Cryptos did not have a great start to the year. The past two years were extraordinary in terms of price momentum. But at the moment, investors are skeptical about what to do next. Ethereum (CCC:ETH-USD) is a blockchain with smart contracting 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, “All good investing is value investing.”
We now know that blockchain is not going anywhere. It has tremendous use cases, and there is too much good here to squander. Governments and financial institutions worldwide are starting to realize the importance of this area.
So, while cryptos are overvalued, just like electric vehicle stocks, you cannot say they are not viable investments. The only thing worth analyzing is whether the reasons to invest in crypto are the right ones.
If you are on the lookout for reasons to invest, Ethereum offers plenty. The Ethereum blockchain has been proving its worth as a practical application for decentralized finance (DeFi) and non-fungible tokens (NFTs). These are just two examples among many others that will soon be coming out of this new technology’s oven.
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 Dramatically Changes the Game
Ethereum has been working on a new proof-of-stake (PoS) model called Ethereum 2.0, which will change how rewards are given out to participants in the network.
In a proof-of-work (PoW) system like Bitcoin (CCC:BTC-USD), users must execute complicated algorithms to validate their transactions and added blocks. This process is referred to as mining because it requires extensive 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 blockchain ledger with real ones.
The proof-of-stake model will eliminate the need for miners and challenge them to ensure they are doing things correctly. Miners and coin stakeholders will create their validator nodes through staking. This means that you can pledge your precious crypto for verifying transactions.
The proof-of-stake consensus mechanism is an alternative to the more widely-used proof-of-work protocols. It has several advantages over PoW, including faster confirmation times for transactions and lower energy 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 capability. This could lead to more widespread use cases in the private and public sectors.
Less Reliant on Bitcoin
In an interesting correlation, the Bitcoin price is positively related to ETH. When one increases or decreases in value, so does the other.
However, over the last couple of years, things have been changing. The DeFi boom in 2020 left many people wondering if this will be a turning point for Ethereum. If so, it means the value of ETH might continue on an upward trajectory and could soon reach its highest price since early 2017.
One of the most popular uses for Ethereum is in DeFi products. These range from stablecoins to cryptocurrency bonds and even share trading platforms. There are a few contenders like Cardano (CCC:ADA-USD) that are providing stiff competition. But Ethereum remains a head and shoulders above every other platform in this category.
Ether seems to have stepped away from Bitcoin’s price fluctuations as of late and is now following its catalysts. Moving forward, this is a key reason to invest capital in this one.
Ethereum’s Platform Is Second to None
Ethereum’s performance is beyond impressive. It has attracted both traditional and institutional investors alike 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 isn’t because it goes up or down, but rather due to its universal acceptance among traders from all around the world who use it in exchanges and online brokerages.
A lot has changed in the world since Ethereum was created, especially with all these new applications coming out on a daily basis that utilize its technology. For example, NFTs provide opportunities not only financially, but also creatively.
This may lead into massive gains if you’re well prepared when you invest in crypto trading. With the help of Ethereum, developers can build an extensive variety of applications that are unique in their own way. That is why developers continue to build dApps on the platform in droves.
The Infrastructure for Decentralized Internet
The volatility of cryptocurrencies can make them an exciting opportunity for traders who are willing to take risks. Ethereum is a gamechanger for both finance and technology with its high-level capabilities.
DeFi is the future of finance. It’s possible that in just a few years, we’ll be using Ethereum-based applications to change how mortgage transfers and security trading work.
Ethereum is a great choice for developers because it has an active community and a large user base. The number of people who contribute to this project on Github and their total followers means you have a clear winner on your hands.
Over time, the Ethereum blockchain has been growing and diversifying. This is one of its best stories—a network that’s expanding with new use cases for all involved parties to enjoy.
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. You can check out his analysis on InvestorPlace and TipRanks.