Ethereum (ETH) is an open source, blockchain-based distributed computing platform and operating system featuring smart contract functionality. Unlike Bitcoin, Ethereum offers low transaction costs. In 2014, when the project was announced, its ICO raised $18 million in Bitcoin or $0.4 per ETH. The project went live in 2015, and in 2016 the market price reached $14 with a market capitalization of over $1 billion.
What Is Ethereum (ETH)?
It is a platform for the creation of decentralized online services based on blockchain and smart contracts. The concept of Ethereum was developed by the founder of Bitcoin Magazine Vitalik Buterin at the end of 2013, and the network was launched on July 30, 2015. Being an open source platform, Ethereum greatly simplifies the introduction of blockchain technology, thus attracting not only new startups but also the largest software developers, such as Microsoft or IBM.
To create a cryptocurrency (crypto asset) on Ethereum, you need first to create a smart contract, and then start paying registration fees for each transaction. For cryptocurrencies, smart contracts contain parameters of the crypto token and the logic behind it.
Trading: Benefits and Risks
There are three ways to make money off the ethereum cryptocurrency: speculation on stock exchanges, mining, and trading contracts for difference (CFDs). The first option has become outdated because the asset growth perspectives are not so large in 2019 as compared with the last year. Besides, the opening of short positions on the exchange requires a loan from a broker, which leads to additional risks without guarantees of earnings.
Mining is still relevant, but it is very expensive. It requires a lot of investment in equipment. Therefore, Crypto trading is the optimal way to make money on ethereum. As compared with speculation and mining, it has the following advantages:
- An opportunity to earn at lower prices. Instead of a long position, you need to open a short one. The mechanism of earnings is simple: with a decrease in the cost of cryptocurrency, another asset in a pair grows in value.
- Cryptocurrencies are extremely volatile. Therefore, they are suitable for scalping – ultra short-term trading. On Forex, you can make deals for a couple of minutes, which is convenient in volatile markets. With proper scalping, profits can be made much faster.
- No need to physically buy cryptocurrency.
As compared to other methods, trading ETH on the crypto market has the following disadvantages:
- Due to the volatility of cryptocurrency, trading ethereum is not recommended for beginners.
- The lack of knowledge of fundamental factors makes transactions riskier, while a pure technical analysis is associated with a lot of false signals.
- Because of the large market noise, it is difficult to use automated advisors.
To minimize these risks, you should leave only a small part of the trading portfolio for the cryptocurrency, diluting it with less volatile instruments.
Today there are two main ways to invest in Ethereum – do it either directly (that is, just invest money in the purchase of cryptocurrency) or indirectly (invest in projects related to the platform).
Most experts agree that Ethereum is not yet the cryptocurrency that needs to be bought and stored in huge amounts for a rainy day. But if you correctly catch the moment of rate fluctuations, you can reach quite a decent profit over a short period of time. For example, you can buy Ethereum at $100 and sell it at $400 in a couple of months. Moreover, Ehthereum’s market cap and price are growing ($33,065,699,505 and $309.49 as of July 2019, respectively), so buying this cryptocurrency today is quite a promising solution.
Investment in Projects
Experts at CoinMarketCap estimate that 7 out of the 10 largest crypto assets are based on Ethereum. For example, the top projects are currently UNUS SED LEO with the market cap of $ 1,540,334,028, Chainlink with $1,081,852,398, and Maker with $734,791,316. Many large investors are inclined to believe that it is strategically more beneficial not just to buy Ether, but invest in projects related to the platform. After all, roughly speaking, Ethereum is nothing more than the blockchain token of Ethereum, a huge platform for creating decentralized applications.
Famous People Talking About Ethereum
Here’s what some prominent people have to say about Ethereum:
“The thing that I often ask startups on top of Ethereum is, ‘Can you please tell me why using the Ethereum blockchain is better than using Excel?’ And if they can come up with a good answer, that’s when you know you’ve got something really interesting.”
– Vitalik Buterin, founder of Ethereum
“I love this stuff – bitcoin, ethereum, blockchain technology – and what the future holds.”
– Abigail Johnson, CEO, and President of Fidelity Investments
“Sales conducted on-chain through smart contracts couldn’t really be done before Ethereum, which is why they are a newer concept. I think this style will become the most common over time.”
– Fred Ehrsam, co-founder of Coinbase
“Whatever happens to bitcoin, other cryptocurrencies are gaining ground and more respect. Ethereum, for instance, has far more transparency.”
– Richard Quest, journalist
Ethereum in the Nearest Future (2019 – 2020)
Currently, it is quite difficult to predict the price of Ethereum. Ethereum, however, is definitely developing as a currency due to the smart contract opportunities. Despite the huge gap in terms of market capitalization, there seems to be a wider gap between Bitcoin and Ethereum when it comes to usage.
Crypto analyst Bobby Ulleri uses in his forecast a model based on the global economy and the role that the distributed database technology will play in it. According to Ulleri, Ethereum will account for 25% of the total cryptocurrency market, which by 2020 will be valued at $4.5 trillion. Since the maximum number of ETH tokens is not limited, Ulleri uses in his calculations the number 100 million suggested by the creator of cryptocurrency Vitalik Buterin. Thus, it turns out that Ethereum’s capitalization will be $1 trillion in 2020, and the cost of one token will be about $11,000.
In order for Bobby’s forecast to come true, Ethereum has to rise in price by 770% compared to its historical maximum of $1,448. This figure does not seem unrealistic, because we remember that Ethereum grew by 10,000% in 2017. In this case, only the analyst’s statement regarding the growth of market capitalization can be questioned. For such a significant increase to occur, it is necessary to attract the capital of large companies, and this will largely depend on the position of the authorities regarding cryptocurrencies.
Source: Monfex Research (monfex.com)