Ethereum, also commonly known as Ether, is the second largest cryptocurrency in the world after Bitcoin, and like any digital currency, it has seen a lot of ups and downs in its relatively short lifespan.
Ethereum price surged to a record $4800 in late 2021, marking a rise of more than 900% over the past 12 months and sparking speculation that Ether would overtake Bitcoin in value.
However, Ether was not immune to the May 2022 crypto routing and it plummeted in value alongside many other cryptocurrencies. Ether is now trading at $1423 (as of July).
What are cryptocurrencies?
Cryptocurrencies are literally digital mediums of exchange that use cryptography as a form of security. More recently, however, the term “cryptocurrency” has evolved to encompass a decentralized finance system (DeFi), a highly volatile asset class that can plummet or surge on the back of a tweet, a space for bad actors to steal can compromise the identities and money of vulnerable investors, a mode of wealth diversification, and a form of digital payment.
Ethereum once had an effective market cap of around $250 billion, but recently lost more than $100 billion in value due to the May 2022 crypto slide and now sits at around $135 billion in market cap.
If you’re familiar with Bitcoin but less familiar with its closest rival, here’s what you need to know about Ethereum, including why it could still become the dominant player on the cryptocurrency stage one day.
First, a crypto wealth warning
You don’t have to follow the financial world that closely to know that cryptocurrencies have become one of its biggest stories in recent years.
Today, they occupy the minds of governments and major financial institutions alike, dividing opinion over whether they are essentially Ponzi schemes that need tight regulation, or simply volatile asset classes for investors who like to gamble big.
If your financial plans revolve around capital preservation — holding onto what you have — then the volatile behavior of cryptocurrencies is definitely not for you.
Last month, Federal Reserve Chair Jerome Powell described cryptoassets as “vehicles for speculation” no better. And at its shareholders’ meeting in May, legendary Berkshire Hathaway vice chairman and investor Charlie Munger said Bitcoin was “disgusting and contrary to the interests of civilization.”
However, comments like this cannot stop millions of lovers around the world from making money from cryptocurrencies, including Bitcoin. This includes Australians, who are becoming increasingly involved: recent research by Roy Morgan found that 5%, or more than a million, of adult Australians own at least one cryptocurrency.
If you’re one of them, Laith Khalaf, UK financial analyst at brokerage AJ Bell, offers simple guidance: “Those looking to gain exposure to cryptocurrencies should only do so with a small amount of money that they are willing to lose,” he suggests before .
It is worth noting that investing in crypto assets is unregulated in Australia, as well as most EU countries and the UK, and there is no consumer protection should anything go wrong.
Which brings us back to Ethereum.
What is Ethereum?
According to online broker eToro, Ethereum is unique in the cryptocurrency universe.
Ethereum, released in 2015, includes an open-source software platform that allows developers to create cryptocurrencies and other digital applications.
Ethereum’s native cryptocurrency is called Ether (trading ticker is ETH), while Ethereum actually refers to a specific blockchain technology, the decentralized distributed electronic ledger that tracks all transactions. Ledgers are the basis for cryptocurrency transactions.
Think of ether as the cryptocurrency token derived from the Ethereum blockchain. A blockchain enables the secure transmission of encrypted data, which means that counterfeiting is almost impossible. As with Bitcoin, these tokens are currently “mined” using computers that solve mathematical problems.
Bitcoin also uses blockchain technology (see above for differences between the two cryptocurrencies), but Ethereum is considered more sophisticated and can be used to run applications. It’s this aspect, some commentators say, that could one day help it push Bitcoin from the cryptocurrency top spot.
Recently, Ethereum’s popularity has increased among both retail and institutional investors.
What are the advantages of buying on Ethereum?
According to eToro, Ethereum can be easily traded or exchanged for other cryptocurrencies.
Additionally, the broker says the cryptocurrency can be used at a growing number of online and brick-and-mortar retailers. Transaction times are faster compared to Bitcoin and it also offers access to a range of decentralized applications (dApps) that allow developers to create new online tools.
Advancement in retail payments was highlighted in March 2021 when UK-based Christie’s became the first auction house of its kind to accept ether as payment for a Beeple artwork. Titled Everydays: The First 5000 Days, the purchase price was $69.3 million.
In late April 2021, the European Investment Bank issued its first €100 million two-year digital bond on the Ethereum blockchain, confirming the financial sector’s growing interest in the cryptocurrency sphere.
Meanwhile, the S&P Dow Jones launched several cryptocurrency indices in early May, including one for Ethereum, aimed at measuring the performance of digital assets.
How to buy Ethereum in Australia?
This can be done through a crypto exchange like Coinbase or through online platforms like Gemini, Kraken or eToro. You can also choose from a number of Australia-based exchanges such as CoinSpot and BTCMarkets, which allow users to buy cryptocurrencies with AUD, in some cases through bank transfers or via BPAY.
You create an account with the chosen provider, verify your location and identity, and then link to your bank account to purchase the currency. Fees vary from one provider to another and can depend on the amount you want to deposit, withdraw (if any) and the transactions you want to make.
Payment methods may include debit/credit cards to PayPal and bank transfers. New investors may require a higher level of customer support compared to experienced traders.
Could Ethereum Price Rebound?
In the world of cryptocurrencies, few things are taken for granted and there are no certainties. And as we reported above, there are many high-level figures in the financial world who have deep reservations about the security, perhaps even the viability, of the overall concept of crypto.
But Nigel Green, CEO and founder of international financial consultancy deVere Group, has previously suggested that Ethereum is the cryptocurrency to watch: “Ethereum can be expected to significantly impact Bitcoin’s market dominance over the next year and beyond becomes. Compared to its larger competitor, Ethereum is more scalable, offers more uses and solutions, such as: B. smart contracts, which are already being used in many sectors, and is supported by superior blockchain technology,” he added.
AJ Bell’s Laith Khalaf acknowledges ether’s relative strengths in the context of cryptocurrencies, but urges extreme caution: “Ether or ethereum is more flexible than bitcoin because it’s programmable depending on usage, so it can be used to verify business transactions or contracts can as well as make payments.
“However, the value of this asset is still only what someone else will pay for it, and while that may be quite a lot right now, once the crypto fever has subsided, it may not be worth the code it’s written in. “
This article is not an endorsement of any particular cryptocurrency, broker, or exchange, nor is it a recommendation of cryptocurrency as an asset class.
