Ethereum (CCC:ETH-USD), the second-largest cryptocurrency in terms of market value after Bitcoin (CCC:BTC-USD), recently got hammered because of a wider crypto selloff.
We have seen several issues plague the crypto markets in recent weeks. The U.S. government was on the brink of shutting down, but President Biden signed a bill that will allow for more time and funds.
The move will relax the crypto markets, which were jolted by both the threatened shutdown and its solution. It did not help matters China shut down exchanges, mining operations and any financial institutions that deal in cryptocurrency.
That is a shame because the altcoin was basking in the spotlight after the London Hard Fork upgrade, but this is a great opportunity for investors to purchase more Ethereum.
There are two sets of proposals that are expected to go live soon. Each of them will lead to a massive upsurge in the token’s price.
Ethereum’s plan is to move from a system of proof-of-work (PoW) that requires mining for token rewards and replace it with one based on proof-of-stake (PoS). This change will allow the network to scale more effectively.
It will also reduce energy consumption. Governments are more conscious of the environmental costs associated with mining digital coins. Against this backdrop, this is a very important development.
As I write this, ETH is trading at $3,439. It is a very nice recovery after the coin plunged after the news from China. Looking ahead, with new upgrades expected for the year-end and in 2022, ETH will only gain from here.
What Does the Future Hold for Ethereum?
Ethereum has become the go-to platform for developers looking to produce new decentralized financial projects, known as DeFi.
In addition, the recent NFT wave is taking over the cryptocurrency world. They generally exist on the Ethereum blockchain, meaning Ether stands to benefit substantially from this new investment trend.
Plus, the Ethereum network is a powerful new tool for users looking to manage legal agreements without the hassle of going through an intermediary. For example, smart contracts allow two parties on this distributed public blockchain system to execute secure transactions independently, all with no lawyer required.
All of these positives aside, we have still not discussed Ethereum’s transition to a more efficient, proof-of-stake system. As a result of this change, Ether will become infinitely more attractive in comparison to Bitcoin.
The latter operates on a PoW mechanism. In the “proof of work” system, miners solve complex mathematical puzzles to earn new bitcoins. This process requires a lot from them in terms of time and energy.
According to a recent report by The New York Times, Bitcoin mining currently consumes about 0.5% of all global energy, which translates into nearly seven times as much power for Google per year.
Meanwhile, in an analysis by Cambridge University, it was found that Bitcoin’s carbon footprint is as bad if not worse than many other countries’ power consumption rates on a per capita basis. These are not great headlines. Institutional investors understand this. This is why they are shifting their attention away from Bitcoin and opting for Ethereum.
Plenty of Reasons to Stay Invested
Cryptocurrencies are a hot topic, with some cryptocurrencies seeing more success than others.
If you’re new to this space and want an introduction to investing your money in coins or tokens of different kinds, there’s plenty out on the market right now. But do research before committing, though, so that no mistakes get made by accident. However, if you want to hedge your bets, there are only two premium options, Bitcoin and Ethereum.
Out of the two, Ethereum is looking like the better coin. It benefits from consistent upgrades and a plethora of use cases.
Bitcoin might be the top coin for now. But smart contracts and decentralized finance are two of the most popular uses for Ethereum’s blockchain. They will continue to boost its price in the coming weeks.
Eventually, ETH prices will skyrocket in response to the upcoming year-end upgrade. That makes it attractive both for long-term investors and short-term traders.
On the publication date, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio. Faizan does not directly own the securities mentioned above.
