Have you considered buying Ethereum? If you are struggling with this dilemma, then you have come to the right place. This guide gives you everything you need to know about investing in Ethereum (ETH) . By the time you are done reading it, you will be in a position to make an informed decision.
Like other cryptocurrencies, Ethereum is highly volatile, and losses can go into the double digits within a very short time. However, when looking at it as a long-term investment, Ethereum (ETH) is worthy of buying in 2023.
While ETH is a large-cap crypto (the second-largest cryptocurrency by market cap), Ethereum has a lot going for it that it can still rally off current prices. This makes it a perfect choice for investors just getting into crypto and looking for a mix of growth and stability.
Just to give you a sneak peek of what to expect, this guide takes you through the advantages and potential risks of Ethereum, a comparison with Bitcoin, and a couple of reasons why Ethereum is a good investment.
Essentially, once you are done, you should have a clear YES or NO answer to the question, “Is Ethereum worth buying?”
So, What Exactly Is Ethereum?
Ethereum is the second-largest cryptocurrency by market capitalization and home to a thriving community of developers. The currency was created as an alternative solution for online payments. Still, it has since expanded beyond this purpose into application development with smart contracts that are used in all industries. You can use Ethereum anywhere there’s an internet connection and develop smart contracts for anything you dare to imagine.
Is Ethereum Worthy Of Buying?
It is important to note that it is not always ideal to invest in crypto assets, including Ethereum, crypto investment can lead to unexpected outcomes. It would be unwise to invest in Ethereum if it is on the verge of depreciating, at least not for the short-term.
Ethereum remains a high-risk investment. Even at times when you think the market has been bearish long enough and can’t go down any further, it can always drop much further. The wise thing to do is to look at Ethereum as a long-term investment.
Should You Buy Ethereum?
Despite its massive adoption and being the dominant Dapps platform, Ethereum’s adoption, especially at the institutional level, is still much lower than that of Bitcoin. Ethereum also has many competitors coming up, a factor that has kept some investors away.
That said, Ethereum has proven to be one of the best investments over the past decade. It went from under a dollar at launch, to a high of $4800 in November 2021. Adoption continues to grow, too, an indicator that Ethereum’s price still has a lot of room for growth despite the recent correction.
Analysts are pretty bullish on Ethereum, too. For instance, according to Cathie Wood of Ark Invest, Ethereum has the potential to trade between $170,000 and $180,000 by 2030. Cathie Wood’s prediction is based on Ethereum’s potential to replace the conventional financial system.
There is lots of optimism around Ethereum in the short term as well. For instance, research by FSInsight projects that Ethereum could trade at $12,000 within the second half of 2023. The projection by FSInsight is based on the increased interconnection between cryptocurrencies and technology stocks.
With such optimism around Ethereum and the cryptocurrency market as a whole, 2023 seems like a good time to jump on the Ethereum bandwagon. That said, it is important to remember that Ethereum is a speculative asset, and it is always best to invest what you can afford to lose.
Crypto investors believe that Ethereum (ETH) is worth buying today compared to other coins in the market. They believe that the value of ETH will grow further this year.
Let’s quickly look at some of the reasons why Ethereum could be or could not be a good investment for you.
Why Buy Ethereum (ETH)?
The reasons we will discuss below should not stop you from doing your own research on Ethereum. ETH is a highly volatile asset and can go in any direction at any time.
Ethereum is the second-largest cryptocurrency by market capitalization and is also one of the most adopted. On this basis, there is a valid reason to believe that in a bull market, Ethereum could do well.
While we generally think that Ethereum makes for a good investment right now, we do not guarantee that you won’t lose your money. Being a speculative investment, it might not be a good option for you if you are risk-averse.
Now let’s take a more indepth look at some of the reasons why we believe Ethereum could be a good investment today.
Ethereum is deflationary
What gives value to any asset is its level of scarcity. If you have an asset whose supply is so high that pretty much anyone can get it, then it loses its monetary value. It’s just simple economics.
It’s on this basis that Bitcoin has gained so much value over a very short period due to its low supply. Using this rationale, Ethereum is a pretty good asset to buy, too.
That’s because, since August 2021, Ethereum has become a deflationary asset. The more Ethereum is adopted, the more of it is burned as gas fees. Given that Ethereum is gaining fast adoption, especially in DeFi, its deflationary nature is likely to drive upside pressure all through the year.
Ethereum is in the process of a major upgrade.
For years, there have been concerns about Ethereum’s usability. These issues are based on Ethereum’s high gas fees and inability to scale. In fact, a lot of its competitors have sprung up, all capitalizing on the twin Ethereum issues of fees and speed.
However, since 2020, Ethereum has been working to deal with these two issues by transitioning to Proof-of-Stake. Once complete, the transition will see Ethereum transactions rely less on the mainnet and more on layer-2 solutions.
Ether is a liquid asset
Being the second-largest cryptocurrency by market capitalization, Ethereum also happens to be one of the most liquid. This means you can buy and sell at any time, depending on your investing strategy. It also means Ethereum is less prone to market manipulation through the trading activities of a few big players.
Ethereum’s popularity is growing.
Ethereum continues to draw a lot of investor attention thanks to its position as the second largest cryptocurrency. Over the last two years, Ethereum has seen widespread adoption not just by retail investors but also by institutions. Today, even major investment banks like Goldman Sachs have Ethereum trading desks, among other Ethereum-focused products.
As more financial services are moved to the blockchain, Ethereum adoption is likely to get even bigger. This also means its price could rally due to the increased demand.
Ethereum could be the future of money.
A few years ago, the prevailing perception was that cryptocurrencies are risky and mainly used by criminals. Today the perception is much different. There is growing acceptance that cryptocurrencies could indeed be the future of money.
This is a big deal, as it means potentially higher levels of adoption than ever witnessed before. For Ethereum, which is the second-largest cryptocurrency, the potential is even higher. That’s because aside from its market visibility, Ethereum is also a platform for digitizing any financial service.
All this gives it a lot of potential to rally in 2023 and dwarf any highs it has made in the past.
What Are The Risks Of Investing In Ethereum?
Although Ethereum has proved to be a promising investment opportunity, it has several caveats that might make you take a pause. From the infamous DAO hack in 2016 that saw investors lose up to $55 million to hackers, to the fact that the price could drop in a blink of an eye, you might want to reconsider your decision.
Unless you are investing in government paper, all investments carry risks. The risks are even higher for Ethereum since it is a cryptocurrency, a market that is known for its extreme volatility.
To help you invest from the point of information, here are some of the risks to investing in Ethereum.
Ethereum is a highly volatile asset.
Just like every other cryptocurrency, Ethereum is a highly volatile asset. This means you should expect double-digit price swings at any moment. Ethereum’s price volatility is easily noticeable in its price action between November 2021 and the end of July 2022. In November 2021, Ethereum was trading at $4800, but by the end of July 2022, it was trading at $1500.
That’s why we recommend that you do your research and involve experts before investing. It can help you mitigate the risks that come with such extreme volatility.
Cryptocurrencies are not regulated.
Lack of regulations is a double-edged sword. Without them, innovation thrives, and that is good for asset prices. On the other hand, it is an environment perfect for criminals to thrive. You can easily lose all your Ethereum to fraudsters, and there is very little you can do about it.
You are vulnerable to exchange hacks.
This is closely related to the risk of no regulations. Since most cryptocurrency exchanges are not under the watchful eye of regulatory bodies, you could lose all your Ether if an exchange is hacked.
Up to this point, you may have the feeling that most of these risks are manageable with a little prudence on your part. That’s because its true. You just need to have the right information, and most of these risks would be eliminated.
For instance, to avoid falling into the hands of exchange hackers, you can opt to store your Ethereum in a cold wallet. No hacker can access them there since your Ether is not connected to any internet network.
What will ETH be worth in 2023?
While Ethereum started 2022 deep in the red, that doesn’t mean that it will be bearish all through the year. There are many instances when Ethereum has dipped only to double or even triple in value a short while later.
For instance, between January 2020 and February 2020, Ethereum rallied from $123 to $359. It then dropped to a low of $132 towards the end of March. Shortly after, it gained upside momentum, and by the end of December 2020, it was trading at $1030.
This means if you can brave the volatility, Ethereum will always be a rewarding investment.
With this background in mind, what can we expect from Ethereum in 2023? To help you plan your investments much better, here is what analysts expect of ETH coin in 2023.
- According to Coinpedia, Ethereum could trade at an average of $6,500 to $7,500 in 2023. However, if the transition to Ethereum 2.0 is a success, Coinpedia expects Ethereum to test a high of $12,000 within the year.
- Ian Balina, the founder of Token Metrics, believes that Ethereum could test $8,000 in 2023. Ballina is betting big on Ethereum’s improving metrics and growing adoption.
- According to Bloomberg Intelligence analysts, Ethereum could end 2023 at around $4,000 to $4,500.
- The Economy Forecast Agency also expects Ethereum to end 2023 around the $4,000 to $4,200 price level.
- On its part, Wallet Investor expects Ethereum to trade at $5,812 by the end of 2023.
Most of these forecasts suggest that Ethereum could make new highs by the end of 2023. Essentially, analysts expect Ethereum to remain volatile, but its future to be brighter than ever before.
Essentially, even though analysts expect Bitcoin to remain the most dominant cryptocurrency in the market, the consensus is that Ethereum will give higher gains.
With the price of Ethereum still low, it could be a good time to invest in this cryptocurrency. The digital currency could eventually rise higher than expected and hit new records by year-end.
Ethereum’s growing adoption has also led to some pretty optimistic price targets for 2023. One of the more optimistic ones is Bernado Schucman of CleanSpark, a software company based in the U.S. With the growth of DeFi, Schucman believes that Ethereum will reach $20k by the end of 2023, thanks to new projects and adoption within this ecosystem.
This viewpoint is shared by Simon Peters of eToro. The expert believes that with the demand for Ethereum Tokens on the rise, there’s less supply to go around. This could mean higher prices in the future. However, unlike Schucman, Peters does not have a specific price target for Ethereum.
Is Ethereum Mining Profitable?
As for today, mining Ethereum has been profitable and this profit appears to be increasing at a steady rate. The cost of mining Ethereum is much lower than that for Bitcoin, because cheaper graphic cards can be used. However, even mining Ethereum has proven less profitable over the last few years.
It is also noteworthy that the transition to Ethereum 2.0 is almost complete. Since Ethereum 2.0 is Proof-of-Stake, Ethereum mining is set to become obsolete this year. It is pointless to invest in an Ethereum mining rig at this point.
Is Ethereum Better Investment Than Bitcoin?
There really is no way to tell which one is better between Bitcoin and Ethereum. Bitcoin is the largest cryptocurrency by market capitalization, so some may argue that it is better. Others may disagree because the only reason why Bitcoin leads is due to its first-mover advantage.
The latter may be a plausible argument because Ethereum is better than Bitcoin in many ways. Ethereum is one of the most sophisticated cryptocurrencies out there. It is more than just a cryptocurrency and is akin to a global decentralized computer. Ethereum’s nature has seen it grow and dominate the decentralized applications market, an area to crypto where Bitcoin has very limited use.
On top of that, Ethereum mining has been profitable for much longer than Bitcoin. This has allowed small investors to take part in it, compared to BTC mining which is now consolidated among a few large players.
Ethereum’s tokenomics are also better than Bitcoin’s in driving adoption. Since Ethereum has a flexible supply, it is much more efficient for those looking to use the Ethereum blockchain in creating Dapps. While it is an advantage, critiques see it as a weakness and why Ethereum may never surpass Bitcoin’s market cap.
However, this argument, too, may not hold water for long. That’s because, now that Ethereum is almost fully transitioning to Ethereum 2.0 it will be deflationary. This means the more it is used, the more tokens are burned. It’s a factor that could see Ethereum Flippen Bitcoin in the future.
Ethereum is better than Bitcoin in many ways. However, Bitcoin is still the number one cryptocurrency by market cap. As such, it will keep drawing in most of the new money getting into cryptocurrencies. On this basis, it would be best to hold both rather than choose one between them.
That said, there are indications that Ethereum has an edge in terms of potential price growth. For instance, data indicates Ethereum trading volumes are rising faster than Bitcoins.
This is a signal that a lot more people are involved in the Ethereum ecosystem than Bitcoin. It is a positive signal to anyone who wants to buy Ethereum today.
As more Dapps choose Ethereum as their launch platform, ETH demand will grow. This increases Ethereum’s odds of profitability when compared to Bitcoin.
Will Ethereum’s Price Rise In 2023?
Analysts are in consensus that Ethereum’s price will go up in 2023. While no one can say how high Ethereum can go with certainty, the future looks promising. Ethereum could surpass its previous all-time highs this year.
Further to that, the Ethereum community is growing day by day, and Ethereum could become the most useful cryptocurrency in the world when Ethereum 2.0 is finalized.
We can never be too sure when it comes to price predictions, but the future of Ethereum looks very promising.
Is There A Possibility Of Ethereum Failing?
At this point, the chances of Ethereum failing are pretty low. If it did not fail after the 2016 DAO hack, the odds of failure are now close to zero. Ethereum now has depth both in terms of investors and the number of projects running on top of it.
The only thing likely to happen is that competitors could take a portion of its market share. However, supposed “Ethereum Killers” have been around for a while now, yet Ethereum’s dominance in the Dapps market remains strong.
Will Ethereum Go Up?
Ethereum may have started 2022 with a slight correction, but it is still strongly bullish when you zoom out the charts. Just 15 months ago, Ethereum was trading at $600. By November last year, Ethereum was trading at $4800. Even at the lowest point of its recent correction at $2400, Ethereum was still much higher than its late 2020 prices.
Ethereum’s current price, still way off it’s all-time highs of $4800, is due to recent fears of a rate hike in the US This saw all cryptocurrencies take a hit as investors fled from risky assets.
However, Ethereum and the cryptocurrency market as a whole has bounced back, an indicator that the rates hike fears have been priced into the market. Besides increased positive momentum in the broader market, several other factors indicate that Ethereum could go up in 2023.
Below are some of the factors that could trigger an Ethereum price increase in 2023:
- Web 3.0 Innovations on the Ethereum Blockchain
- Successful transition to Ethereum 2.0
Is Investing In Ethereum A Good Idea?
Overall, Ethereum seems like a pretty strong investment in general as it combines good growth, excellent fundamentals, strong adoptions, and industry tailwinds, while its market position is strong as well.
Save for a dip that started in early 2022, Ethereum has been in a bull rally for over a year. Since bear markets don’t last forever, Ethereum will likely gain value in 2023.
Besides the speculative aspect, Ethereum adoption is on a growth trajectory. Since the prices of coins and most other assets rely on the growing demand for the underlying asset, Ethereum adoption in DeFi and other markets is a positive indicator for ETH.
Analysts are pretty bullish on Ethereum, too. They are betting on Ethereum’s position as the second-largest cryptocurrency by market capitalization and its growing adoption in Web 3.0 applications. Since analysts influence the cryptocurrency market as opinion shapers, their nod is a positive signal for Ethereum.
The main reason likely to drive Ethereum adoption is its increased adoption in web 3.0, which is drawing some of the best developers globally.
Ethereum is also likely to benefit from its shift to Ethereum 2.0, which has introduced staking and makes Ethereum more usable for Dapps development.
An example of Ethereum’s usage in Web 3.0 is Compound. Compound is an ERC-20 token that empowers community governance of the Compounds protocol. The Compound protocol enables users to borrow and lend COMP and other cryptocurrencies without an intermediary. The Ethereum blockchain secures all this. At the moment, $7.47 billion worth of ETH is locked up in Compound.
This is a big deal as it is a positive indicator of the growing demand for Ethereum in the fast-expanding DeFi market. It is a confidence boost for anyone thinking of investing in Ethereum in 2023 and for years to come.
As long as Ethereum maintains its position as the top Dapps platform, especially in DeFi, it will likely remain a profitable crypto asset.
If you are still undecided, we recommend doing more research until you are sure this is what you want to do.
That said, we do believe that Ethereum is a good investment in 2023 and beyond.