3 reasons to invest in Ethereum in this bear market
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Cryptos did not have a good start to the year. The last two years have been extraordinary in terms of price dynamics. But for now, investors are skeptical about the way forward. Ethereum (CCC:ETH-USD) is a blockchain with smart contract capabilities, allowing users to create their tokens and decentralized applications. Its technology is what sets it apart from other cryptos, and it deserves your attention in this bear market.
To quote Charlie Munger, “Any good investment is an investment of value.”
We now know that blockchain is going nowhere. It has huge use cases, and there’s too much good here to waste. Governments and financial institutions around the world are beginning to realize the importance of this area.
So, while cryptos are overvalued, much like electric vehicle stocks, you can’t say they aren’t viable investments. The only thing worth analyzing is whether the reasons for investing in crypto are the right ones.
If you’re looking for reasons to invest, Ethereum offers plenty. The Ethereum blockchain has proven itself as a practical application for decentralized finance (DeFi) and non-fungible tokens (NFT). These are just two of the many examples that will soon come out of the oven of this new technology.
Overall, Ethereum offers several reasons to invest. And if you want to hedge your risk, this is one of the best crypto options out there.
Ethereum 2.0 radically changes the game
Ethereum has been working on a new proof-of-stake (PoS) model called Ethereum 2.0, which will change the way rewards are distributed to network participants.
In a proof-of-work (PoW) system like Bitcoin (CCC:BTC-USD), users must run complicated algorithms to validate their transactions and added blocks. This process is called mining because it requires a lot of time and energy from the user to verify if their transaction or block addition was legitimate. This helps maintain Bitcoin’s security by preventing fake transactions from being included in the blockchain ledger along with real ones.
The proof-of-stake model will eliminate the need for miners and challenge them to make sure they’re doing things right. Miners and coin stakeholders will create their commit nodes through staking. This means that you can pledge your precious crypto to verify transactions.
The proof-of-stake consensus mechanism is an alternative to more widely used proof-of-work protocols. It has several advantages over PoW, including faster confirmation times for transactions and lower power consumption rates. The latter also makes crypto more environmentally friendly.
What could this mean for the future of blockchain? If Ethereum 2.0 is successful, it will have significantly increased transaction processing capacity. This could lead to more widespread use cases in the private and public sectors.
Less dependent on Bitcoin
In an interesting correlation, Bitcoin price is positively tied to ETH. When one increases or decreases in value, so does the other.
However, in the past two years things have changed. The DeFi boom in 2020 has left many wondering if this will be a turning point for Ethereum. If so, it means that the value of ETH could continue on an upward trajectory and could soon reach its highest price since the beginning of 2017.
One of the most popular uses of Ethereum is in DeFi products. These range from stablecoins to cryptocurrency bonds and even stock trading platforms. There are a few suitors like gimbal (CCC:ADA-USD) that offer fierce competition. But Ethereum remains a head and shoulders above all other platforms in this category.
Ether appears to have recently moved away from Bitcoin’s price swings and is now tracking its catalysts. Going forward, this is a key reason to invest capital in it.
Ethereum’s platform is second to none
Ethereum’s performance is more than impressive. It has attracted both traditional and institutional investors with its skyrocketing gains in value over time, making it one of the most sought-after coins on Wall Street right now.
ETH is one of the most liquid investment assets in today’s global economy. This is not because it goes up or down, but rather because of its universal acceptance among traders around the world who use it in online exchanges and brokerages.
A lot has changed in the world since Ethereum was created, especially with all these new apps coming out daily that use its technology. For example, NFTs offer not only financial, but also creative opportunities.
This can lead to massive gains if you are well prepared when investing in crypto trading. With the help of Ethereum, developers can create a wide variety of unique applications in their own way. This is why developers continue to build dApps on the platform in droves.
The Infrastructure for the Decentralized Internet
The volatility of cryptocurrencies can make it an exciting opportunity for traders who are willing to take risks. Ethereum is a game-changer for both finance and technology with its high-level capabilities.
DeFi is the future of finance. It is possible that in just a few years we will be using Ethereum-based applications to change how mortgage transfers and securities exchanges work.
Ethereum is a great choice for developers because it has an active community and a large user base. The number of people contributing to this project on Github and the total number of their subscribers means you have a clear winner on your hands.
Over time, the Ethereum blockchain has grown and diversified. This is one of its best stories: a growing network with new use cases that all parties involved can benefit from.
As of the date of publication, Faizan Farooque had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.
Faizan Farooque is a contributing author for InvestorPlace.com and many other financial sites. Faizan has several years of experience in stock market analysis and was a former data reporter at S&P Global Market Intelligence. You can check out his analysis on InvestorPlace and TipRanks.
3 reasons to invest in Ethereum in this bear market
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