[Blog] 6 Things to Consider Before Investing in Ethereum

If you're searching for a cryptocurrency to invest in that isn't Bitcoin, you've probably heard about Ethereum (ETH). Technically speaking, Ethereum is a programmable blockchain, and its token is called Ether. It's a promising cryptocurrency, second only to Bitcoin, because it supports things like Smart Contracts, Decentralized Finance (DeFi) apps, and non-fungible tokens (NFTs), which Bitcoin currently lacks. Using the token Ether, Ethereum does peer-to-peer transaction processing and contracts (ETH).

Using Ethereum wallets, investors browse their Ethereum accounts and conduct transactions. They use the online wallet to check their balance, send and receive payments, and connect to applications. Discover a list of online wallets to handle your Ethereum if you're interested in investing in Ethereum.

Vitalik Buterin founded Ethereum in late 2013 to solve the shortcomings of Bitcoin. Additionally, Ethereum is a helpful application platform with its decentralized financial ecosystem. The capitalization of ETH surpassed $25 million at its initial sale.

How does Ethereum work?

Ethereum is constructed on a public and decentralized blockchain. Every transaction is public, validated, and logged on the system. No one is permitted to alter the ledger's entries (blockchain).

Everyone can access a copy of the ledger and view all transactions on the system. Ethereum isn’t governed or maintained by a central entity or individual. All users with access to the system have peer rights.

Transactions on the blockchain employ cryptography to maintain the network's safety and security.

Verify transactions on Ethereum by solving complicated mathematical equations or "mining" with a computer to add new blocks to the Ethereum network. Participants who verify transactions receive Ethereum tokens as a reward. Ether is the token name for Ethereum (ETH).

Users utilize Ether for lending, borrowing, and trading (via DEXs - decentralized exchanges) of products and services.

According to the development plan, Ethereum will undergo four crucial stages, namely:

  1. Frontier
  2. Homestead
  3. Metropolis
  4. Ethereum 2.0

Ethereum is now prepared to enter phase 4.

Are Ether and Ethereum identical?

Ether is the name of the coin utilized by the Ethereum blockchain (ETH). Users swap, trade, invest, and store assets using ETH. Most cryptocurrency exchanges let customers acquire ETH. To purchase ETH, deposit cash (e.g., US dollars) by bank transfer or debit card into a cryptocurrency exchange.

Ethereum is a distributed ledger network that enables users to store and trade ETH. In addition to the ETH trading function, Ethereum includes several more features. Use Ethereum to store data through decentralized apps. Personal data or sophisticated financial transactions are examples of data.

Ethereum lacks a central authority that controls the whole blockchain network. The trading partners negotiate the purchase/sale and exchange of products and services according to the conditions disclosed in the smart contract.

The system automatically conducts transactions, delivering ETH to the receiver when they meet the contract criteria. Transaction parties don’t require the engagement of an intervening third party, unlike typical contracts.

Due to its immense potential, Ethereum is presently one of the most popular investment possibilities. Before investing in it, there are a few considerations to consider.

The versatility factor

Due to all the initiatives produced on its network, Ether's price has remained the same. Despite this, the blockchain has become the most trustworthy on the market. Its greatest strength is its adaptability and enduring relevance.

Furthermore, steady value appreciation might be considered more valuable given its long-term growth. While Bitcoin dominates the market for digital assets, Ethereum radically changes the game.

The Merge update in 2022

In 2022, Ethereum will transition to proof-of-stake. The Merge modifies how Ethereum operates.

The Merge aims to move the Ethereum blockchain from its current proof-of-work (PoW) consensus mechanism to a quicker, more secure, and more energy-efficient proof-of-stake (PoS) consensus model.

Modifying the second-largest blockchain requires many steps. Instead of miners, Ethereum will use significant stakeholders to validate transactions. To validate transactions and earn Ether, validators "stake" their funds. If they confirm illicit transactions, 'takers' lose their money. Using a validator, smaller investors receive incentives by committing currencies. The 'burning' of transition and transaction fees will result in less ETH and a deflationary cycle, allowing the currency to soar.

The cost

Since the beginning of 2021, Ethereum has not traded for less than USD 1000, and it remains the most popular cryptocurrency among crypto investors. The current Ethereum price is about $1589.

Interestingly, about the same time in 2021 that Ethereum achieved its all-time high of nearly $4,800, the notoriously high transaction price of the cryptocurrency plummeted by roughly 50%. The volatility of Ethereum in 2022 has increased recently.

At the start of 2022, Ethereum was valued at around USD 3,770. However, the value of the cryptocurrency continued to decrease until it hit about USD 2,400 at the end of January, its lowest level since July 2021.

The unpredictability

Solana and Cardano provide comparable services which compete with Ethereum. A crucial indicator for comparing Ethereum to its competitors is the number of active projects on each network. Despite Ethereum's early adoption, its competitors, such as Solana, are gaining popularity.

Consider the uncertainty of the cryptocurrency market at all times. Timing is critical when purchasing and selling bitcoin. You run the risk of losing your cryptocurrency investment due to market fluctuations.

The hazards

Ethereum may play a role in global computing and currency exchange, but beware of the hazards.

Investing in Ethereum, like investing in other cryptocurrencies, is dangerous. The extreme volatility of cryptocurrency increases profits but magnifies losses.

The past volatility of Ether's price might be a substantial drawback for certain investors, especially newbies. Additionally, the fluctuating nature of Ethereum's transaction fees is unattractive.

The others

Here are some considerations when deciding whether to invest in Ethereum. These are enumerated below:

Other considerationsDescription
Decreased inflation risk
Inflation is now a popular subject. Ethereum has a built-in inflation mechanism that is less susceptible to manipulation, reducing the likelihood that your coin will lose value.
People are drawn to Ethereum mainly because it is among the most liquid cryptocurrencies, meaning you can transfer it swiftly.
The volatility of the Ethereum market may be advantageous, as skilled traders recognize patterns and profit from them.
Other considerations when deciding whether to invest in Ethereum (2022)

Ether is the second-largest cryptocurrency in terms of market capitalization. It is a prominent blockchain network. It was introduced in 2015 and continues to evolve.

Ethereum is actively building a transaction processing version of Ethereum 2.0 that is more scalable, quicker, safer, and environmentally friendly.

Unlike other cryptocurrencies that merely utilize the blockchain to record transactions, Ethereum builds a network that enables developers to design decentralized apps. It is the basis for a De-Fi decentralized financial system that delivers safe and transparent financial services without intermediaries. In addition to dApps, Ethereum offers collectible digital assets known as NFTs.

How to purchase Ethereum?

Investing in Ethereum is easier than you believe. Here are five steps for getting started:

  1. Determine your risk level
  2. Pick a cryptocurrency exchange or an ideal platform
  3. Add funds to your account
  4. Purchase Ethereum
  5. Keep your Ethereum in either a hot or cold wallet.

Here is the procedure required to purchase Ethereum:

The financial benefit

Ethereum's designers and developers are well-respected members of the cryptocurrency world. On the cryptocurrency market today, there are around 3000 dApps built on 16 major blockchain platforms. On the Ethereum network, more than 2800 dApps have been constructed. There are more than 100,000 active users daily.

However, the transaction charge that helps to sustain the system's functioning is relatively significant and costlier than in the past and compared to many other systems. Ethereum also faces competition from Solana and Cardano, which offer comparable services.

Also, consider the volatility and unpredictability of the whole cryptocurrency market. Generate a substantial profit by purchasing or selling cryptocurrencies at the optimal time. However, accept the possibility of losing your money due to abrupt market volatility.

ETH is a currency to be considered for long-term investments. There are better solutions than this if you employ a short-term investing approach. 

Thinking about investing in Ethereum?

There are several cryptocurrency platforms and hundreds of distinct coins on the market. Devote a great deal of time to studying and evaluating to select the ideal platform and currency for investment.

In 2022, Ethereum 2.0 is anticipated to be finalized and implemented. This causes investors to pay increased attention to ETH. An update to Ethereum might drastically improve its value. We hope this essay on Ethereum has provided you with an overview of cryptocurrency.