Pros and cons of investing in Ethereum

The Ethereum platform is a way to combine two spheres of finance and technology and transform them into an entirely new framework. If you want to start bitcoin trading you may use ethereum trader as you will get the best liquidity, and the platform is immune to volatility risk.  The Ethereum blockchain is arguably the most successful venture in this new industry, with tremendous gains for early-adopting investors. However, as a result of the rapid growth in price over time, it’s becoming increasingly difficult for smaller investors to participate in this market.

Still, with all of its limitations and volatility, plenty of experts are highly supportive of this technology. In recent months we have seen Ethereum go from quite popular as a currency to a system with incredible potential as an investment vehicle. Unfortunately, with such a rapid price increase, it’s hard to get a comprehensive view of the best ways to invest in Ethereum. The below-mentioned will analyze the pros and cons of investing in Ethereum.

Price of Ethereum:

The Ethereum price has been highly volatile over time, but data shows overall stability. Since January 2021, the Ethereum price has ranged between $2500 and $3000USD, with an average of USD 2800 per token. That’s quite a lot of volatility compared to a traditional currency like the dollar or yen, which barely moved over time.

It’s important to note that this price fluctuation is because of an entirely different market than any conventional market; it’s defined by investors coming together to exchange and grow the value of their cryptocurrency holdings and incentivizing developers with tokens in exchange for services. As you can see from the price chart, Ethereum has a relatively tight price range compared to other cryptocurrencies like Bitcoin and XRP. Considering how much more controversial the trade of Bitcoin and Ripple is, the stability of Ethereum is rather remarkable.

The Pros of Investing in Ethereum:

Inflation vs Deflation:

Inflation is terrible for any business, especially one that’s as capital-intensive as cryptocurrency exchange markets are today. Cryptocurrency exchanges will never be able to offer zero inflation for their customers (there will always be miners who create new coins). Still, they can create inflationary environments in which their tokens are used.

The Ethereum platform introduced a new paradigm in marketplace economics by creating deflationary exchanges with 0% transaction fees. As a result, no one needs to make or spend money because they will be able to exchange their tokens later for what they need or want, hopefully at an even higher price.

The rewards of mining:

While experts typically don’t like the idea of paying anyone for services, Bitcoin and Ripple have so many potential flaws that having “miners” is one way to keep your currency from collapsing. Miners are paid for securing your transactions and verifying them, incentivizing them to hold massive amounts of currency to earn more as time goes on.

Ethereum miners don’t need to be paid in token form (this could detract from Ethereum’s intrinsic value), but they do earn the right to keep the tokens they mined, whatever the market has decided at that time is worth. The other added benefit of having miners is that it encourages people who aren’t experts in blockchain tech to look at your system and offer potential improvements, either voluntarily or by paying them with ETH tokens.

The long-term potential:  

Ethereum has been around for less than eight years, but technology has come a long way. Finally, the platform is starting to develop products for mainstream investors, including major corporations like Facebook and Microsoft.

The recent partnerships between Ethereum and IBM, Uniswap, and Microsoft will help these companies realize their vision of creating an entirely new marketplace with a global economy powered by blockchain technology. While this has significantly increased the demand for Ether tokens and will make it more challenging to purchase, it does provide an excellent opportunity to buy into an expanding economy.

The Cons of Investing In Ethereum:

While the stability of the price range for Ether tokens is impressive compared to other cryptocurrencies, it does mean that considerable attention needs to be paid to entering this market. While Ethereum has always been a relatively stable and profitable currency to use on the platform, it’s still quite volatile compared to other fiat currencies like Ethereum. So if you were looking to buy a more significant amount of Ether tokens in the hopes of selling them at an even higher price for a profit, you should probably wait for entry points that have no significant risk attached.

Lack of liquidity:

For investors who aren’t familiar with cryptocurrency exchanges, two significant problems emerge when you look at the price chart for Ether tokens. First, many people don’t want to hold their cryptocurrency as an investment because they want it to go up without having to make any effort or risk involved and trade it off when it reaches a higher limit. Undeniably trading is considered an optimal solution for short-term profits, but considering the future potential of ethereum, it is necessary to hold this currency for extended periods. The liquidity of ethereum as compared to bitcoin is lesser is one of the prominent drawbacks that makes bitcoin more attractive than ethereum.