In the crypto market, you will find the cryptocurrency Bitcoin, which is at the forefront. This is the most popular cryptocurrency available today – and it has been for many years. But Ethereum follows close behind, and undoubtedly gives Bitcoin tough competition.
Together with Bitcoin, Ethereum is seen as one of the best options when it comes to investing in cryptocurrency. However, many end up in the typical trap where they think Ethereum (and Bitcoin) have already reached the top.
But it is as far from the truth as it is possible to get. It is important to remember that cryptocurrency is generally associated with high volatility, which means that the value of the currency fluctuates to a very high degree, which means that we can determine exactly that with confidence. The value of Ethereum has not reached the top yet – and the value can still rise to unprecedented heights.
It is also not uncommon for many to choose Bitcoin over Ethereum without blinking, but sometimes it pays to think a little about it. In this article, we will take a closer look at why you should do just that in connection with investing in cryptocurrency and Ethereum.
Possible periodic growth in the Ethereum price
As already mentioned, volatility is a concept that is often heard in connection with cryptocurrency. Volatility can be both high and low, but in connection with most cryptocurrencies, volatility is high.
In practice, high volatility means the value of the cryptocurrency can fluctuate sharply. One day it may be worth a lot of money, while the next morning has gone straight to the bottom. New investors often think that these fluctuations are scary, and choose to sell off what they have when something like this occurs.
But as an investor, it can actually pay to have some ice in your stomach. Because even though the last few months have been characterized by Ethereum’s transaction costs being extra high (and thus pushing down the value of the cryptocurrency), there is no reason to believe that it will continue like this.
The developers of Ethereum work day and night to get this sorted out, and then the introduction of Layer 2 and the upgrade to Proof of Stake played an important role. And when this is in place, there will probably be a periodic growth in the Ethereum price.
Introduction of Layer 2
In connection with Layer 2 , it is important to emphasize that there are different solutions that can be used. The developers of Ethereum have chosen to use plasma chains.
The plasma chains are simply separate block chains ( read more about block chains ) that act as a smaller copy of the blockchain of Ethereum. These blockchains are anchored in the Ethereum blockchain in the same way as the ordinary Ethereum blockchains.
Have you heard of something similar, but it had a different name? Was the name then child chains instead? This is the nickname for the plasma chains, so these two terms refer to the same thing.
The purpose of this is to secure the Ethereum blockchain even more. The load from the transaction volume is of course large, but the plasma chains cause the load to be spread over several block chains, which is only positive for the block chain itself!
See more about what Layer 2 is and what this means:
Upgrade to Proof of Stake
In order to compete with Bitcoin, Ethereum has to increase the speed of the blockchain, and this is where the upgrade of Proof of Stake comes in.
In the past, Proof of Work has been important on the Ethereum blockchain, but it has led to an excessive consumption of electricity for a single transaction – and that is without a doubt very unfortunate. Therefore, the developers of Ethereum have had to try something else.
And what the developers of Ethereum have done is replace Proof of Work with Proof of Stake . They have simply changed the consensus mechanism of Ethereum, and anyone with some knowledge of this knows that this is a fairly large change that must be made very carefully – but it has proven to be profitable for Ethereum.
With that said, this is not a change that has happened overnight. It was started already in 2020, and only now are the developers ready to take the last step that moves to the entire blockchain over to Proof of Stake. The process has thus taken two full years!
The total amount of Ethereum is infinite
It is not to be underestimated that Bitcoin and Ethereum are very similar. But there is an important difference here, and that is that the developers of Bitcoin have already limited the amount of Bitcoin that can exist. The developers of Ethereum have not done that.
There are only 21 million in Bitcoin – this is something we have known since Bitcoin took the world by storm. In practice, this means that Bitcoin is a deflationary currency, but it is not Ethereum. Ethereum is the opposite – an inflation currency.
Ethereum is an inflation currency, because the developers did not pre-determine the number of available units, but instead chose to regulate this annually. This means that the number of Ethereum is theoretically more or less infinite. Every single year it issued new amounts of Ethereum, and the consequence of this is an inflation that drops steadily every single year.
However, it will be exciting to see how a complete transition from Proof of Work to Proof of Stake will affect this. Maybe Ethereum ends up being a deflationary currency?
Is it wise to invest in Ethereum now?
Next year (2023) it will be 10 years since Ethereum appeared on the crypto market. The cryptocurrency is thus 10 years old, and it will probably make many people think that Etherum is outdated. And then there is the other in addition to this.
In recent years, Ethereum has been characterized by the blockchain’s scaling problems, that the blockchain’s transactions do not happen as quickly as consumers want and that a transaction has led to a very high consumption of electricity – and despite this, prices have been far too high.
However, as we have seen above, Ethereum has taken specific steps to prevent this – but this is a process that has undoubtedly taken time. As a result, Ethereum is based on one of the most active ecosystems in the crypto industry.
Because of this, there is absolutely good reason to believe that Ethereum will be a safe investment target for many years to come. In other words, you can take what the skeptics say with a good pinch of salt!
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Tips for investing in Ethereum
No matter what time you invest in Ethereum (whether you have already done so, are considering doing so in the near future or maybe sometime in the future), it is important to think carefully about it before jumping into it with both legs. Here are some tips to keep in mind when investing in Ethereum:
- Think carefully about the case and find out what you want to do. You have to decide on this in order to devise a strategy that will work in the long term. There is a big difference between making a long-term investment and wanting to speculate a little in the market.
- Do not forget that the volatility of Ethereum is high. Because of this, you should never invest more than you can actually afford to lose. After a good period, it may be tempting to invest a little more, but remember that it can also turn around, so never make a hasty decision.
- If you want to invest in cryptocurrency, then you need to understand how the cryptocurrency market works. It is important for you to have the slightest chance of doing well. If you know the factors that affect the value, then it is much easier to try to predict how the market is developing.
- As a crypto investor, it is extremely important to stay up to date on what characterizes the market at all times. However, this is not something that should be necessary to say, as this is something most crypto investors know, but we still say it because a good thing can not be said too often. Our website kryptovaluta.info is a good source here.
- If you are completely new to the game, there are several programs you can use to make it all a little easier to understand. eToro, for example, has its own copry trading feature, which simply completes the thought process for you. This is a feature that is also used by investors who have many years of experience behind them.
For someone who is relatively new to the game, these points can quickly seem a little overwhelming. We fully understand this, and therefore we will try to simplify them a bit. In this way, they may be a little easier to understand:
- Think carefully about the case before you invest. Read up and talk to people you know who have a little more experience. Get in touch with new ones if you do not know anyone from before.
- Do not bet everything you own – a little in the stomach never hurts.
- Develop a clear strategy before embarking on anything.
- Follow what is happening in the market.