Is Ethereum a Good Investment?

As of today, November 2018, Ethereum is not a good investment option – in the sense that you should not expect high returns from it at least in the short-term. Ethereum has moved in a sideways trend since mid-September. From August to the beginning of September, the second largest cryptocurrency lost about 60% – dropping from $425 to about $171 on September 12. It has regained some of its losses and now is trading at about $210, but the general sentiment is still bearish.

One could say that Ethereum was simply following the general trend of the entire crypto market, which is usually copying the movements of Bitcoin, but it is not true with Ether. Buterin’s coin was performing really poor, even when compared with the oldest cryptocurrency out there. For example, BTC lost only 14% for the same period – August – September. It suggests that Ether’s downtrend is quite independent and driven by fundamental factors that affect investors’ confidence.

Why is Ethereum Declining?

One of the most important reasons behind Ethereum’s poor performance is the decline in the initial coin offering (ICO) market. Last year, blockchain and tech startups were keen to raise funds through this method, which allowed to avoid regulations and to conveniently accumulate the required funds to deploy the projects. However, as the number of scams and fails increased, ICOs started to lose credibility from investors and the community. Thus, the number of ICOs has dramatically decreased, which translates into lower demand for Ethereum, given that most of the ICO projects are building their new tokens based on Ethereum’s ERC20 standard and raising funds through the Ether coin.

Recently, research firm Autonomous Research said that the ICO activity collapsed by 90% since the beginning of 2018. Thus, in September there were raised less than $280 million, which is quite far from $2.4 billion recorded in the first month.

Besides, Ethereum is losing confidence because of uncertainties related to its future. Even though it’s the widest used dApp and smart contract-oriented blockchain network, it still struggles with scalability and other challenges. Some users complain about congestions in the system because of the high number of transactions, failed transactions, lower rewards for miners, and so on.

Ethereum is one of the most functional and capable blockchain networks, but it has to adapt to the fast-changing world of crypto. At this particular moment, this cryptocurrency is not the best investment instrument to rely on.

Does Ethereum have a Future?

Even though Ethereum is not in the best shape today, the network is still capable of reviving. Yes – ICOs are not inspiring confidence anymore, but there is a new market that can be very helpful for Ethereum – it’s about the security token space. Recently, more and more entities choose to tokenize their assets on Ethereum, thus giving token holders actual ownership rights and sometimes dividends and voting rights, rather than simple promises as in the case of ICO-based utility tokens. Security tokens are backed by real-world assets, and the experts are expecting to revolutionize the stock, commodity, and real estate markets among others. In the long-term, Ethereum might be a winner, but as an investor, you should better have a well-diversified portfolio.

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