Cryptocurrencies are relatively new assets for investment, but they have exploded significantly in value over the past year. They offer the advantages of high potential and accessibility. After Bitcoin, Ethereum is poised to be the next big thing in the crypto market. If there is one thing that’s constant about this market, it is its volatility.
Many investors see Ethereum as a better long-term cryptocurrency investment than a short-term one. However, there are some that see the short-term value in it.
Before you determine where this crypto network stands, it is important to understand what it stands for and its utility.
What is Ethereum?
Ether is Ethereum’s native cryptocurrency. Ethereum is a decentralized platform that enables smart contracts. These are programs on the blockchain that run when certain conditions are met. The platform also allows the development and execution of decentralized apps or DApps without the need for 3rd party interference or control.
A massive supply-demand mismatch is in the wake for Ether due to a number of reasons. The first one is the imposition of structural outflows of supply by the London fork. The second is the unsteady rollout of Ethereum 2.0. A short-term upside is expected and a matching bull run in this market because of the demand mismatch.
Some of the key risks during this short-term scenario include:
- There can be short-term sell pressure and this can lead to a fall in volatility. Current investors may be forced to liquidate.
- There can be strong competition from other Layer 1 networks
- Potential clampdowns on fiat-crypto gateways by regulators
Why Ethereum Makes a Good Long-Term Investment?
Ethereum is expected to become a viable long-term investment platform. It has the network effect working in its favor. The network effect refers to a system where users find value in a service. The platform has a huge ecosystem of DApps. Almost 805 of all DApps are developed on it and the numbers are increasing at a fast pace.
Ethereum has a supportive community of developers formed around it. The result is a steady but sure increase in the use scenarios of the blockchain.
The platform’s only major challenge is scalability. This arises from its dependence on the PoW consensus system. However, when Ethereum 2.0 fully rolls out, this problem is expected to vanish. It has a first-mover edge and vast adoption. These factors are expected to keep it ahead in the arena of decentralized finance. It also stands out for its excellent record in the areas of up-time and security.
There are many factors working in the long-term investment profile of Ethereum.
Broader Exposure to the Crypto Market
Ethereum offers broader exposure to investors to the crypto market. It was developed, not just as a decentralized alternative to digital money, but to demonstrate how a blockchain network can be used in other scenarios. It was also created to provide a platform for developers to easily deploy DApps.
There is more to it than just trading and holding Ether. It can be used to host many other cryptos using its token system. Many cryptos and DApps are developed on or run on this platform. Ethereum also gives you exposure to internet assets such as non-fungible tokens (NFTs). The platform is expected to create even more asset classes in the future.
Ethereum’s value lies in expanding its functionality, allowing users to create unique applications. This is expected to significantly increase its demand over the long term.
Many institutional investors now see Ethereum as a viable platform for the storage of value. Cryptocurrency has strengthened its stature as an institutional asset class in the past year, encouraging the following entities from taking positions in Ethereum:
- Investment firms
- Wealth managers
This significantly increases the long-term viability of this platform for investment.
If you are interested in bitcoin trading, visit Ethereum Code. Its deflationary nature means Ethereum can counter the inflationary pressure created by the creation of new coins.
Once Ethereum 2.0 is fully rolled out, it is expected to improve the platform and significantly improve its long-term prospects. Thus, there are many reasons why Ethereum is seen as a better long-term investment instrument. Last year, ETH gained a significant amount of purchases. Long positions outnumber short positions by a big margin. With ETH 2.0, the transactions will become more affordable and faster. Thus, there are many factors favoring the long-term position in this cryptocurrency.