Should We Invest In Ethereum?
Which cryptocurrencies will be Google, Facebook, Apple, Amazon and Nasdaq of the crypto world? Because of the depth and complexity of the crypto world, it is not easy to answer this question. In addition to the investment objective, I am looking for the answer to this question to get to know the blockchain universe and satisfy my intellectual curiosity. To answer such a question, it would be the best way to study the significant cryptocurrencies one by one.
I tried to evaluate Bitcoin comprehensively in my previous post. You can reach the post containing my reviews on Bitcoin from here.
I would like to analyse Ethereum, the second most valuable cryptocurrency in my article today. Ether is the name of the crypto money of the Ethereum ecosystem. However, since crypto is listed as "Ethereum" in the exchanges, I used the name "Ethereum" in order not to create confusion.
Ethereum is an open-source, blockchain-based operating system designed to create smart contracts.
Ethereum was introduced by cryptocurrency researcher and programmer Vitalik Buterin at the end of 2013. The system was launched on 30 July 2015 with the sale of 11.5 million coins.
As a result of security problems in 2016, Ethereum blockchain was divided into two. The original Ethereum blockchain is called Ethereum Classic. Ethereum is still the 2nd most valuable crypto and Ethereum Classic is the 18th most valuable crypto.
It is an interesting choice to give the name of ether, a volatile gas for a Crypto money, on a monetary issue where trust is essential. Buterin said that he chose this name because the environment in which light is moving is called as "ether" and because it sounds pleasant.
In March 2017, the Enterprise Ethereum Alliance (EEA) was established with the participation of various blockchain startups, research groups and companies. By July 2017, the Union had more than 150 members.
There are 100,88 million Ethereum coins in the market. Ethereum's total market value as of today is $ 46.42 billion. This represents 16% of the total cryptocurrency volume, which is 288.4 billion dollars.
Comparison of Bitcoin
- 240.393 transactions were made with Bitcoin in the last 24 hours, 80.751 transactions were made in Ethereum.
- Average transaction amounts with Bitcoin are approximately 100 times higher than Ethereum.
- A block is created every 8 minutes in Bitcoin, and a block is created every 15 seconds in Ethereum.
- Transaction fees are determined according to the amount of calculation required by the transaction, bandwidth usage and storage requirements in Ethereum, and Bitcoin transactions are determined according to the transaction size in bytes.
If we consider the blockchain as a new Internet, Bitcoin and the other cryptocurrencies with the purpose of money transfer can be compared with e-mail. Ethereum is a platform to develop features for different purposes on the blockchain. Developing applications on a blockchain without Ethereum-like platforms requires intense coding, cryptography knowledge. Thanks Ethereum, from electronic voting to digitally recorded intellectual property, from legal obligations to trading transactions, many applications are implemented.
Besides being a subject of trade, such as other cryptos, Ethereum is used to pay the fees for transactions made by application developers on the Ethereum network.
What Is A Smart Contract?
Smart contract is an expression used to describe the computer code that facilitates the exchange of money, content, property, shares, or other valuable assets. A smart contract running on a blockchain is a self-running computer program that automatically runs when certain conditions are met. Because smart contracts operate on the blockchain, they can work without the possibility of censorship, interruption, fraud or third-party intervention.
Ethereum allows developers to create the set of operations they want, instead of giving them a limited set of operations. This means that developers can develop thousands of new applications on the Ethereum blockchain that have not been thought of before. Vitalik Buterin said Etherium is a kind of Swiss knife that developers can use for different purposes.
Investing In Ethereum?
Could Ethereum be Google, Facebook, Apple of crypto World? I don't know the world of crypto well enough to answer this question, but my research shows that it is one of the most serious candidates. Someone can argue that it already has been.
Being the first in the world of technology does not always provide lasting success. Google was not the first search engine; Facebook was not the first social media platform, Apple was not the first company to produce personal computers. Followers have the advantage of learning from the difficulties experienced by the early developers of technology.
The following table shows the development of Ethereum prices over the years compared to Bitcoin.
Other than the first year of release, we see that Ethereum is always performing better than Bitcoin. Time will show if this relative performance advantage will continue.
Is the current Ethereum price eligible to invest? To answer this question, I demonstrated daily prices on a chart from 7 August 2015, the day Ethereum was traded first, to yesterday, and I added a trend line to the chart on the Excel.
The average of the value over time can give us an idea of the "real" value of an asset. In this context, when I examine the chart and the trend line I created on it, I have predicted that the "expected" price of Ethereum is for yesterday was USD 608 and "expected" price for the year-end is USD 726. The R-square value, which shows the explanatory of the linear trend line, is 0.6223, indicating that we have to be cautious about these price forecasts.
When we try to explain the same set of data with a polynomial equation, we get a better R-square value, such as 0.72. According to the formula, the "expected" price of Ethereum today is 855 USD and the expected price for the end of the year is 1197 USD.
When the statistics on the site http://etherscan.io/charts are examined, it is seen that things are going well on Ethereum.
I can't say that Ethereum is the "best" crypto to invest in, but it seems to be a good investment alternative.
Despite a relatively low R-square, I find the prices shown by the linear trend in the graphs above more reasonable. Because the more complex the model is, the more likely it is to reveal the past data, over-fitting is a trap. As I mentioned above, we need to be very cautious about these predictions, as the crypto market is very volatile. Like most other cryptocurrencies, Ethereum seems attractive concerning investment at the current price.
I'm neither an investment nor a crypto expert, so the information I share here should not be considered as investment advice.
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Thanks for reading.