• Cynthia Madison, at Content Creator


• 18.05.2023 12:00 pm
#Financial

Ethereum (ETH), the second largest cryptocurrency by market capitalisation after Bitcoin, accounts for almost 20% of the $1.1 trillion global crypto market, making it one of the safest long-term bets if you are looking to diversify your portfolio with digital currency. While last year was defined by market turbulence and 2023 is no short of political developments, economic events, and other unforeseen occurrences, jumping off the plane and panic selling or making irreversible changes to an investment portfolio is not the go-to method to prevent losses among seasoned investors. Historically, markets do eventually bounce back after downturns, meaning that those who overreacted and sold their assets can't benefit from market rebounds. 

Before discovering where Ethereum is going in 2023 and what events are going to bring positive media exposure, it's worth mentioning last year's highlights. Many cryptocurrency owners were caught off-guard several times in 2022, more precisely when FTX filed for bankruptcy and Luna Crash collapsed and rushed to sell their assets to recover some of the money invested. 2023, however, started on a positive note with cryptocurrencies prices surging, and following a period of downturns and dips, Ethereum and other cryptocurrencies are finally witnessing a bullish momentum. Prices might recover slowly but hopefully surely, which is why it would make more sense now than three months ago to buy Ethereum. 

Despite the turbulence experienced last year in the cryptocurrency market, Ethereum remains one of the safest long-term bets for investors willing to weather the ups and downs of this volatile world. Let's discover the most important aspects impacting Ethereum this year so you can make informed decisions if you want to buy the dip. 

Photo source: https://unsplash.com/photos/L2QB-rG5NM0

Is it a good time to invest in Ethereum? 

After a bad year for the cryptocurrency market, 2023 started more positively. Ethereum prices have reached new highs in recent weeks, and coin issuance is once again deflationary, with 66,000 ETH reducing supply. This is due to the switch from Proof-of-Stake to Proof-of-Work in September 2022, when the long-awaited Merge upgrade is finally released. Owing to the new consensus mechanism, a fraction of Ethereum is being burned, turning it into a deflationary asset once again, after fluctuating between deflationary and inflationary over the years. This is good news for crypto enthusiasts looking for scarce virtual assets.

A "deflationary" currency is one that sees its supply decrease over time, contrasting "inflationary" currencies, where the supply grows. Notably, deflationary currencies appeal to cryptocurrency enthusiasts, as they believe the scarcity will increase the value of their assets. Some cryptocurrencies' supply decreases over time, meaning their value grows if demand stays constant. Binance Coin (BNB), for instance, burns tokens quarterly to limit the supply and ensure a maximum of 200.000 coins. However, owing to burning events, the current BNB supply is lower. 

Why are investors optimistic about Ethereum?

Several things impact a cryptocurrency's price and must be considered when looking to add digital coins to your investment portfolio. Among the most important are the news and media exposure surrounding it. Whether now is a good time to buy the dip is debatable and depends on the investor. What's for sure is that Ethereum has gained quite a lot of good media exposure owing to the past upgrades that followed the highly anticipated merger of the Ethereum Mainnet and the Beacon Chain PoS system. Nevertheless, the impact of the Merge was not necessarily reflected in the cryptocurrency's value, but in a better global perception of the network, as it reduced energy consumption by more than 99.99%, according to Ethereum.org.

The Shanghai Upgrade, the next major event for Ethereum, will take place around April 12 and finally enable users to withdraw their staked ETH. Significant improvements like these may benefit the token's value thanks to improved scalability and efficiency for the network. Investors believe that the Ethereum price, which has recently risen, will skyrocket following this long-awaited upgrade. 

How to approach Ethereum investments in the next period?

There are several types of investors, including those seeking to take advantage of market crashes to make investments at bargain prices, like billionaire Warren Buffet. On the other hand, sceptics are pessimistic about the revival of an asset when its value is low, so they choose to stay away from it. 

While it's true that Ethereum has yet to reach its all-time high of November 2021, this isn't a reflection of the future. This token, just like its counterparts, went through challenging situations. Even though nothing can guarantee that they ended just because 2023 started on a positive note, buying at a discount can be a smart move for those believing in the potential of digital currency.  

Whether Ethereum will experience similar returns again is uncertain. But since its price is two and a half times lower than its 2021 peak, investing in it at a bargain price is worth considering. Even if it doesn't see momentous returns, approaching its all-time high again could bring significant yield. 

Final take

Despite the turbulence experienced last year in the cryptocurrency market and the whole financial system, Ethereum remains one of the safest long-term bets for investors looking to diversify their investment portfolio with cryptocurrency. Those willing to weather the ups and downs of this volatile world may reap the benefits of patience in the bear market. However, nothing and no one can guarantee financial returns, especially in such volatile markets. Plus, investing in cryptocurrency requires thorough research on cryptocurrency options and a deep understanding of your long-term goals and risk tolerance. To establish the latter, consider your behavioural tendencies and what you would do when seeing your asset's value drop. 

Ethereum has been having a good year so far, but only time can tell where it will be in the future. Ensure you are informed when you start investing in cryptocurrency, use common sense, and only spend money you can afford to lose.