It was a recent Coinbase report that made me consider the prospects of ether (ETH) which is the second largest cryptocurrency by market capitalization.
According to Coinbase, ETH could outperform all our expectations in the next few months. I think this prophecy is interesting and so I want to share my personal opinion on why I consider ether as a good investment and what might propel its growth.
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Let us first take a look at how ETH has been doing this year: It is up 29%, which may seem impressive, however it pales in comparison to Bitcoin (BTC), which rose by 50%. Even broader crypto market represented by CoinDesk 20 Index grew by 28%. So, ETH did not perform as well as some others. Nevertheless, I believe it still has many positive factors contributing to its long-term value appreciation that can significantly boost its price soon.
ETH has no major supply-side pressures unlike other cryptocurrencies according to a report from Coinbase. This means that there are no miners panic selling like in some other digital coins or token unlocks by large holders making it unique. As a result, the downward pressure on prices is minimized as supply-side constraints disappear. In fact, as ETH 2.0 gets underway, staking and layer 2 scaling continues to take more ETH out of the market. Staking requires locking up ETH so that it can be used to provide network security and earn rewards while layer 2 solutions are added on top of Ethereum to make it faster.
I am also excited about Ethereum’s role in decentralized finance (DeFi). DeFi is one of the fastest growing areas within cryptocurrency focused on replicating conventional financial systems like banks and exchanges but in a decentralized manner using blockchain technology. The Ethereum Virtual Machine (EVM) has seen ETH become central to this cause because developers can create smart contracts on its platform. Most DeFi applications operate through these smart contracts. Therefore, the popularity of EVM use cases and advancements made with respect to layer 2 technologies underline its status as DeFi’s backbone.
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Coinbase further notes that US approval of ether ETFs traded on the spot market could be a major factor as well. An ETF is a fund that can be bought or sold on an exchange like a stock. But, if any ETHER SPOT ETF gets approved in the United States, this could open up ETH to more investors, especially those institutional ones who may not feel comfortable acquiring digital assets directly. The market might be underestimating these probabilities and their timing, Coinbase says. If so and an ETF is approved sooner than expected, there will likely be significant demand for ETH which would push its price upwards.
Likewise, Coinbase believes that even though the first deadline for the implementation of an ETF was missed in May 2024, it is highly likely that such refusal can still be overruled through court process. This positive view of the possibility of getting through the ETF approval process adds another reason why ETH has potential upside.
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There are several reasons to be hopeful about ETH’s prospects even though it has lagged behind BTC and the market at large this year. The absence of any significant supply side issues, its centrality in DeFi and the possibility of U.S. spot ETFs are some of the factors that could push its price upwards within months. I think ETH can pull a rabbit out of hat in terms of performance and may turn into a great investment prospect for you.
Posted Using InLeo Alpha
Posted Using InLeo Alpha