The second-most-popular crypto has outperformed Bitcoin even with the recent drop in cryptocurrency prices, and many see tremendous potential in its real-world uses.
The second-most-popular cryptocurrency, ETH, the native cryptocurrency on the Ethereum network, has been crushing Bitcoin BTC so far in 2021 after Bitcoin's huge price run-up at the end of 2020 and earlier this year. Even after the big recent price drop in crypto, Ethereum ETH is still up roughly 280% year to date as of May 22, while Bitcoin is up about 33%. With the outperformance and the recent dip, I think now could be an opportune time to buy Ethereum ETH. Here's why:
Real-world utility
Like Bitcoin BTC, Ethereum ETH is a decentralized network powered by the digital ledger blockchain technology, and it can be used for digital payments. But it differs from BTC in that code can be built and programmed onto Ethereum's blockchain network to create decentralized apps and smart contracts that run constantly and that can't be manipulated or controlled by a third party. Ethereum.org calls Ethereum "the world's programmable blockchain technology," which I think is a great description.
And this is what is making ETH exciting right now and part of what has been driving up the price. For a while now, people have been saying how much real-world applicability blockchain technology has, but now we are really starting to see it. Ethereum blockchain is powering most nonfungible tokens (NFTs), which have taken off this year. NFTs are digital files such as video, and audio stored on the blockchain, and each has a digital signature key that makes it unique and impossible to duplicate. Owning a piece of data that anyone can see a copy of by Googling might sound silly, but it's not unlike owning physical data. Sure, you could get a famous art copied and no one might know, but you wouldn't have the original of that art, which is worth way more.
Ethereum blockchain is also popular for running smart contracts, which are basically programmed and automated smart contracts that can't be retroactively changed and that run without needing to be carried out by some sort of the third party. For instance, a contract could be set up in a pizza delivery transaction once the person who ordered the pizza receives it, money is automatically sent to the restaurant account. NFTs are actually powered by smart contracts technology to verify authenticity and ownership.
Ethereum 2.0
Another big catalyst could be the Ethereum network's transition to Ethereum 2.0. The transition, which is supposed to fully take place in 2022, is a set of upgrades that are supposed to make blockchain technology more secure, more scalable, and less reliant on energy for mining, and therefore more sustainable.
That's exciting on its own, but the merge could also effectively increase demand for Ethereum price. Other than the fact that Bitcoin BTC was the proof of concept for all decentralized cryptocurrencies, investors are drawn to it because it has a finite supply of only 21 million BTCs, leading some to believe the crypto is a hedge against inflation. Ethereum network does not have a fixed supply of ETH tokens, but there is talk that the minting of new ETH tokens may start to slow once the network transitions to Ethereum 2.0.
Vitalik Buterin, Ethereum co-founder has said that new-token issuance should be reduced under Ethereum 2.0. Last year, annual issuance was around 4.7 million new ETH per year. Following the implementation of Ethereum 2.0, he said issuance could fall to somewhere between 100,000 and 2 million Ether per year.
Buy Ethereum
Investors typically watch how ETH trades compared to BTC. Since the beginning of 2020, the price of Ethereum ETH has ranged from 1.3% to as high as 8% -- recently when Bitcoin BTC began to tumble -- of Bitcoin's price per token. But during the last price big bull run for crypto in 2017 and 2018, ETH price got as high as nearly 14% of BTC price, so we really haven't even seen it outperform its historic performance in relation to Bitcoin. Given all the smart contracts and apps Ethereum is starting to power in the real world, the catalyst that could come from Ethereum 2.0, and the recent decline in cryptocurrency prices, I would definitely recommend buying Ethereum ETH.
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