What is Ethereum crypto? – Advisor Forbes Australia

Ethereum, also known as Ether, is the second largest cryptocurrency in the world after Bitcoin, and like any digital currency, it has seen quite a few ups and downs in its relatively short lifespan. .

The price of Ethereum hit an all-time high of US$4,800 in late 2021, marking an increase of more than 900% over the past 12 months and sparking speculation that Ether might overtake Bitcoin’s value.

However, Ether was not immune to the May 2022 crypto routing and declined in value along with many other cryptocurrencies. Ether is now trading at $1,423 (July).

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What are cryptocurrencies?

In the true sense, cryptocurrencies are a digital medium of exchange that uses cryptography as a form of security. More recently, however, the term “cryptocurrency” has evolved to encompass a decentralized financial system (DeFi), a highly volatile asset class that can dive or soar on the back of a Tweet, a space where bad actors can steal identities and money. of vulnerable investors, a form of asset diversification and a form of digital payment.

Ethereum once had an effective market cap of about $250 billion, but it recently lost more than $100 billion as a result of the May 2022 crypto slide and now sits at about $135 billion in market cap.

If you’re familiar with Bitcoin but less familiar with its closest rival, here’s what you need to know about Ethereum, including why it could one day still become the dominant player in the cryptocurrency scene.

Source: eToro

First, a warning about cryptocurrency

You don’t have to follow the financial world so closely to know that cryptocurrencies have become one of the biggest stories in recent years.

Today, they are a concern for governments and major financial institutions and are divided on whether they are essentially Ponzi schemes that need to be heavily regulated or just volatile asset classes for investors who like to play with high stakes.

If your financial plans revolve around capital preservation – holding on to what you have – then the volatile behavior of cryptocurrencies is definitely not for you.

Last month, Jerome Powell, the chairman of the US Federal Reserve, described crypto assets as nothing better than “vehicles for speculation”. And at his annual general meeting in May, legendary Berkshire Hathaway VP and investor Charlie Munger said Bitcoin was “disgusting and contrary to the interests of civilization.”

However, such comments do not stop millions of enthusiasts around the world from trying to monetize cryptocurrencies, including Bitcoin. This also applies to Australians, who are increasingly taking action: a recent study by Roy Morgan found that 5%, or more than a million adult Australians, own at least one cryptocurrency.

If that includes you, Laith Khalaf, British financial analyst at brokers AJ Bell, offers a simple piece of advice: “Those who want to gain exposure to cryptocurrencies should only do so with a small amount of money they are willing to lose,” he states. in front of. . .

It should be added that investments in crypto assets are not regulated in Australia, as well as most EU countries and the UK, and there is no protection for consumers in the event of a problem.

Which brings us back to Ethereum.

What is Ethereum?

According to online brokers eToro, Ethereum is unique in the cryptocurrency universe.

Launched in 2015, Ethereum includes an open-source software platform that developers can use to create cryptocurrencies and other digital applications.

The native cryptocurrency of Ethereum is called Ether (the trading symbol is ETH), while Ethereum actually refers to a specific blockchain technology, the decentralized distributed electronic ledger that keeps track of all transactions. Ledgers are the foundation of cryptocurrency transactions.

Think of Ether as the cryptocurrency token derived from the Ethereum blockchain. With a blockchain, encrypted data can be transferred securely, making counterfeiting almost impossible. As with Bitcoin, these tokens are currently “mined” through computers that solve math problems.

Bitcoin also uses blockchain technology (see above for the differences between the two cryptocurrencies), but Ethereum is considered more advanced and can be used to run applications. It is this aspect, some commentators say, that could one day help push Bitcoin away from the top spot among cryptocurrencies.

Lately, Ethereum’s popularity has increased among retail and institutional investors.

What are the advantages of buying in Ethereum?

According to eToro, Ethereum can be easily traded or bartered for other cryptocurrencies.

In addition, the broker claims that the cryptocurrency can be used by a growing number of online and brick-and-mortar retailers. Transaction times are faster compared to Bitcoin and it also provides access to a number of decentralized applications (dApps) that allow developers to create new tools online.

Retail payment advances were highlighted in March 2021 when UK-based Christie’s became the first auction house to accept Ether as payment for a Beeple artwork. Titled “Everydays: The First 5000 Days”, the purchase price was worth $69.3 million.

At the end of April 2021 and confirming the financial sector’s growing interest in cryptocurrencies, the European Investment Bank issued its first-ever €100 million digital bond for two years via the Ethereum blockchain.

Meanwhile, the S&P Dow Jones launched several cryptocurrency indices in early May, including one for Ethereum, aimed at measuring the performance of digital assets.

This can be done through a crypto exchange like Coinbase or through online platforms like Gemini, Kraken or eToro. You can also choose from a range of Australian exchanges, such as CoinSpot and BTCMarkets, which allow users to buy cryptocurrencies with AUD, in some cases also via bank transfer, or via BPAY.

You create an account with the chosen provider by confirming your place of residence and your identity, then log into your bank account to purchase the currency. Fees vary from provider to provider and may depend on the amount you wish to deposit, (optionally) withdraw and the transactions you wish to perform.

Payment methods can be those via debit/credit cards to PayPal and bank transfers. New investors may need a higher level of customer support compared to seasoned traders.

Could the price of Ethereum rise further?

In the world of cryptocurrencies, little is self-evident and there is no certainty. And as we reported above, many prominent figures in the financial community have deep reservations about the security, if not viability, of the overall concept of crypto.

But Nigel Green, CEO and founder of the international financial advisory firm deVere Group, has previously suggested that Ethereum is the crypto to watch: “Ether is expected to significantly diminish Bitcoin’s market dominance in the coming year and beyond. Compared to its largest. rival, Ethereum is more scalable, offers more applications and solutions, such as smart contracts that are already used in many industries, and is built on superior blockchain technology,” he says.

AJ Bell’s Laith Khalaf acknowledges Ether’s relative strengths in the cryptocurrency context, but urges extreme caution: “Ether, or Ethereum, is more flexible than Bitcoin because it’s programmable based on usage, so it can be used to verify business transactions or contracts and to make payments.

“However, the value of this asset is still only what someone else will pay for it, and while that may be a lot right now, it may not be worth much once the crypto fever has subsided. “

This article is not an endorsement of any particular cryptocurrency, broker or exchange, nor does it constitute a recommendation of cryptocurrency as an asset class.

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