As Ethereum nears the date it fully shifts to proof-of-stake, the crypto community’s excitement is growing, and investor interest in the network’s crypto token is on the rise again. Read on to learn about the investment case for Ether (ETH), how The Merge will affect the crypto network, and how to invest in Ethereum.
What is Ethereum?
Ethereum is an open-source smart contract computing platform that enables the development of decentralized applications (DApps).
Launched in 2015, Ethereum builds on Bitcoin’s innovation by providing more than a payments network. Ethereum provides an open distributed network on which developers can build a wide range of blockchain applications powered by smart contracts.
In many ways, the “world’s computer” Ethereum can be viewed as a blockchain app store on which a wide range of applications can be built, ranging from decentralized financial services to online games and more.
Ethereum is a popular blockchain, boasting a lot of developer and user activity. As of May 2022, there were 2,970 projects built on the network, making this the highest DApp activity in the entire industry. Also, the network has approximately 4 million smart contracts and recorded net revenue of $1.28 billion in Q2 2022. During the same quarter, there was an average of 471,447 daily active Ethereum wallet addresses.
Ethereum’s developer community is constantly improving the protocol to make it scalable and efficient. To this end, Ethereum will fully transition from proof-of-work (PoW) to proof-of-stake (PoS) through an upgrade called The Merge scheduled for Q3 or Q4 2022. September 19, 2022, is the soft deadline developers are working with, but this is still subject to change.
The Investment Case for Ethereum
In the late 1990s and into the early 2000s, the dot-com era saw a lot of speculation from investors as they invested their money in internet companies they believed exhibited the most potential for success.
Surviving this speculative bubble meant companies had to grab a sizeable portion of the market share; fast. They also had to be flexible enough to adapt to unforeseen shifts in the market. However, the very few that made it are today some of the top companies in the world.
They say history repeats itself, and true to these words, we’re seeing something almost similar transpiring with the emergence of crypto projects. Both individual and institutional investors are speculating on the projects that will make it out alive.
Ethereum is one of the projects that’s well-positioned to potentially experience monumental growth in the future, attracting investor interest. Let’s take a look at why that’s the case.
Ethereum Holds More Than Half of DeFi’s Market Share
According to data on DeFi Llama, Ethereum holds more than half of DeFi’s market share. Decentralized finance is arguably one of the most fundamental facets of Web3 and could potentially be very big in the future. That means Ethereum is well-placed to be a major player in the future of Web3.
But this can only happen if the network maintains or expands its existing DeFi market share, which is currently under threat from competitors like BNB Smart Chain, EOS, and Avalanche.
The Ethereum Ecosystem Relies on ETH
Ether (ETH) is a valuable part of the Ethereum ecosystem. Users need it to interact with the many DApps built on Ethereum, thereby creating demand. Ether’s demand may increase as more projects build on its blockchain. And since its inception, the number of decentralized applications has grown tremendously.
Moreover, as the second-largest cryptocurrency by market cap, investors tend to look at it first when they want to diversify their crypto exposure after they purchase Bitcoin. Ether is liquid, accessible, and acts as a proxy for the altcoin market, making it a popular cryptocurrency among all types of investors.
A Lineup of Protocol Upgrades
Since its launch, Ethereum has remained spirited in making protocol upgrades as it seeks to achieve its network and scale. Ethereum has demonstrated its commitment to becoming better and more efficient, one upgrade at a time.
The upcoming merge is one of the most anticipated protocol upgrades in the history of Ethereum. It shows the project is flexible enough to change, especially with the growing environmental concerns regarding PoW blockchains. After The Merge, Ethereum will move on to its next major upgrade, known as sharding.
Ethereum Has the Biggest Web3 Developer Community
Ethereum has the largest developer community in the crypto industry, as revealed in the State of Crypto 2022 report by a16z. It has close to 4,000 monthly active developers, followed by Solana at slightly less than 1,000. Developer activity is important for the growth of any blockchain protocol because it highlights how much (or how little) is being worked on.
In August 2021, the London hard fork introduced EIP-1559, changing how Ethereum fees work. Previously, users essentially bid to have their transactions added to the blockchain. With the new change, they pay base fees, and an additional tip to miners. The base fees are then burned, reducing the supply of ETH. The network has burned 2,588,976 ETH to date. Scarcity is pivotal if ETH is going to achieve its aspired ultra-sound money status.
While the points above are positive indications of why you could invest in Ethereum, keep in mind that its success isn’t guaranteed. The crypto project will only make it beyond the current speculative phase if it upgrades rapidly, innovates, grows its market share, remains flexible, and simultaneously maintains a scarce crypto asset.
What is the Merge & How Could it Affect the Price of ETH?
The Merge is an upgrade that will join up Ethereum’s mainnet and the new PoS layer known as the Beacon Chain. The result will be one proof-of-stake blockchain that is less energy-intensive.
The PoS-based Beacon Chain shipped in December 2020 and has since been running parallel to the mainnet. The Merge will, therefore, bring the two together, fully transitioning Ethereum into a PoS blockchain.
Ethereum has been running on a PoW consensus mechanism since its launch, which requires the use of energy-intensive equipment. The switch to PoS will, therefore, reduce Ethereum’s energy consumption by an estimated 99.95%.
As The Merge shipping date draws nearer, the price action of ETH has slightly improved despite the current bear market. For instance, Ether’s price remained below $2,000 since May 31 but bounced back past this price point briefly in mid-August. Whether Ether will surpass its 2021 all-time high following The Merge is uncertain. However, some experts predict the price may double or quadruple after The Merge.
How to Invest in ETH as a Professional Investor: 3 Options
Professional investors have the ability to add Ethereum exposure to their portfolios in several ways. Let’s take a look at these now.
The most obvious way to invest in ETH is to buy the cryptocurrency from a crypto exchange and store it in a secure crypto wallet. This is a hands-on approach, requiring investors to register an account on an exchange, set up a wallet, and store their ETH safely.
Investors that want a more hassle-free process can invest in Ethereum futures on CME. This gives investors the advantage of trading on a regulated exchange without directly holding Ether. CME also offers micro ETH futures, which at the time of writing had a higher open interest and higher volumes than micro BTC futures.
Ethereum ETPs are easily accessible, just like stocks, and no unique setup is involved. They track the price of ETH and are 100% collateralized with actual Ether holdings. The Iconic Funds Physical Ethereum ETP, for example. is available to European investors.
Introducing the Iconic Funds Physical Ethereum ETP
Iconic Physical Ethereum ETP (Ticker: IETH) is an exchange-traded product (ETP) that tracks the price of Ether (ETH). Each share in the ETP gives the holder a claim on a predefined amount of ETH.
- Physically backed by ETH stored in cold storage with additional third-party insurance.
- Competitive management fee of 0.95% p.a.
- Listed and traded on Deutsche Börse Xetra
- No lending/staking of assets.
Click here to learn more about the Iconic Physical Ethereum ETP.
About Iconic Funds
Iconic Funds is the bridge to crypto asset investing through trusted investment vehicles. We provide investors both passive and alpha-seeking strategies to crypto, as well as venture capital opportunities.
We deliver excellence through familiar, regulated vehicles offering investors the quality assurances they deserve from a world-class asset manager as we champion our mission of driving crypto asset adoption.
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