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Ethereum (CCC:ETH-USD) is the world’s second-largest cryptocurrency. ETH prices have surged more than 350% since the beginning of 2021.
Source: shutterstock
By comparison, Bitcoin (CCC:BTC-USD) is up about 60%. Those who invested $1,000 in Ethereum at the beginning of 2021 could be sitting on almost $4,500 in September. Ethereum currently hovers at slightly above $3,300 territory.
Ethereum is swiftly evolving into a separate domain where decentralized digital infrastructures and marketplaces are flourishing on the network. And ETH is the digital asset for the most popular smart contract and decentralized application (DApp) platform in the crypto space.
At the current growth rate, Ethereum’s market cap of $390 billion is estimated to outpace Bitcoin within a few years. So let’s look at how and why ETH might make a worthy addition to investor portfolios.
While Bitcoin still gets the headlines in the crypto world and mainly works as a decentralized currency to hedge against inflationary fiat currencies, Ethereum has evolved.
Now its blockchain allows for DApps to run on the platform, driving value from practical, real-world applications that enable numerous transactions online.
Many on the Street concur that we have yet to see the full potential of the network. Ethereum allows developers to create their own self-executing applications thanks to the use of smart contracts that are at the heart of all Ethereum-based DApps.
Smart contracts automatically execute certain functions when predetermined conditions are met. DApps cover many key sectors, including finance, insurance, decentralized exchanges (DEX), entertainment platforms (such as games or gambling), social networks, or healthcare. There is no central development team or authority behind these DApps.
Recent metrics suggest, “The DApps Market size was valued at USD 10.52 Billion in 2019 and is anticipated to reach USD 368.25 Billion by 2027 at a CAGR of 56.1%. The rising demand for fast transaction process and the benefits of DApps such as transparency, reliability, flexibility, and scalability are stimulating the global DApps Market.”
There are over 3,000 DApps built across various blockchains. About 90% are based on the Ethereum network. InvestorPlace.com readers interested in digital assets would benefit from keeping a tab on the growth of DApps, both on the Ethereum network as well as other platforms.
Recent Developments
The environmental sustainability of crypto mining has been a significant obstacle haunting digital assets. Ethereum recently launched the “London hard fork.” It aims to discourage mining on the network. And the end result will likely be less energy consumption. It also decreases transaction fees, leading to a decline of 20%-30% in mining revenue.
Currently, the algorithm behind the network is proof-of-work (PoW), but it will move to a proof-of-stake (PoS) protocol by the end of 2022. This change will enable Ethereum owners to verify transactions themselves in exchange for “interest,” or receiving a fraction of the transaction fees.
The transition to PoS will allow for sharding and higher transaction throughput. Therefore, Ethereum’s overall scalability should also increase.
Since the upgrade, analysts estimate that around $700 million worth of Ethereum has been taken out of circulation. Therefore, investors seeking to hedge against inflation have taken notice. This development makes ETH an even more attractive investment. Thus, we are likely to see a further increase in demand and prices.
Investment Banks on the Ethereum Network
The shift to an eco-friendly configuration is a bullish catalyst for Ethereum. It also represents a key step toward ensuring the asset’s long-term sustainability.
Meanwhile, a growing number of prominent companies worldwide as well as large Wall Street banks are currently using the network. For instance, ING Group (NYSE:ING) uses Ethereum to settle payments, trading documents and bilateral lines of credit.
TD Ameritrade, part of discount broker Charles Schwab (NYSE:SCHW), uses Ethereum to facilitate smart contract future trades.
JPMorgan Chase (NYSE:JPM) is on track to launch its own JPM coin with smart contracts on the Ethereum platform.
In the DApp space, Ethereum has emerged as the industry standard, similar to IBM‘s (NYSE:IBM) dominance in the world of computing during the early 1980s. Goldman Sachs (NYSE:GS) suggested that Ethereum’s real use cases could make ETH the predominant digital store of value.
Bottom Line on ETH
Ethereum’s first-mover advantage provides the digital coin with deep liquidity. It also offers the most opportunity for smart contract development.
As a result, ETH is the leading crypto asset that embodies the most opportunity for extracting value. Given the number of smart contracts running on the platform, Ethereum is possibly among the best crypto investments.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil, Ph.D., has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all three levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.
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