Is Ethereum a Good Investment?

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Ethereum

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As one of the leading cryptocurrencies in terms of market capitalization and technological advancements, Ethereum has established itself as a leading blockchain platform with strong utility and potential for growth. But with the volatile nature of the cryptocurrency market, many investors are left wondering, is Ethereum a good investment?

In this guide, we will delve into the factors that make Ethereum an attractive investment option, as well as the potential pitfalls to look out for. Whether you are a seasoned investor or a curious beginner, gaining insights into Ethereum's investment potential can help you navigate the complexities of the digital currency market.

Understanding Ethereum: An Overview

Ethereum is not a cryptocurrency — it’s a global computer for running decentralized apps (dApps). Ether (ETH) is the cryptocurrency that powers the Ethereum network, and it's the required form of payment for running your app or processing your transaction on the highly-desired Ethereum blockchain. 

While Bitcoin is really good as a store of value, it doesn't support smart contracts like Ethereum does. Arguably, Ethereum is equally capable as a store of value. This being said, many prefer bitcoin to store value because of its hard-capped supply. While both the supply of Bitcoin and Ether are increasing, there will never be more than 21 million bitcoin in circulation. With Ethereum 2.0 and EIP-1559 however, Ether may become deflationary, that is, the supply of the token will actually decrease with time.

Ether has been competing with Bitcoin for the top spot as the largest cryptocurrency by market capitalization since its release in 2015 and came close to overtaking Bitcoin in February 2018. Both of these coins have hit new all-time highs since then, and there appears to be more room for both to grow in 2024. Some experts predict Ethereum will "flip" Bitcoin this market cycle to become the dominant cryptocurrency in the industry.

How Ethereum Has Performed Since Launch & in 2024

Ethereum has had a volatile price history since its launch in 2015. In its early days, Ethereum was trading at just a few dollars per coin. However, during the cryptocurrency boom of late 2017, Ethereum reached a high price of over $1,400. In Nov. 16, 2021, it reached an all-time high of $4,891.70. Since then, Ethereum's price has fluctuated significantly, driven by factors such as market speculation, technological developments, regulatory news and overall market sentiment.

How Did Ethereum Perform in 2023?

In 2023, Ethereum performed exceptionally well, experiencing significant growth in its value and market capitalization. The implementation of Ethereum 2.0 brought about scalability improvements and lower transaction fees, making the platform more efficient and attractive to investors and developers. The rise of decentralized finance (DeFi) applications also boosted Ethereum's performance, as more projects were built on its blockchain. Overall, Ethereum solidified its position as a leading smart contract platform and continued to show strong growth potential.

How Much is Ethereum Right Now?

As of Jul. 18, 2024, Ethereum (ETH) is priced at $3,406.85

Ethereum Price Prediction

Price predictions are not always accurate, but a Ethereum price forecast can highlight potential investment opportunities. Benzinga has compiled important information regarding ETH future prices to address questions about whether Ethereum will rise in value. Discover ETH price forecasts here.

Where to Buy Ethereum

Decided you want in on the Ethereum action? Listed below are a handful of exchanges where you can purchase Ether. If you're new to crypto, jump to our guide on How to Buy Ethereum or compare exchanges with the Best Cryptocurrency Exchanges guide.

Advantages of Ethereum

The overwhelming performance of Ethereum has attracted traditional and institutional investors alike. Ethereum and other cryptocurrencies provide you with the following advantages over traditional investments that point to Ethereum being a good investment:

• Volatility: While this was previously seen as a negative, smart investors have realized market cycle patterns and are able to capitalize on the parabolic gains produced by market bubbles.
• Liquidity: Ethereum is arguably 1 of the most liquid investment assets due to the worldwide establishment of trading platforms, exchanges and online brokerages. You can easily trade Ethereum for cash or assets like gold instantly with incredibly low fees. The high liquidity associated with bitcoin makes it a great investment vessel if you’re looking for short-term profit. Digital currencies may also be a long-term investment due to their high market demand.
• Lower inflation risk: Unlike world currencies — which are regulated by their governments — Ethereum has a transparent inflation plan that is subject to less meddling. The blockchain system is infinite, and there’s no need to worry about your crypto being deflated.
• Decentralized finance: Ethereum and DeFi are relatively young — non-fungible tokens (NFTs) and many other new applications are becoming more mainstream on a daily basis. This newness brings unpredictable swings in price and volatility, which may create opportunities for massive gains.
• Finality: The consensus mechanism of a blockchain ensures the integrity and security of the transaction record. Ethereum offers customizable consensus methods such as RAFT and IBFT for enterprise networks, which provide quick transaction finality and require less infrastructure than the Proof of Work algorithm.
• Tokenization: Ethereum enables businesses to represent any digitally registered asset as a token. By tokenizing assets, companies can diversify their product offerings (e.g. unique paintings), develop new incentive models, as well as fractionalize previously large assets (e.g. real estate) and allow for crowdsourced data management.

Disadvantages of Ethereum

Ethereum may play a part in the future of monetary exchange and global computing systems, but it is equally important that you are aware of the concerns surrounding cryptocurrency investing. However, a few are certainly overblown (or will be fixed soon) and mistakenly make some investors think that Ethereum is a bad investment.

• Volatility: If you happened to buy Bitcoin on December 17, 2017, the price was $20,000. Weeks later, you couldn’t sell your investment for more than $7,051. Although you would be doing great now, to avoid painful losses in the short term, keep a close eye on the market. This isn't a unique disadvantage for Ethereum as all cryptos (except for some stablecoins) are volatile so this alone doesn't make Ethereum a bad investment by any means..
• High transaction fees: Arguably Ethereum's largest drawback, transaction fees, hold back the network from reaching mainstream adoption. Using Ethereum's blockchain can cost hundreds of dollars, so retail investors with smaller amounts of capital are priced out from using the network. While other smart contract blockchains have cheaper fees, Ethereum has the most applications and use cases built on its blockchain.
• New regulation: The government is unlikely to let cryptocurrencies remain completely unregulated for long. New regulations could interfere with business models, and cause crashes that are entirely out of your control.
• Threat of online hacking: Hacks are a threat facing many cryptocurrency investors. Most exchanges let you buy and sell your cryptos using a mobile app or website. However many users also store their crypto on exchange wallets. This leaves them susceptible to losing their investments should the exchange get hacked, and their private keys being stolen. Cryptocurrency held on most exchanges isn’t insured by the Federal Deposit Insurance Corporation (FDIC).
• Competition: There are a ton of emerging smart contract platforms giving Ethereum a run for its money, namely Binance Smart Chain, Cardano and Polkadot. While these cryptocurrencies offer better scalability than ETH, they lack decentralization and the robust DeFi ecosystem that Ethereum has on its network.
• Proof of Work consensus: Although Bitcoin also uses proof of work consensus, this is more of a con for Ethereum. Transactions on Bitcoin are only necessary to transfer the crypto, while Ethereum's network is used for a variety of functions. Proof of work is more expensive and slower than proof of stake, which is currently being used by many ETH competitors.

Ethereum Trading Signals

IntoTheBlock provides a fantastic suite of fundamental and technical trading signals to help you make your own informed decision on whether Ethereum is a good investment or not.

How to Store Ethereum Safely

So, is Ethereum a good investment? It can be if you do your research, manage your coins properly and keep an eye on the market. Crypto investing is not as simple as calling a broker and buying or selling. You are actively involved in the process, and that means you need a wallet. Cryptocurrency wallets are a fundamental part of the ecosystem, giving you the ability to easily send and receive money.

There are two types of wallets: software and hardware. MetaMask and Exodus Wallet are typically the best route to go for software wallets, and the Ledger Nano X is the best hardware wallet.

Ethereum NFTs

A key driver for Ethereum's blockchain is the rise of NFTs. Almost every high-value NFT is secured by Ethereum's blockchain, including CryptoPunks, Bored Ape Yacht Club, and Art Blocks. Many new users on Ethereum were drawn to its network to invest in NFTs, so if NFTs continue to breach into the mainstream, it's likely Ethereum will continue to gain adoption. While other platforms like Solana and Avalanche have NFTs, the market for non-fungible tokens on these blockchains is magnitudes smaller than that of Ethereum.

Disclaimer: Do not take out a loan to invest in cryptocurrencies like Ethereum. Do not purchase them with credit. Do not do anything that could endanger you or jeopardize your financial future. If you aren’t sure how much risk you are capable of handling, consult a financial advisor who is trained for this.

Ethereum vs. Other Investment Options

Bitcoin and Ethereum have completely different use cases. Bitcoin acts as a store of value, similarly to gold. Ether acts as a store of value too, while the Ethereum Virtual Machine enables a host of innovative applications such as DeFi, NFTs and the metaverse.

The Ethereum Virtual Machine allows coders to write programs called “smart contracts.” Ethereum smart contracts can automate thousands of financial products and are the building blocks of NFTs. These smart contracts enable full-fledged applications like decentralized exchanges (DEXs) and automated market makers (AMMs).

While very basic smart contracts are technically possible on Bitcoin's blockchain, Ethereum's custom programming language and huge team of developers make it the likely long-term settlement layer. Bitcoin's blockchain acts as a decentralized ledger for processing payments. Ethereum is a ledger with a full computer attached, allowing much, much more than just processing payments.

As far as which of the two is a better investment, it's impossible to say for sure. It’s likely that both Bitcoin and Ethereum will stand the test of time and coexist peacefully in the future. Bitcoin is ahead now but Ethereum seems to be the clear winner in terms of utility though it is generally more volatile. At the end of the day, your investment decisions must be made by you (or an investment advisor). The best thing you can do is to educate yourself as much as possible before risking any of your hard-earned money, and never invest money you aren’t willing to lose entirely. You don't want to end up on the front page of Wall Street Bets, after all. 

Should You Invest in Ethereum?

Investing in Ethereum can be a risky but potentially rewarding venture. As one of the largest and most established cryptocurrencies, Ethereum has a strong community and a wide range of use cases beyond just digital currency. Its smart contract functionality has enabled the development of decentralized applications and other blockchain innovations. However, like any investment, there are risks involved, including market volatility and regulatory uncertainties. It's important to do thorough research and understand your risk tolerance before deciding to invest in Ethereum.

Frequently Asked Questions

***Information is not intended for U.S. users