Evaluating Ethereum's Evolving Investment Case

Bitcoin is the behemoth and the one that garners the most attention, but as more advisors (and clients) are discovering, the cryptocurrency universe is about much more than bitcoin.

Currently, there are nearly 9,600 digital coins on the market, according to CoinMarketCap.com. Indeed, plenty are dubious and aren't going to be around for long. Trading prices in the thousandths of a cent are often indicative of as much. However, there's also more meat on the crypto bone beyond bitcoin.

An obvious starting point in that conversation is ethereum. It's the second-largest digital currency, one that's highly versatile and serves as the bedrock of the decentralized finance (DeFi) movement.

DeFi refers decentralized finance. Though it's still in its early innings, DeFi blends the disruptive elements of fintech with the emerging utility of the blockchain. In plain English, DeFi moves traditional financial services – think loans, brokerages and more – to the blockchain.

Ethereum's An Emerging Crypto Force

Bitcoin is just 13 years old and ethereum is even younger at almost seven years old. Neither should be judged by age, but rather by functionality and usage cases.

“Ethereum’s launch in July 2015 introduced a novel blockchain with a built-in Turing-complete language, which is a programming language that can be used to embed logic and complete more advanced transactions than simple payments,” according to Global X research. “The introduction of this language has allowed developers to create and integrate applications into Ethereum, serving as the base layer of an open ecosystem capable of hosting smart contracts and decentralized applications (DApps).”

While some clients may be familiar with ethereum in terms of its existence, many aren't aware of its impressive network effects that now support not only DeFi, but things such as gaming, non-fungible tokens (NFTs) and stable coins.

“Another network effect of Ethereum is the developer tools and audience for projects. When decentralized applications are made, there are is lot of technical knowledge needed and work to be done. Ethereum has the most mature developer tool suite, and the largest amount of knowledgeable developers. It also provides a large audience for projects (such as NFTs or games), making it attractive to use for startups,” according to a Cornell University study.

One of the central pillars of the ethereum network is that it's fully transparent. Its blockchain records and stores transactions on a digital ledger.

“When a node receives a new transaction, the Ethereum client independently verifies the validity of this transaction against a comprehensive set of criteria outlined in the protocol rules, including an evaluation of the digital signature,” adds Global X. “If the transaction is valid, the node saves the transaction within its local pool of pending transactions and further propagates it to all of their neighbor nodes.”

Bright Future for Ethereum

Like bitcoin, and any other digital asset for that matter, ethereum has its bouts with volatility, but the long-term outlook for its network and prices is compelling. That bright future could be bolstered by declining gas fees and transaction fees.

“Ethereum’s adaptive features also position it well to play a central role in disruptive movements like the evolution of the internet to Web 3.0, which at its core is a user-owned blockchain ecosystem. Considering developments like these and the demand that they could create for ETH, we view this digital asset and the blockchain network that it fuels as having meaningful growth potential,” concludes Global X.

Acknowledging those factors, it's not surprising some experts see exponential upside ahead for ethereum. Some believe it could ascend to $40,000 and that's saying something because ethereum currently trades around $2,500.

Related: Tapping Into the Emergence of Blockchain Technology