Summary
- Ethereum is the second-largest cryptocurrency by market capitalization
- Ethereum is used by many large companies and has potential as it is being used for NFT
Ethereum is the second-largest cryptocurrency in terms of market capitalization after Bitcoin. Its price has continued to rise despite repeated volatility in the seven years since its birth.
It has attracted the attention of famous companies such as Microsoft and Toyota. It is one of the virtual currencies whose price is expected to rise.
However, many of you may be thinking, "I don't know much about Ethereum, and I want to see why it is expected to have a promising future.
"If you read to the end, it should help you decide if you should buy Ethereum or not!"
Differences between Ethereum and Bitcoin
Ethereum's price movements to date
6 Reasons Why Ethereum's Future Price is Expected
- Ethereum is related to Bitcoin's price movement
- Possibility of reducing the gas price (fees)
- Significant updates in four stages
- Partnerships between Ethereum and famous companies
- Possibility of listing Ethereum ETF in the U.S.
- Widespread use of NFT
- The best time to buy Ethereum is when the price has crashed
Basic Knowledge of Ethereum
Ticker: ETH
Price: $3,062.00
Market cap: $365.16B
Approval Algorithm: PoW (to be migrated to PoS)
Developer Vitalik: Buterin
Issue limit: None
*Price and market capitalization are as of February 11, 2022.
First of all, the developer of Ethereum is a Canadian programmer named Vitalik Buterin.
His interest in Bitcoin was sparked in high school, and he developed Ethereum while in college.
Ethereum has risen in price from $0 to $3,062 in the seven years since its release.
Features of Ethereum
Ethereum has the following three features
- The second-largest cryptocurrency by market capitalization
- It uses smart contracts.
- The approval algorithm is scheduled to change from PoW to PoS.
(1) The second-largest cryptocurrency by market capitalization
Ethereum is the second-largest cryptocurrency in market capitalization among all virtual currencies.
Bitcoin, the leading cryptocurrency, has a market capitalization of about $829.14B, followed by Ethereum with about $371.64B.
"Market capitalization is the number of units issued times the currency's market value!"
(2) It uses smart contracts
One of the features of Ethereum is its use of smart contracts.
A smart contract is "the automatic execution of an agreement on the blockchain."
With smart contracts, users can program specific actions to execute a particular activity.
Therefore, rules such as "users who pay 1 ETH will automatically get this data" can be set up.
For example, in a regular contract, even if a user pays the fee, there is a possibility that the service provider will run away or that the user will not receive the service due to system trouble.
However, with a smart contract, the user does not have to worry about not receiving the service because a particular action will occur upon payment of the fee.
Intelligent contracts are supposed to handle arrangements in various fields besides payments, including finance, real estate, and government services!
"There are many places where Ethereum is expected to be used!"
(3) Approval algorithm to be changed from PoW to PoS
Ethereum plans to change its approval algorithm from Proof of Work (PoW) to Proof of Stake (PoS) through an update.
An approval algorithm is a mechanism that processes cryptocurrency transactions worldwide and records them in a blockchain.
Cryptocurrency exchanges are recorded in the blockchain. The blockchain is made up of people around the world processing calculations.
After being checked and approved for correctness, each exchange is recorded in the blockchain. The person who does the approval work receives cryptocurrency as a reward.
Doing the transaction approval work is called "mining," The person doing the transaction work is called a "miner!"
Involved in the rules of mining is the approval algorithm, and there are various methods such as PoW and PoS.
PoW is an approval algorithm requiring considerable computational processing to approve transactions, consuming a lot of power.
PoS, on the other hand, has a rule that the approval process must be done by a person who holds a lot of cryptocurrencies, so it does not require a considerable amount of computation like PoW.
Therefore, PoS is said to consume less power than PoW and can be operated with fewer resources.
Ethereum plans to move from PoW to PoS through future updates.
Differences between Ethereum and Bitcoin
The main differences are the developers, the maximum number of units issued, and the uses!
Both share the same high market capitalization, but there are differences between the two.
The first is about developers.
Bitcoin's developer is called Satoshi Nakamoto, but this is a pseudonym, and his identity has not been revealed.
Ethereum, on the other hand, is known to be developed by Vitalik Buterin.
The second is the maximum number of virtual currencies that can be issued.
The maximum number of Bitcoins issued is 21 million BTC, but Ethereum does not limit.
The third is the use of cryptocurrency.
Bitcoin is mainly used as a means of payment. Still, Ethereum can be used for smart contracts, as mentioned above, so that arrangements can be smoothly concluded and executed on the blockchain.
Intelligent contracts can develop dApps (decentralized applications), making it possible to create various platforms on the blockchain.
For example, games using NFT (Non-Fungible Token) and Defi (Decentralized Finance), which became popular after 2021, are dApps developed on the blockchain.
In addition to finance and games, there is potential for use in a wide range of other genres.
So Ethereum can be used for the business side of things!
Ethereum's price movements to date
Ethereum is expected to be used for business purposes. The price has risen to $3,062 in just seven years.
However, it has gone through a series of wild swings to reach this price.
Let's take a look at Ethereum's price movements to date.
The first significant move in Ethereum was in 2017.
This was the bubble year for virtual currencies, also known as the "first year of virtual currencies," Many virtual currencies, including Ethereum and Bitcoin, rose in price.
However, the following year, 2018, the cryptocurrency bubble burst.
The entire market dropped significantly, and Ethereum's price fell from $1294.48 to $120.82 over a year from January 2018.
Furthermore, in 2020, a new coronavirus epidemic broke out. The cryptocurrency market fell, the stock market, with Ethereum, dropped from about $258.90 to $112.19 from February to March 2020.
However, after 2021, the market came back to life due to the popularity of Defi and NFT.
Since then, the price has gradually risen, reaching a new high of $4678.36 in November.
However, it has fallen about 30% from its high due to monetary easing reduction.
From 2021 to 2022, the cryptocurrency market tends to be affected by interest rate hikes and tapering by the U.S. Federal Reserve (FRB).
6 Reasons Why Ethereum's Future Price is Expected
The following are six reasons why Ethereum is expected to increase in price in the future
- Ethereum is related to Bitcoin's price movement
- Possibility of reducing the gas price (fees)
- Significant updates in four stages
- Partnerships between Ethereum and famous companies
- Possibility of listing Ethereum ETF in the U.S.
- Widespread use of NFT
Ethereum is related to Bitcoin's price movement
This is the most recent one-year Chart of both.
From March to May 2021, Bitcoin shows a bullish trend, but the rest shows a similar movement.
As you can see, Ethereum's price movement is similar to that of Bitcoin.
Since Bitcoin has a higher market capitalization and is better known than Ethereum, if Bitcoin rises further in price, Ethereum can be expected to follow suit.
Possibility of reducing the gas price (fees)
Until now, Ethereum has been plagued by soaring gas prices (fees).
An auction system determines Ethereum's fees. As many users have continued to pay high prices, the costs have continued to rise.
The higher the fees, the higher the cost of using Ethereum, making it more challenging.
However, in June 2020, one of Ethereum's significant updates, "London," implemented a new fee model, EIP1559.
The EIP1559 fee model "introduces a base fee for Ethereum fees."
Since the base fee is set at a certain level, it will prevent the price from skyrocketing as it has in the past.
In addition, EIP 1559 will burn a portion of the fees paid, which will reduce the overall supply of Ethereum and contribute to the Ethereum price increase.
"The fewer the number of Ethereum, the more scarce they become, which leads to a rise in the price of Ethereum itself!"
Significant updates in four stages
Ethereum will go through four stages of significant updates, eventually turning into Ethereum 2.0.
With Ethereum 2.0, the approval algorithm will be PoS, processing speed, and soaring fees can be improved!
The four significant updates to Ethereum are as follows
- Frontier
- Homestead
- Metropolis
- Serenity
We are currently in the middle of the final phase, Serenity, which starts in December 2020.
Ethereum's price also has a history of rising through significant updates.
So updates are also a factor in price increases!
Partnerships between Ethereum and famous companies
Ethereum has partnered with many large companies. The Ethereum Enterprise Alliance (EEA) has been formed with over 500 member companies.
The EEA is an organization that aims to promote the use of Ethereum, and it includes famous companies such as Microsoft, Toyota, MasterCard, Mitsubishi Tokyo UFJ, NTT, Intel, and IBC.
"So you can see that a lot of people appreciate Ethereum!"
Possibility of Ethereum ETF listing in the U.S.
Ethereum is expected to be listed on the Ethereum ETF in the U.S. in the future.
ETFs are "exchange-traded funds," meaning they're mutual funds that can be traded on a stock exchange!
One of the reasons Ethereum ETFs are expected to be listed is that the Bitcoin ETF was listed in the U.S. in October 2021.
Until now, bitcoin ETFs have been handled in other countries, but the fact that it is a "bitcoin ETF approved by the SEC (U.S. Securities and Exchange Commission)" drew attention.
Now that the Bitcoin ETF has been approved in the U.S., people expect Ethereum to be the following ETF.
If the Ethereum ETF is approved, more institutional investment funds will likely flow into Ethereum than ever before, and the price will rise.
If you want to know more about Bitcoin ETF, read here.
Widespread use of NFT
The Widespread use of NFT is also related to the price increase of Ethereum.
NFT(Non-Fungible Token) is digital data to exchange image, video, and music data rights on the blockchain!
As mentioned above, NFTs have been all the rage since 2021 and have spawned various platforms around the world.
Since Ethereum is mainly used for NFT exchange, Ethereum users will inevitably increase as NFT becomes more popular.
As the number of users increases, the price of Ethereum is expected to rise.
How far will Ethereum go up?
Ryan Watkins, a senior research analyst at cryptocurrency analysis firm Mesari, predicts that Ethereum 2.0 could overtake Bitcoin.
According to Ryan Watkins, "The change in mechanism from PoW to PoS will increase security," and it may eventually surpass Bitcoin's market capitalization after the update to Ethereum 2.0 is completed.
Source： Cointelegraph｜ 'Deflationary' Eth2 could flip Bitcoin: Messari analyst
Also, according to the British news media "Independent," "JP Morgan explains that Ethereum is more advantageous than Bitcoin."
JesseCohen, a senior analyst at uk.investing.com, a financial markets platform, stated the following.
"With the price still below the $5,000 level, many expect ETH to double in price in 2022. That said, bitcoin is showing no signs of slowing down, With mainstream adoption likely to gain further momentum in the year ahead."
Source： INDEPENDENT｜ETHEREUM IS A BETTER BET THAN BITCOIN, JPMORGAN SAYS
"These are just my predictions, so you'll have to make your own investment decisions!"
When should you buy Ethereum?
The following methods are recommended
- When the market crashes significantly
- Invest a small amount each month
Summary
In this post, I have explained the features and prospects of Ethereum and recommended exchanges to buy it.
Finally, let's review the essential points of this post
Summary
- Ethereum is the second-largest cryptocurrency by market capitalization
- Ethereum is used by many large companies and has potential as it is being used for NFT
