Ethereum Under $1,200: The Easiest Reason to Buy Now!





At its peak, Ethereum (ETH 0.71%) had a market capitalization of just under $550 billion. Today, Bitcoin (CRYPTO :BTC) and Ethereum combined have a market capitalization of less than $550 billion. Needless to say, the crypto selloff was fast and brutal.

The fact that Ethereum is down nearly 80% from its peak is a compelling reason to consider buying it now. However, an even better investment thesis is the multi-decade growth that Ethereum could achieve if it transitions from crypto industry-specific utility to real-world applications. Here is a simple explanation of why Ethereum might be a good buy now, and a better investment than Bitcoin for some investors.

digital energy

For now, Bitcoin and Ethereum both have “proof of work” type consensus mechanisms that use computing power to mine tokens, verify and perform transactions, and support and power the network. Ethereum’s native currency, the ETH token, is used to pay for so-called “gas fees”. The gas feeds the network. ETH is used to verify transactions and is the currency of Ethereum. See the article: Here’s How Cardano Massively Outperforms Bitcoin and Ethereum and Avoids Market Drop. BTC, the native currency of Bitcoin, functions similarly to the ETH token. However, Ethereum is moving from proof-of-work to proof-of-stake, which should speed up transactions and reduce costs (more on that later).

Although they work more or less the same way, the practical use cases for bitcoin and ethereum have expanded in recent years. Bitcoin is best suited as a store of value and a medium of exchange. But it is Ethereum that is the real engine for the growth and development of the crypto industry. You have probably heard of bitcoin as digital gold. Ethereum is closer to digital energy.

Ethereum differentiators

The Bitcoin White Paper was born out of the financial system’s collapse in 2008, as a global medium of exchange that could operate independently and without interference from sovereign nations. See the article: Dogecoin Price Prediction: Interest in DOGE wanes as buyers can’t prevent a 14% drop.. The people who started Ethereum built on the starting point of Bitcoin realizing that the blockchain – a distributed public ledger – can be used for much more than transactions and payments.

Smart contracts are at the heart of Ethereum’s usefulness. A smart contract automatically executes based on a pre-determined set of conditions. In other words, “if x happens, do y”. Examples include insurance contracts, loans, real estate contracts, etc. But smart contracts can be used in virtually any industry. The main advantage of smart contracts is that they are fair, transparent and instantaneous, which reduces administrative costs and speeds up the payment of claims.

Ethereum is also the currency for most non-fungible tokens (NFTs). The second in importance is Solana.

The vast majority of current decentralized finance (DeFi) protocols run on Ethereum. However, many of these protocols and decentralized applications (dApps) are still in beta stage or are mostly used to help other crypto projects perform better. Like the internet in its early days, crypto has so far failed to penetrate the lives of everyday consumers.

So, while bitcoin is a better store of value, Ethereum is more like a hub around which most of the creativity and venture capital funding in the crypto world revolves. Ethereum is a much better investment for people who think decentralized blockchains will one day have practical use – like smart contracts that automatically run an insurance policy. Conversely, bitcoin is best suited to investors who believe blockchains are best used as a form of security against centralized institutions and as a pathway to ownership and control of one’s wealth.

Some risks to consider

Unlike bitcoin, which is virtually unopposed in terms of security and longevity, Ethereum is a riskier and more rewarding asset. Solana and Cardano are just a few of the many layer 1 blockchains that compete with Ethereum. On the same subject : Binance CEO CZ Applauds Axie Infinity Team: AXS Prepares for Recovery.. Like Ethereum, these blockchains provide the foundation upon which Layer 2 protocols can be built. You can think of Ethereum as a smartphone, Layer 2 protocols as apps on the smartphone, and creating and executing smart contracts as things those apps do.

To be more competitive, Ethereum has planned an upgrade – formerly known as Ethereum 2.0 – that will move Ethereum from the previously discussed proof-of-work consensus mechanism to proof-of-stake. This should make the network faster and safer while significantly reducing gas costs. However, the project is continually delayed. And if it goes wrong, it could pose a security threat to Ethereum.

What’s more, a competing Tier 1 blockchain could one day surpass Ethereum and offer a better set of services. There is only one Internet. And a lot of people think there can only be one layer 1 blockchain in the end. So far, however, these blockchains have been able to coexist and grow. We could see multiple layer 1 blockchains coexisting and providing different speed and security benefits.

Reasons not to buy Ethereum

The sale of Ethereum coupled with the growing investment in DeFi provides an attractive investment opportunity. But if you don’t believe in practical use cases for layer 1 blockchains or just want to see the network become more sophisticated, it’s perfectly understandable not to buy Ethereum or buy Bitcoin instead.

Ethereum has only been around since 2015 – which seems like an eternity in the crypto space. But in reality, it is only in its infancy. The liquidation of the crypto provides an excellent stress test for the long-term stability of the crypto and the exchanges that support it. If crypto can ride through another prolonged bear market and then re-enter a period of growth, that will go a long way in building confidence that crypto is not just a passing fad.

Thomas E.
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