Is it a Good Idea to Buy Ethereum (ETH) in 2022?
Are you still on the fence about investing in crypto? Trying to keep up in conversations about it, but more importantly—want to experience first-hand what it's like to be successful investing in cryptocurrencies? Before you dive in, educate yourself on which ones are worth it right now—and in the long run. In this article, we'll cover Ethereum.
We'll look at some of the reasons you should, and also maybe shouldn't invest in this. Going beyond "just" the numbers—although they're massively important, we're looking at the place of Ethereum in the world of crypto, and the world in general, so you can determine whether it's something you want to invest in.
Here's what we'll cover
The emergence of Ethereum and what is Ethereum: let's start by understanding what it is you're possibly investing in because Ethereum is much more than just a cryptocurrency.
Five reasons investing in Ethereum is a good idea. We're zooming in on the big picture and are looking at the strengths of this cryptocurrency and blockchain. No time to lose? Here's the gist of it:
Ethereum's predictions are promising.
Ethereum is "better" than bitcoin.
Ethereum 2.0 is more sustainable.
Ethereum is decentralized
Why you might want to avoid Ethereum: to make a well-calculated decision, it's crucial you also investigate the downsides of your possible investment. We discuss the volatility of Ethereum and what this could mean for your investment in the long run.
Closing time: we'll finish with some pointers on how to safely invest in Ethereum and when and where to buy it.
The Emergence of Ethereum
Everybody knows bitcoin and that it kick-started countless other cryptocurrency projects to either improve or compete with bitcoin. One of the biggest projects that were launched was Ethereum, which drastically changed the crypto market.
Right now, Ethereum is the second-largest cryptocurrency when looking at volume—but it's much more than that. It has a lot more use cases than coins like bitcoin. This reflects in its value, too: in 2021, Ethereum gained more than 400% in value, whereas bitcoin's only had a modest 62% rise (as of Dec. 31).
What is Ethereum?
Ethereum isn't just a payment cryptocurrency.
Before you decide to buy Ethereum, it's important to understand what it really is and how it came to be. Ethereum has two purposes: it's "money", giving it its value. But possibly more interesting is that Ethereum is a blockchain, an open-source software platform.
It's often described as a supercomputer, which could be paving the way for existing concepts such as decentralized finance due to the smart contract functionality that allows for recording transactions without buyers and sellers without an intermediary or central authority.
Developers love it too and greedily build decentralized applications on top of it.
To interact with the platform, they use its native currency, ether (ETH) which allows them to pay for running apps or processing transactions on the Ethereum blockchain.
5 reasons investing in Ethereum is a good idea
So, Ethereum sounds interesting: it's future-focused, and the decentralized part sounds promising. Plus, when comparing its value to bitcoin, you could be easily tempted to take the leap and become an investor. But let's break up what's happening around Ethereum so you learn to understand what you're really investing in.
Ethereum's Predictions Are Promising
Crypto experts generally agree that the demand and value of Ethereum will go up over time. They just don't agree on how much that will exactly be. Predictions range from $9,000 per coin to even $150,000. Either way, crypto watchers are positive about Ethereum's future in various degrees.
Ethereum Is "Better" Than Bitcoin
Simply put: it's a lot more versatile, and the Ethereum blockchain has a lot more utility, which gives it a strong competitive advantage.
Ethereum is proving to have a strong real-world utility. It doesn't just host its own ether token but is also the base for applications like the massively popular non-fungible tokens (NFTs). Plus, it's paving the way to a banking revolution by enabling decentralized finance.
Ethereum 2.0 Is More Sustainable
Have you been interested in investing in any sort of cryptocurrencies, but has the environment held you back? That's understandable.
Even Tesla CEO Elon Musk acknowledged how harmful cryptocurrencies are to the environment by no longer accepting them as a currency to pay for Tesla cars.
Why are cryptocurrencies so bad for the environment? They have to be mined. This is an incredibly energy-intensive process, using a series of complicated computer processes. The energy taken to mine crypto has been met with a lot of criticism around the world. While they are what many consider the currency of the future, their environmental impact certainly isn't future-proof.
Here's how bad it is exactly: in 2021, Ethereum and Bitcoin mining operations, combined, emitted more than 78 million tons of CO2 into the atmosphere—roughly the emissions of over 15.5 million cars.
Luckily, crypto is picking up on the criticism and looking at ways to make it more environmentally friendly and energy-efficient.
Ethereum 2.0 is an example of that, which is supposed to use 99.95% less energy than the current technology.
They achieve this by merging with the beacon chain proof-of-stake system. With the Proof-of-Stake system, smaller devices can be used, reducing power consumption drastically. Moreover, there is no longer a need for mining hardware.
So, if you're interested in crypto but only want to jump in if you're able to make environmentally conscious decisions, keep an eye out for Ethereum 2.0
Ethereum is Decentralized
A big benefit for Ethereum is that whatever information is stored on its blockchain is safe from governments or any other agencies. That makes the data, smart contracts and applications on it uncensorable. This can help keep people informed in specific situations without censorship interfering.
Why you might want to avoid Ethereum
Ethereum has a lot of potentials, but like any cryptocurrency, it also comes with its risks. Let's also take a look at some of its downsides, so you can make a well-calculated decision regarding your possible investment.
Ethereum is Extremely Volatile
Ethereum has a tendency to bounce up and down in its value. Now, anyone investing in crypto knows that one should "ignore" short-term peaks and lows because it's about the long-term investment. Still, the volatility of the cryptocurrency matters because it affects when you should buy or sell.
February 2022 is a great example of how Ethereum reacts to real-world events. On Feb. 23, after Russian President Vladimir Putin ordered troops into Ukraine, it dropped below $2,400, where it was still above $3,000 the week before.
But this is not the first time Ethereum is proving to be volatile. Last May, Ethereum lost nearly 50% of its value, and over the course of 2018, Ethereum's price plummeted by nearly 94%.
Keep in mind that there's no guarantee that Ethereum will be a success in the long run. Crypto is still uncharted territory, regardless of what experts are saying. We're all new to the game, so make sure to inform yourself properly before laying your life savings down.
Want to Invest in Ethereum? Here's How To Do It
If you've done the calculations and feel safe enough to invest in Ethereum, you're going to want to pick the right strategy.
Strategy 1: Buy and Hold
Simple and straightforward: the buy-and-hold approach is trying to leverage the volatility of a cryptocurrency, making it relatively perfect for Ethereum. In this case, it's all about timing and, most of all, patience: the goal is to hold on to your Ethereum long term, with the goal of realizing price appreciation, despite volatility.
Strategy 2: Trading
You can also choose to trade your Ethereum. With spot trading, you will have to be a lot more "on top of" the value of Ethereum and willing to act fast. Are you interested in the trading approach? You'll want to take a look at our guide that covers everything you need to know to get started with trading.
Things to keep in mind before you invest in Ethereum
A lot of people have learned about the challenges of investing in crypto the hard way. To prevent you from doing the same, take this quick checklist into account every time you're tempted to invest in a cryptocurrency—whether that's Ethereum or any other crypto.
Only buy ether from reputable exchanges.
Invest only what you can lose.
Know this will be a matter of timing, so be ready to make quick decisions
Reduce your risk by diversifying. Don't put all your eggs in one basket.
Make sure to use really, really strong passwords. Also: 2-factor security is a must.
Keep Learning About Crypto
If this is the start of your adventure in the world of cryptocurrencies, you've got a lot left to learn. If you want to become comfortable around crypto, read on about handy techniques such as technical analysis in our complete guide.