Ethereum, also commonly known as Ether, is the second largest cryptocurrency in the world behind Bitcoin and, like any digital currency, has experienced its fair share of ups and downs over the course of its relatively short life.
Ethereum’s price soared to a record $ 4800 at the end of 2021, which meant an increase of more than 900% over the previous 12 months and sparked speculation that Ether would surpass Bitcoin’s value.
However, Ether was not immune from the crypto routing of May 2022 and lost value along with many other cryptocurrencies. Ether is now trading at $ US1423 (as of July).
What are cryptocurrencies?
In the truest sense of the word, cryptocurrencies are a digital medium of exchange that uses cryptography as a form of security. However, in more recent times, the term “cryptocurrency” has evolved to encompass a decentralized financial system (DeFi), a highly volatile asset class that can plummet or rise following a Tweet, a space in which attackers can steal. identity and money of vulnerable investors, a way of diversifying assets and a form of digital payment.
Ethereum once had an effective market cap of around $ 250 billion, however, it recently lost more than $ 100 billion in value due to the cryptocurrency crash of May 2022 and is now at around $ 135 billion in market cap.
If you’re familiar with Bitcoin but less interested in its closest rival, here’s what you need to know about Ethereum including why, someday, it may still become the dominant player on the cryptocurrency stage.
First, a crypto wealth warning
It is not necessary to follow the financial world so closely to know that cryptocurrencies have become one of its biggest stories in recent years.
Nowadays, they worry the thoughts of governments and major financial institutions alike, and they split opinion as to whether they are essentially Ponzi schemes that need to be strictly regulated or are simply volatile asset classes for investors who love a bet. high risk.
If your financial plans revolve around capital preservation – holding on to what you have – then the volatile behavior of cryptocurrencies is definitely not for you.
Last month, Jerome Powell, chairman of the US Federal Reserve, described cryptocurrencies as nothing better than “vehicles for speculation.” And at its AGM in May, legendary Berkshire Hathaway vice president and investor Charlie Munger said that Bitcoin is “disgusting and contrary to the interests of civilization.”
Comments like these, however, fail to discourage millions of enthusiasts around the world from trying to make money with cryptocurrencies, including Bitcoin. This includes Australians, who are getting into more and more action: recent research by Roy Morgan revealed that 5%, or more than a million adult Australians, own at least one cryptocurrency.
If that includes you, Laith Khalaf, a UK financial analyst at broker AJ Bell, offers some simple guidance: “Those looking to gain exposure to cryptocurrencies should only do so with a small amount of money they are willing to lose,” he suggests.
It is worth adding that cryptocurrency investments are not regulated in Australia, as well as in most EU countries and the UK, and there is no consumer protection if things go wrong.
Which brings us back to Ethereum.
What is Ethereum?
According to the online broker eToro, Ethereum is unique in the cryptocurrency universe.
Ethereum, released in 2015, embraces an open source software platform that developers can use to create cryptocurrencies and other digital applications.
Ethereum’s native cryptocurrency is called Ether (the trading ticker is ETH), while Ethereum actually refers to a specific blockchain technology, the decentralized distributed electronic ledger that tracks all transactions. Ledgers are the foundation of cryptocurrency transactions.
Think of Ether as the cryptocurrency token derived from the Ethereum blockchain. A blockchain allows for the secure transfer of encrypted data, making counterfeiting nearly impossible. As with Bitcoin, these tokens are currently being “mined” via computers that solve mathematical problems.
Bitcoin also uses blockchain technology (see above for the differences between the two cryptocurrencies), but Ethereum is considered more sophisticated and can be used to run applications. It is this aspect, some commentators say, that could one day help him divert Bitcoin from the top spot in cryptocurrency.
In recent times, Ethereum’s popularity has grown among both retail and institutional investors.
What are the advantages of buying in Ethereum?
According to eToro, Ethereum can easily be traded or exchanged for other cryptocurrencies.
Additionally, the broker says the cryptocurrency can be used by a growing number of online and brick-and-mortar retailers. Transaction times are faster than for Bitcoin, and it also provides access to a number of decentralized applications (dApps) that allow developers to create new online tools.
Advances in the retail payments sphere were highlighted in March 2021 when UK-based Christie’s became the first auction house of its kind to accept Ether as payment for a Beeple artwork. Called “Everydays: The First 5000 Days”, the purchase price was $ 69.3 million.
At the end of April 2021 and confirming the growing interest of the financial sector in the sphere of cryptocurrencies, the European Investment Bank issued its first two-year digital bond of 100 million euros via the Ethereum blockchain.
Meanwhile, in early May, the S&P Dow Jones launched several cryptocurrency indices, including one for Ethereum, aimed at measuring the performance of digital assets.
How do you buy Ethereum in Australia?
This can be done via a cryptocurrency exchange like Coinbase or via online platforms like Gemini, Kraken or eToro. You can also choose from a range of Australian-based exchanges, such as CoinSpot and BTCMarkets, which allow users to buy cryptocurrencies with AUD, including via bank transfers, in some cases, or via BPAY.
You create an account with your chosen provider confirming your place of residence and identity and then connect to your bank account to purchase the currency. The fees vary from one provider to another and may depend on the amount you wish to deposit, (if any) withdraw and the transactions you wish to make.
Payment methods may include PayPal debit / credit cards and wire transfers. New investors may need higher levels of customer support than experienced traders.
Could the price of Ethereum go up again?
In the world of cryptocurrencies, few things can be taken for granted and there are no certainties. And as we noted above, there are many prominent figures in the financial community who have deep reservations about the safety, perhaps even the feasibility, of the general concept of cryptocurrency.
But Nigel Green, chief executive and founder of the international financial advisory firm deVere Group, previously suggested that Ethereum is the cryptocurrency to watch: “Ether can be expected to significantly affect Bitcoin’s market dominance in the coming year, and beyond. Compared to its bigger rival, Ethereum is more scalable, offers more uses and solutions, such as smart contracts that are already used in many industries, and is backed by superior blockchain technology, “he added.
AJ Bell’s Laith Khalaf acknowledges Ether’s relative strengths within the cryptocurrency context, but recommends extreme caution: “Ether, or Ethereum, is more flexible than Bitcoin because it is programmable on a per-use basis, so it can be used. to verify commercial transactions or contracts such as in addition to making payments.
“However, the value of that asset is still only what someone else will pay for it, and while that may be enough right now, once the cryptocurrency fever subsides, it may not be worth the code it’s written in. ”
This article is not an endorsement of any particular cryptocurrency, broker or exchange nor does it constitute a recommendation of cryptocurrency as an investment class.