In what can only be described as another milestone in crypto’s journey into the mainstream market, Ethereum (CCC:ETH-USD) prices hit an all-time high this week. Cryptocurrencies have become increasingly popular as more businesses and investors find them a great investment opportunity and payment method. Leading this trend is Bitcoin (CCC:BTC-USD), the world’s largest crypto. The currency briefly hit a peak of $63,000 after starting the year around $30,000. It has a combined market value of $1.1 trillion.
Second to Bitcoin is Ethereum, a blockchain technology that hasn’t received too much coverage in mainstream media. However, the recent gains in its native coin ether hint at much greater upside for the currency in the coming months.
Ether is an underdog in the crypto world but may prove as lucrative an investment as Bitcoin.
Ethereum Hits An All-Time High
As cryptocurrencies work themselves into the mainstream financial world, Bitcoin’s less-popular alternative, Ethereum hit a record high of over $3,200. The recent gains have many investors bullish on its future of this currency.
Long story short, Ethereum (or ether) surged 1,200% in just over a year. In May 2020, the coin was trading at $214.25. Fast-forward one year, ether is now changing hands for around $3,100. The currency now commands a total market value of $359 billion as it slowly eats into Bitcoin’s market share.
If you’re just hearing about Ethereum, here’s what you need to know. Ethereum is an open-sourced blockchain technology and the second-largest cryptocurrency in the world. Unlike Bitcoin, which primarily serves as a digital currency, Ethereum’s uses are much broader. The crypto operates on blockchain technology that also doubles as a computing platform. This system allows users to store smart contracts and distributed applications. Adding to this, Ethereum is largely decentralized, meaning there is no single entity that controls the value of this currency.
These qualities have made Ethereum a crypto-investor favorite in recent months. Ether is the currency that trades on the Ethereum blockchain technology, making it just one piece of the puzzle. Blockchain technology as a whole offers a limitless number of opportunities. The decentralized layer of computing that the system offers has enabled developers to create decentralized finance (DeFi) applications, programmable money and NFTs on the Ethereum network.
Ethereum may be second to Bitcoin, but the long runway for growth and versatility of the platform makes it a great investment.
The Recent Surge Is Part Of A Mass-Market Movement
The recent surge in Ethereum prices is another step in the mass adoption of cryptocurrencies in the mainstream market. Once considered to be largely controversial, cryptos have now become a viable investment option and payment method. The price rally in currencies like Bitcoin is a result of this increased optimism. Cryptos like Dogecoin (CCC:DOGE-USD) and Ethereum recently shadowed the explosive rise in BTC’s price.
Companies rallied behind this price growth as fintech giants like Square (NYSE:SQ) enabled users to buy and sell crypto on their platforms. Although this feature has been around since 2018, it has gained a lot of traction lately. According to the company’s CFO, Amrita Ahuja, nearly 3 million people did Bitcoin transactions on the app last year and an additional 1 million in January 2021.
PayPal (NASDAQ:PYPL), another major player in the space, also enables crypto transactions on its platform. More recently, it announced that people can trade their crypto for fiat currency to pay for things. This feature will be available on its subsidiary Venmo as well.
Adding to this hype, many companies also view digital coins as a viable investment option. Leading this trend is Tesla (NASDAQ:TSLA), which added $1.5 billion in Bitcoin to its balance sheet. The company announced that it will now accept Bitcoin as payment for its products. Other companies like MicroStrategy (NASDAQ:MSTR) and Mogo (NASDAQ:MOGO) have also added millions of dollars in Bitcoin to their balance sheet.
While Ethereum has yet to see the same inclusivity as Bitcoin, the recent rally in its prices hints at greater acceptance in the future.
The Bottom Line
The price rally in Ethereum makes the digital currency a good investment option, but it’s also worth considering the risks. Ether prices have been on a steady incline in the last couple of months, but cryptos as an asset class are incredibly volatile. This makes them a good investment for investors who have a large risk appetite. Abrupt price swings are commonplace in digital currencies.
However, Ethereum’s blockchain technology adds to the versatility of this investment. In addition to its digital currency, the blockchain technology that the crypto operates on has a wide variety of uses. From NFTs to DeFi applications, the growth opportunities of Ethereum’s blockchain serve as a great hedge against the volatile price movements of cryptocurrencies.
Ethereum had a strong price rally this month but with the growth opportunities that likely remain ahead, this crypto is just getting started.
On the date of publication, Divya Premkumar held a long position in SQ stock, PYPL stock and BTC-USD. She did not hold (either directly or indirectly) any positions in the other securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for Investor Place since 2020.