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Tuesday, November 30, 2021

Ethereum is Blowing up – Should I Buy?

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Did you know some people believe that the price of Ethereum has been hitting new ATHs since the beginning of the year only because she’s sitting pretty on the second spot of coinmarketcap top crypto listing by market capitalization?  

Well, there are and it’s absurd because If we were to apply the same logic to the guy who sits on the top spot, you’d think that Bitcoin would enjoy the same growth that Ethereum is enjoying but that’s not the case. However, it’s true that if you bought Bitcoin early in the year, you’d have doubled your money but if you compare that to Ethereum at the time of writing this article, you’d have more than quadrupled your money.

It probably feels like light years but it wasn’t too long ago that Vitalik Buterin fell in love with Bitcoin. After studying the cryptocurrency for a while, he discovered that it had limited capabilities because he felt Blockchains could be more than just mere money. He envisioned a different type of currency that could be programmed to serve as a base for the creation of other applications and thus Ethereum was born.

In 2015, Ethereum was launched and has since grown to be the ultimate rival of the King of cryptocurrencies, or at least that’s what people think. Although there is still a large difference between their market capitalization and price with Bitcoin as King, Ethereum is certainly on fire this year having blown past the $4000 mark and these are the major reasons why;

Ethereum is Blowing up – Should I Buy?
Ethereum is Blowing up – Should I Buy? – coin desk 1 Day Chart

1 – Non-Fungible Token (NFTs) fueling Ether Demand

Up until a few years ago, people barely believed the narrative that crypto is the future of money but fast-forward to the present and NFTs are now a thing. The fact that NFTs requires users to put their Ethereum into smart contracts reduces the amount of Ethereum sitting on exchanges thus increasing the demand for Ethereum as investors use the tokens to buy virtual art or land, in the form of non-fungible tokens (NFTs), on platforms such as SuperRare and Decentraland. More so, with less supply to meet the demand of people willing to buy Ethereum on exchanges, the price ultimately skyrockets. Additionally, if you’ve been paying attention to the crypto space, you’d notice that as more utilities like NFTs and Decentralized Finance (Defi) are built on the Ethereum Blockchain the value of Ethereum is driven up.

2 – European Investment Bank Issues $121M Digital Bonds Using Ethereum

On the 27th April 2021, the European Investment Bank (EIB), the lending arm of the European Union, used Ethereum technology to issue €100 million ($121 million) in two-year digital bonds for the first time with Goldman Sachs, Banco Santander SA, and Societe Generale AG serving as joint managers.

Vice President Mourinho Félix, European Investment Bank (EIB) stated “Innovation at the EIB goes beyond the projects we are supporting. As a global leader in the green and sustainability bond markets, the EIB is clearly well‑placed to lead the way now in the issuance of digital bonds on blockchain. These digital bonds will play a role in giving the Bank a quicker and more streamlined access to alternative sources of finance to boost finance for projects across the globe”

Danny Kim, head of revenue at SFOX, a full-service crypto broker, said reports on the EIB digital bond issuance has “triggered a bullish institutional use case for Ethereum”.

This is certainly a big win for cryptocurrencies and a mammoth validator of the Ethereum Blockchain. It’s now only a matter of time before other major players follow suit as this move by the EIB indicates that the digitalization of capital markets would be beneficial to market participants in the long run, including a reduction of intermediaries and fixed costs, better market transparency through an increased capacity to see trading flows and identity asset owners, as well as a much faster settlement speed.

RELATED: Investing 101 Baby Steps – Tips to Get Started

3 – Ethereum’s Consensus Model

Last year, the first phase of Ethereum 2.0 went live, marking an overhaul of the existing Ethereum 1.0 blockchain. The core of the Ethereum 2.0 architecture is the Proof of Stake (POS) consensus mechanism, which replaced the existing Proof of Work (POW) consensus mechanism. 

Proof of Stake consensus mechanism can be used by blockchains to agree upon a single true record of data history. POS validators commit a stake to attest or validate blocks into existence. In the case of Ethereum, validators are people on the network who run nodes, attest blocks, and validate transactions on the Ethereum network. They do so by staking about 32 ETH within the network and are randomly selected to propose a block on the blockchain while others then attest that they’ve seen the block. Once there is a sufficient amount of attestation the block is added to the blockchain. Validators receive rewards both for successfully proposing blocks and for making attestations about blocks that they have seen and this incentivizes people on the network to lock up more of their Ethereum.

POS comes with several improvements, including energy efficiency, lower barriers to entry, stronger crypto-economic incentives, and greater revenue-generating capabilities for a broader set of users.

Should you Buy?

Now let’s talk about whether you should buy Ethereum. First off, I would like to put out a disclaimer, I am not a Financial advisor so this shouldn’t be treated as financial advice. However, I am a huge fan of Ethereum and I probably would do the following if I didn’t have any.

So, if for example, I was a salary earner I would probably buy a set amount of Ethereum every month from this point onwards for a couple of years; Dollar Cost Averaging. If I had money saved up, I would probably use 20% of that money to buy some Ethereum and treat it like something I lost. If I had nothing at all, I probably would pray to the God of cryptocurrencies for a major fluctuation in price that’d see me borrowing money to buy a lot of Ethereum.

Regardless of your use case scenario, now more than ever, with the release of the POS consensus model, the adoption of the blockchain by major players, and development of utilities using the network, the current price is better reflecting the value and use of Ethereum, so I would wager that buying now is still a good bargain as experts believe that we’re hitting the $10,000 mark this year.

Recently I became a plug for people who can’t buy crypto directly from exchanges due to certain crypto restrictions in their country. If you find yourself in such a situation, consider joining my WhatsApp group to learn how you could go around it legally using this Link. More so, I’d appreciate it if you’d like, comment, and share this article to help others make decisions that may be life-changing for them.


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