Ethereum (CCC:ETH-USD) has performed extremely well in 2021 having returned 394.44% year-to-date, and it’s not over yet. With several milestones crossed, this crypto is sure to make some big moves soon.
The crypto trading asset has been a boon for growth investors since they saw huge gains from purchases made in the months of March and April 2020 when Ethereum traded at $136 on March 31.
Those savvy enough to invest in the coin at this stage are now reaping the benefits.
Now you might be wondering whether this is the right time to buy. Ethereum’s price fell 10% on Tuesday as many bulls got stopped out of their positions.
If you are an active crypto investor, these ups and downs are not new. In fact, if you are in your second or third year of trading, these are pretty common.
In the long run, ETH will continue to rise alongside scheduled updates. One is coming up before the end of this year. The other one will take place early next year.
Ethereum Keeps Going Up
Ethereum has become the go-to cryptocurrency for those who want to take control of their finances without relying on intermediaries.
Innovative solutions like smart contracts allow users to do things such as trade stocks or buy a property with just one click, completely online – all from within Ethereum’s blockchain.
Ethereum is like an operating system for the distributed economy. Through smart contracts, it’s providing protocols and decentralized applications in all sorts of platforms including borrowing, lending, and synthetics trading.
Ethereum is the first mover in DeFi. But it’s facing strong competition from Tron (CCC:TRX-USD) and Cardano (CCC:ADA-USD).
Cardano and Tron have been providing the same smart contracts, but with a few differences.
ADA is still working towards meeting its roadmap goals while TRON has gained major ground in terms of fair share within the decentralized finance (DeFi) market- despite having fewer dApps available as well.
It’s been a tough few months for Ethereum. Cardano and Tron’s transaction fees are close to $0 which brings strong competition.
Many crypto analysts are asking whether Ethereum will keep its first-mover advantage in smart contracts over time, especially seeing how they’re currently more expensive than other coins on average.
But considering the upgrades on the horizon, these questions can wait. As it transitions to a proof of stake (PoS) model, ETH will continue to rise exponentially in the coming months. Unlike many of the meme coins, Ethereum has strong tailwinds.
Functionality Sets Ethereum Apart
Cryptocurrencies and blockchain technology have been hit hard by the coronavirus pandemic, but it’s not all doom-and-gloom.
Prices dipped at first with Bitcoin (CCC:BTC-USD) leading the way followed closely by altcoins including Ethereum.
Bitcoin and Dogecoin are cryptocurrencies that don’t provide any solutions for businesses or organizations. They’re mainly used in online payments. However, the functionality beyond facilitating payments is limited.
There are multiple possibilities for cryptography with Ethereum. Beyond simply sending and receiving digital money, it can also be used in an entirely different type of transaction called smart contracts.
Smart contract functions allow you to execute agreements between two or more parties without getting involved in the mechanics that make up these transactions—such as payment processing.
Ethereum is a leader in this segment and one of the first to introduce DeFi applications and protocols. With these, they can play an extensive role for individual users as well as business organizations looking forward to great potential returns
Etherum is miles ahead of the competition, and it’s gaining more trust from regular investors.
With Cardano trying to compete with them in DeFi space while Tron works on decentralized applications (DApps), Ethereum seems to be winning out for now at least until other cryptocurrencies can catch up.
Ethereum plans to shift in 2022 from a proof of work (PoW) consensus model. That is a mechanism where users can only validate transactions according to the coins they hold.
Users are excited about this change because it means less centralization of mining power and greater decentralization for the network. That will lead to faster confirmation times when making transactions on Ethereum.
Risks to the Thesis
Cryptocurrencies are on everyone’s radar, and with good reason. Ethereum brought about new possibilities in cryptocurrency technology as a whole when it launched back in 2015. However, it’s not all sunshine and roses.
If strong regulation sets in though DeFi poses a serious challenge for all centralized finance corporations around world because they will no longer be able regulate it properly.
In addition, cryptocurrencies are always at risk of devaluation and this includes Ethereum.
It’s important to consider the possibility that your hard-earned fiat currency may lose its value when considering investing in crypto markets, so do thorough research before you invest any money.
We have just seen a sharp correction. These are commonplace in the space. That is why you have to pick and choose your spots very carefully.
For example, in the runup to two recent upgrades—the Altair and London Hard Fork upgrades, respectively—the price appreciated considerably. More such opportunities are around the corner for those that can time their exit and entries to near-term catalysts.
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.
