Ethereum’s role in your investment portfolio
If you’re active in the world of trading, then you already know that cryptocurrencies are one of the most popular assets to own. Their appeal arises from the novelty of the technology and its promise to revolutionize systems, surpass tech borders and change the way industries work. However, as with anything popular, there are also many who don’t support crypto investments and even criticize the ventures. This is mainly due to cyber currency’s reputation for volatility, with many seeing it as simply too unstable to ever be a worthwhile investment. While that’s not necessarily false, it’s important to remember that all investments carry a certain degree of risk and if you’re not willing to face it at all, investing may simply not be for you.
One of the most popular currencies out there is Ether, the fuel powering the Ethereum blockchain network, an innovation set to transform the internet via decentralization. While the technology is still in its cradle and therefore not used on a massive scale, those who are certain that it’s set to change online finances and applications forever are not few. If you’re thinking about investing in crypto, here are some of the reasons why you should consider reserving the lion’s share of that venture for Ethereum.
Risk equals reward
There are many who would never seriously consider adding Ether (or any type of crypto for that matter) to their investment portfolio. That’s because theoretically Ethereum is more of a speculative, long-term trade and a revolution in the financial and technological landscape rather than a simple coin to buy or sell. However, if you want to be at the forefront of tech development and be upgraded on the latest arrivals in the world of automatization, you want to stake your claim in the world of Ethereum.
The truth is that in the world of trading the amount of success you’re going to have is largely dependent on the amount of risk you’re willing to take. While there are undoubtedly price fluctuations when it comes to Ethereum, regularly checking the ETH price chart is going to help you make more informed decisions. The price swings can be attributed to several factors, among them the higher concentration of Ethereum among holders. And while this perhaps makes it more challenging for traders, particularly those who are just starting their investing journeys, nothing good ever came easily.
The main advantage of Ethereum is seen in the long-term benefits and often skyrocketing levels of revenue. So if you’re the type of trader that doesn’t shy away from a little extra risk, Ether will provide you with ample rewards. A stake as small as 2% will more than double the annualized returns over a period of roughly five years.
When you start learning about investments, you learn that a diversified portfolio is highly desirable compared to one that contains only a few similar assets. This is a case against the classic “putting all your eggs in one basket”, where you’re more likely to bring unwanted risk to your capital unless you branch out. If you believe that you’re being weighted too heavily towards a particular sector, it might be time to consider an investment in Ethereum. Given the fact they’re fast and non-time-consuming, the transactions will be easy to perform and add to your portfolio.
Diversification is important due to the promise for continuous development and income. The ecosystem of trading is forever shifting and transforming, and different investments have different values depending on the time and external events such as major shifts in world politics or economy. For this reason you must seek to not only extend operations to different companies, but also to other industry sectors. For example, Ethereum can be a welcome addition if everything you’ve focused on so far are precious metals, real estate or bonds.
In recent years Ether has become increasingly more attractive for investors for its potential to drastically affect portfolios for the better. Its generally low correlation with socks helps mitigate a significant portion of buoyancy and stabilize it. Correlation trends are also an important factor. A negative correlation with the US dollar is particularly valuable since it means that Ethereum can serve as a hedge against weakness in fiat currency.
Compared to other crypto
Ethereum holds a unique position in the crypto world because the currency is actively used to create decentralized finance systems, applications and tokens. The blockchain isn’t only home to its own coin, but many others as well, albeit less well-known. While at first glance there’s no apparent difference between ETH and other currencies, the reality is that the ledger system which eliminates the need for third-party verification makes it all different.
Much like other forms of cyber money, Ethereum is secured via cryptography and can be used for P2P transactions. It also requires a software or hardware wallet in which you must store your keys and passwords that enable your access to your coin when you need to use it. However, the use case for Ethereum is much broader compared to its peers. It circulates more frequently than its competitors, with about 68% of the overall supply classified as active over the past year, with other cryptocurrencies recording over 20% less than that.
For its introduction back in 2015, an initial set of 72 million coins was launched, and compared to other crypto there’s no supply limit on the amount of Ether that can be mined. Which brings us to the last point which is:
Supply and Demand
Given that Ether is in high demand, the supply is bound to match that tendency. The major updates that appear all the time, such as EIP 1559 and Ethereum 2.0 do, however, affect the amount of Ethereum available for trading. For instance, in the case of the former, anytime a transaction was made, an almost insignificant amount of ETH was burned. When cumulated, this made Ethereum’s value increase, and even the smallest changes in supply record shifts in trading behavior.
If you’re considering diversifying your portfolio, Ethereum is an asset you’re not going to regret investing in.