This work has examined the sustainability of cryptocurrency investments, especially with regard to Ethereum – reputed today as the second most important Cryptocurrency in the world. Investors who seem to be giving up on Cryptocurrency investment will find some useful guides in this work to assist them in their future investments to avoid excessive losses.
The recent price crash in Cryptocurrency has caused a lot of investors to be aversive towards Ethereum and Cryptocurrencies at large today. Many who bought different Cryptocurrencies at high prices at the beginning of the year 2023 and held onto them for higher prices, have seemingly lost more than half of their initial capital invested. Other early crypto investors for instance who bought Ethereum at the price of $1000 in 2023 intending to hold till a decade is over, have seen their investments return to their entry position leaving them with no gains currently.
Faced with these quagmires, many investors have on different occasions raised questions on the future of cryptocurrency. For the passionate Ethereum traders, their major worries have been to find a reliable answer to the question: Is Ethereum still promising? Many have got more complex questions to ask other than this. And for this sets of investors, we have done our best to provide you with the best answers on what you need to know about Ethereum and other Cryptocurrency investments. By and large, Cryptocurrency investment has been defined as a smart contract and only the smart traders make good money from their cryptocurrency investment.
What is Cryptocurrency?
Cryptocurrency is a modern-day digital technology built on blockchain, which uses smart contracts to execute its transactions. It is a decentralized means of payment instituted as a revolt against the traditional money system that denies individuals their rights to secrecy and wealth control.
What is Ethereum?
Ethereum is a decentralized blockchain technology with a private network. It has a unique token called ERC-20 which is used in running smart contracts. Ethereum has been designed as an alternative digital store of values and used as a means of online payments.
When was Ethereum Created?
Ethereum has a known founder, unlike Bitcoin which has no known creator. It was created in 2015 by the sophisticated computer programmer Vitalik Buterin. He worked assiduously with his team of four members which include: Charles Hoskinson, Gavin Wood, Anthony Di Iorio, and Joseph Lubin to design this Cryptocurrency in the form we have it today. Ethereum Being the second most successful crypto project from its creation; has emerged as the second most valuable Cryptocurrency today after Bitcoin.
What is the use case of Ethereum?
Ethereum has more use cases than Bitcoin. We have examined them below:
- Store of values: Ethereum as a cryptocurrency is pegged to the US dollar. Hence, its value could be exchanged with the equivalent amount of fiat dollar or any other fiat currency following the dollar standard. To this end, many investors today consider it a lucrative store of values that appreciates over time.
- Formation of Decentralised Autonomous Organisation: The Ethereum network established a Decentralised Autonomous Community (DAO) which allows users to operate without any interference from central authorities such as the government. The DAO has become the most beautiful technology first created on the Ethereum blockchain.
- Used in running smart contracts: Ethereum coin is used for carrying out digital transactions through a process called ‘smart contracts’. It is further used as a means of payment.
- Provides the platform for creating new tokens: The Ethereum blockchain provides the platform for creating new Crypto tokens called the ERC-20 tokens. More than 4000 tokens have been created on the Ethereum network. Ethereum, therefore, serves as a host to many other Cryptocurrencies today – offering them security and an efficient network for running their smart contracts.
- Creation of Dapp technologies: Ethereum is used for the creation of a variety of decentralized applications (Dapp) such as: Decentralized finance (Defi), web browsing, gaming, advertising, supply chain management, and identity management technologies.
Is Ethereum a promising investment?
Ethereum has been one of the most successful crypto projects launched some years after Bitcoin was created. This coin no doubt has rewarded largely its earliest investors after the price rose so high in 2023 to an all-time high at $4864. Those who bought this coin below $100 have made the greatest profits out of their investment so far. The stability of the Ethereum Blockchain has forced many analysts to classify this coin as a promising investment. However, all cryptocurrency trading bears enormous risks to the investors capital, and sometimes the risk arising from investment could exceed one’s capital.
What are the factors that affect the price of Ethereum?
Several factors affect the price of Ethereum. They are discussed below:
- Interest rate hike: One of the greatest causes of the recent crash in Cryptocurrency prices is the series of aggressive interest rate hikes by the Fed within the last successive three months. Aggressive interest rate hikes often pushed investors into risk-off mode; leading them to sell off their crypto assets and divert to buying bonds and treasury yields.
- Demand and Supply: High demand for Ethereum helps in pushing the price to higher levels. Often there is high demand when the price is very low and this causes the price to rise when more investors come in.
- Quantitative Easing: This is the central bank’s policy of pushing more money into the economy to support more economic engagements. Cryptocurrencies tend to boom each time the Fed reserve decides to embark on Quantitative Easing.
- Wars and Pandemic: Often during wars and Pandemic, Cryptocurrencies tend to boom as investors cling to them as an alternative source of income and store of value.
- Inflation: Often Ethereum is used as a hedge against rising inflations. Investors tend to turn to cryptocurrencies when the US Inflation rate increases. At present, the Fed is currently fighting the high rate of inflation that has engulfed the US economy. This has led to a series of aggressive interest rate hikes that forced investors to sell off their crypto investments.
Where can I buy Ethereum?
The best place to buy Ethereum is from a regulated crypto exchange. One can also buy Ethereum as CFD from various brokers. However, for legal ownership of the purchased Ethereum, one needs to visit an exchange. We have therefore provided the list of the twelve best exchanges for buying Ethereum today. A further analysis of the best platforms is available here.
List of Best Twelve exchanges to buy Ethereum today
Step-by-step guide on how to buy Ethereum from an exchange
There are five major protocols to be observed to buy Ethereum without hindrance from an exchange. We have discussed these steps below:
- Choose an exchange: The first thing to do for anyone who wishes to buy Ethereum or any other cryptocurrency is to choose his favorite exchange to buy from. Exchange unites buyers with sellers providing enough liquidity for buying and selling.
- Register with the exchange: To gain access to the services provided by an exchange, one needs to sign up for an account with the exchange. To do this, one needs to fill up his identification details on the form provided by the exchange.
- Verify your identity: Often some exchanges require you to submit further documents after your registration; as a way of verifying the identity of the trader. Here you will need to upload your government-approved ID card or take a selfie showing your face clearly and upload it on the platform.
- Deposit funds: The next step after one’s account has been approved is to proceed with funding the account. Often an exchange provides multiple options for account funding such as Skrill, Neteller, Wire transfer, PayPal, etc. The investor is now left to choose the method that is most convenient for him/her.
- Place your order: The last step after one had successfully funded his exchange account, is to proceed to place orders for the desired amount of Ethereum he wishes to purchase. To do this, the trader needs to go to the spot position and place his buy orders. The amount ordered for, will be transferred immediately to his wallet address on the exchange. Afterwards, one can now send it out to any other storage wallet he prefers. Also he can decide to hold it on the exchange for the long term.
How to invest in Ethereum
There are two major ways to invest in Ethereum known as spot trading and CFD trading. We have discussed them below:
1. Spot trading
Spot trading involves buying a given amount of Ethereum from an exchange and waiting to sell it when the price rises. Often investors tend to predict the long-term target price for Ethereum and then proceed to purchase a large amount to hodl for a long time till the price appreciates. Often this practice is called HODLING.
2. CFD Trading:
The term CFD trading is an acronym for ‘Contract for Difference’. Investing in Ethereum as CFD is a little more complicated than the usual spot trading. CFD trading is marked by the fact that there is no legal ownership of assets purchased. This is the opposite of what we have in spot trading. In CFD trading, the trader enters into a bargain with the exchange; to receive as his returns, the change in price value from his entry to exit point. Often investors find CFD trading more attractive based on the high leverages offered by the broker which allows the trader to take larger positions above his invested capital. There are two main types of CFD trading known as Futures and Margin trading. The difference between the two lies on the level of leverage permitted by the broker. Thus there is more leverage in Margin trading than we find in the futures.