Well that didn’t last long. Ethereum (CCC:ETH) cracked the $2,500 mark for the first time on April 15. But the crypto currency is down at around $2,290 less than a week later. It’s hard to tell if that means anything. It probably doesn’t. For crypto enthusiasts, volatility is a constant.
There seems to be an interesting phenomenon with cryptocurrencies. Normally, investors have to be motivated to buy and hold. But in the crypto world, it seems people need motivation to sell. Maybe that’s because this is an asset class prone to wide swings.
Even when the crypto market has a sell-off, true believers remain.
That’s something to consider as you look at the price of Ethereum.
On the one hand, even understanding all the uses for the underlying blockchain technology, I can’t say it’s a great value at the moment.
And at the same time, I know that the price could drop much further and individuals would hang on.
Maybe this is just what will happen as long as retail investors stay in control. Which is why I say buying Ethereum makes sense. At least you’re buying more than a digital currency — you’re buying the underlying technology.
I’ve become aware of Ethereum’s role in facilitating the sale of non-fungible tokens (NFTs). I won’t pretend to be an expert in this latest trend. But suffice it to say, it’s serving as a catalyst for ETH, which is becoming widely accepted as a payment method for these NFTs.
Winner Takes Most
When I last wrote about Ethereum, I mentioned that as Ethereum 2.0 takes shape, the Ethereum blockchain will offer increased latency. This may boost Ethereum at the expense of altcoins like Ripple (CCC:XRP) and Stellar Lumens (CCC:XLM).These coins have been gaining popularity by capitalizing on their higher latency over the Proof-of-Work (PoW) Ethereum.
I wanted to revisit that, because it brings to mind the nature of competition among cryptocurrencies. Altcoins such as Ripple and Stellar Lumens popped up to address what the creators viewed as a shortcoming of Ethereum. So when Ethereum responds in the way it has (moving to a proof of share, rather than a proof of work system), it’s fair to wonder why.
After all, the cryptosphere was supposed to be more egalitarian and less about a “winner take all” mentality. But this sure sounds like an effort to take most, if not all of the applications that programmers want to place on the blockchain.
It’s been long theorized that one reason so many digital coins have cropped up is because the cost of entry is relatively low. However, the other side of that argument would point out that coin founders have been able to make significant profits.
Does that mean that the goal of many of these altcoins is to help make Ethereum better? Or is it simply to entice speculation? And does that really make Ethereum better?
Ethereum Remains a Buy
I’m curious to see how democratic the blockchain will remain. Right now, although some competing blockchains exist, Ethereum is the largest and the go-to blockchain for decentralized finance (DeFi). As more applications are added to the blockchain, it stands to reason that Ethereum will be the primary platform. And for that reason alone, it’s worth a long position for speculative investors.
However, I don’t think the bullish case for Ethereum is as simple as saying you’re buying the internet in 2000. After all, there is only one internet. But there are becoming more blockchains. But that’s a story for a different day.
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for Investor Place since 2019.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.