Ethereum Is Poised for a Major Comeback When Geopolitical Tensions Abate

Ethereum (ETH-USD) has had a rough start to the year as the second-largest crypto in terms of market capitalization. As of March 8, ETH has fallen 31.3% from $3,728 at the end of 2021 to $2,563, according to CoinMarketCap.

Landscape art with the Ethereum

Source: shutterstock

That is almost twice as bad as the 16.8% decline in Bitcoin (BTC-USD). For example, Bitcoin ended last year at $46,407. But by March 8, it was trading at $38,619.

It’s probably not that people have less optimism for Ethereum than Bitcoin. That is because historically, ETH has tended to have a more volatile ride than BTC. But this might just be due to the fact that the former’s market cap of $308 billion is a little less than half the size of Bitcoin’s $732.3 billion.

Ethereum has fallen alongside other cryptos recently, but several factors point to a strong recovery for ETH once the conflict nears its end.

Where Things Stand at Ethereum

Ethereum is a global open-source platform for decentralized applications (dApps) and smart contracts. Ethereum’s advantage over Bitcoin is that its platform allows the use of decentralized finance (DeFi) apps and related smart contracts.

Ethereum plans to move to a non-mining transaction validation system sometime during 2022. The date is not yet set for Ethereum’s move to a proof-of-stake (PoS) protocol, which I wrote about recently. This will transition it away from its current proof-of-work (PoW) protocol, which uses ETH mining.

Moreover, this past summer, Ethereum instituted a new fee-burning protocol with its EIP 1559 upgrade. I discussed in another article how this acts like a share buyback program with stocks, helping to push the price higher.

This system will allow people to confirm their Ethereum transactions without having to mine coins. The prospect of this might be helping to lower the traditionally-high Ethereum processing fees recently.

Recently, Decrypt magazine wrote that there are “signs that Ethereum’s high-gas-fee woes may be abating.” This has long been a source of frustration to many users. If this begins to happen, it will definitely act as a catalyst for Ethereum’s price.

What Investors Should Do With ETH

As a result, now might be a good time to take advantage of Ethereum’s price. The crypto has moved to a low point, and its price is creeping up. Even if this is not the low point, it could be worth investing in anyway. This level is an opportunity for investors to average down into the situation.

Considering the aforementioned improvements to its platform, ETH is clearly one of the cheap cryptos that could move higher when Russia’s invasion of Ukraine is over or close to ending.

Recently, donors have sent at least $57 million in Ethereum to Ukraine for its defense. That amount has likely risen dramatically this week.

This shows Ethereum has uses beyond a means of payment and a platform for smart contracts. It can also be used for noble purposes, like helping organizations in dire need. This will likely leave a lasting impression in many Ethereum holders’ minds.

Nevertheless, at this point, investors who have not taken a position in Ethereum yet are probably seriously considering doing so. Even if this does not prove to be the low point, it allows investors to set a cheap base point from which they can average down.

The same is true for existing investors. At just more than $2,563 as of March 8, Ethereum could easily double from here once Russia’s war with Ukraine is nearing its end.

On the date of publication, Mark Hake did not hold (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.

Mark Hake writes about personal finance on mrhake.medium.com, Newsbreak.com and Beehiiv.com.


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