There aren’t too many opportunities on the market today that are as underpriced as Ethereum (ETH-USD). The cryptocurrency is down 35% so far this year and has dropped more than 45% since November.
That’s a pretty amazing drop for a cryptocurrency that many people believe is far superior to Bitcoin (BTC-USD). Cryptocurrencies lost more than $1 trillion in value in recent months as uncertainty with the Federal Reserve and the global market trickles into the crypto space.
When I last wrote about Ethereum, the price was at $4,500 and going strong. Maybe you can blame me for popping the bubble, as I wrote the following:
“For all of those investors who are thinking about taking their profits and running, I’ve got a single word of advice. Don’t. Not yet, at least. Or maybe, not ever.”
I’m the first to admit that’s a pretty cringey comment when you look at what’s happened to Ethereum in recent weeks. But I’m a long-term investor and I don’t jump into stocks and cryptos for a short-term gain. I keep a long-term horizon in mind. So as much as I frown at my computer every time I look at the Ethereum chart these days, I’m still holding onto my tokens. In fact, this is a great time (in my eyes) to add to my position at a hefty discount.
Ethereum at a Glance
Ethereum was launched in 2016 with a proof-of-work (PoW) consensus protocol that was similar to Bitcoin. Proof-of-work is designed to stave off economic attacks, while allowing secure computer nodes to agree on any information published on the network.
However, critics of PoW say it’s too slow and expensive (with excessive fees). And it uses a lot of energy.
So Ethereum is in the process of changing with Ethereum 2.0 and a proof-of-stake (PoS) protocol. It’s a long process and it’s being handled by people a lot smarter than me. But in short the upgrade to Ethereum 2.0 comes with some significant improvements:
- It will have greater scalability so Ethereum can support thousands of transactions per second, using less time and electricity;
- It provides better security needed to thwart cyberattacks;
- It will have a reduced carbon footprint, because mining for coins will no longer be required.
Ethereum is well on its way to making Ethereum 2.0 happen. It’s a three-prong process. First was Beacon Chain, which went live last year. The second step will be combining Beacon Chain into the Ethereum mainnet. And finally, Shard Chains will split the network to allow for more capacity in storing data and processing transactions.
Unfortunately (or fortunately, if you are bargain hunting), Ethereum’s price drop probably isn’t over. There are some experts who are expecting the Ethereum price to continue dropping, at least for now.
Sharat Chandra, vice president of research and strategy for EarthID, expects Ethereum and other cryptocurrencies to continue their fall.
And Mudrex CEO Edul Patel says there’s a chance Ethereum could fall below $2,000.
“It has multiple strong support levels at $2,200 and $1,850,” he said. “There are very slim chances of ETH dropping below $1,800 in the near future. However, if that happens, it will be a great buying opportunity.”
The Bottom Line on Ethereum
If you want to maximize your investments, you can’t ignore cryptocurrencies. Ethereum has a market value of more than $295 billion. That puts it at a higher market cap than companies such as Disney (NYSE:DIS), Coca-Cola (NYSE:KO) and Toyota (NYSE:TM).
In short, these assets aren’t going anywhere.
Ethereum already handles more than 1 million transactions daily on its network, and its Ethereum 2.0 upgrade will make the network easier and cheaper to use.
I’m fully expecting the price of Ethereum to continue to drop for the near term, but that’s okay, because I’m not going to be tapping into those funds anytime soon. I’ve got plenty of time to wait for the turnaround. And in the meantime, I’ll be accumulating more ETH to add to my position.
If you’re close to retirement, then the crypto space is too volatile for comfort right now. But if you’re looking at a longer timeline, this is an exciting time for Ethereum.
On the date of publication, Patrick Sanders was long ETH-USD. He did not have (either directly or indirectly) any other 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.
Patrick Sanders is a freelance writer and editor in Maryland, and from 2015 to 2019 was head of the investment advice section at U.S. News & World Report. Follow him on Twitter at @1patricksanders.