can earn rewards by pledging coins with a validator.

The transition and transaction fees being ‘burned’ will lead to fewer ETH and a deflationary spiral, enabling the currency to skyrocket.

  1. The Price

Since early 2021, Ethereum has not traded below USD$1,000, and it remains an exceptionally popular cryptocurrency among crypto investors.

Interestingly, around the time Ethereum reached its all-time high of about USD$4,800 in 2021, the notoriously high transaction price of the cryptocurrency dropped by approximately 50%. Lately, the volatility of Ethereum in 2022 has heightened.

At the beginning of 2022, Ethereum was worth approximately USD$3,770. But the value of the cryptocurrency continued to decline until it reached roughly USD$2,400 by the end of January, the lowest level since July 2021.

  1. The Unpredictability

Ethereum faces competition from Solana and Cardano, which offer comparable services. The number of active projects on each network is an essential metric for comparing Ethereum to its rivals. Despite Ethereum’s first-mover advantage, its rivals, like Solana, are gaining ground.

Always consider the unpredictability of the crypto market. When buying/selling cryptocurrency, timing is everything. You risk losing your crypto investment due to market changes.

  1. The Risks

Ethereum may play a role in the monetary exchange and global computing, but you must be aware of the risks.

Investing in Ethereum is risky, much like investing in other cryptocurrencies. The tremendous volatility of cryptocurrencies can raise earnings but also multiply losses.

The historical volatility of Ether’s price can be a significant downside for certain investors, particularly newcomers. Additionally, Ethereum’s transaction fees fluctuate, which is undesirable.

  1. The Others 

Here are other factors to take into account when choosing Ethereum to invest in. These are listed below:

  • Lower Inflation Risk. Inflation is a hot topic right now, and Ethereum includes a built-in inflation mechanism that is less susceptible to manipulation, hence minimizing the possibility of your cryptocurrency losing value.
  • Liquidity. One of the primary reasons why people are drawn to Ethereum is that it’s among the most liquid crypto, meaning it can be exchanged quickly and easily.
  • Volatility. The volatility in the Ethereum market may actually be beneficial, as experienced traders might identify patterns and gain from the volatility.

FAQs

What Is Ethereum’s Blockchain Size?

The Ethereum blockchain expands as needed. Because of its flexibility, the Ethereum blockchain is at the heart of DeFi and NFTs. In the first quarter of 2021, more than USD$1.5 trillion in transactions were cleared on this network.

How Many Remaining Ethereum Exist?

The number of Ethereum coins left refers to EIP-1559, commonly called the London hard fork, which took effect on August 5, 2021. This contentious measure destroys (or burns) coins with every transaction. In fact, 1.98 million Ether have been burnt by the upgrade at 135 ETH per hour. All of this creates confidence regarding future supply and could contradict claims that Ether could be unlimited.

Does Ethereum Have A Maximum Supply?

When the blockchain began in 2015, there were fewer Ethereum coins. At that time, 72 million ETH existed. The quantity of new Ethereum coins may decrease when the network transitions from PoW to PoS.


Conclusion

It’s highly recommended that, before making any large investment in Ether or any other cryptocurrency, you should consider the potential risks associated with such investments with a financial advisor. Even if you believe Ethereum has potential, you should only invest money that you can afford to lose due to the high level of risk and volatility in this market.


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