As of June 5, Ethereum traded higher than Bitcoin on the market and looks set for more gains. Ether, the Ethereum token, catapulted from $8.24 January 1 to $203.30 a month ago, a 2,367 percent gain. Since then Ethereum ratcheted a mighty $212 in late May, and surged to $250.41 two days ago, with a slight drop to $246.62, Monday morning. With Russian President Vladimir Putin meeting with Ethereum inventor Vitalik Buterin to discuss applications of the technology in his country, analysts see an ether on the rise.
Reasons for Ethereum Success
Right now, most of the world, Asia leading, is mad for cryptocurrency with growing global economic uncertainty, and many investors looking for unconventional means of investments to shelter their money.
While the USD Index plunged, falling from around 3.6 percent to 0.8 percent end May, Bitcoin thrived, hitting $2,760 on May 25. Ethereum flourished, too.
Part of the reason for Ethereum success may be the rise of initial coin offering (ICO)-based projects, many of which are worth tens of millions of dollars. To invest in most of these projects, you have to buy into Ethereum which automatically applies the terms and conditions of a contract once it has been agreed upon.
“Many crypto projects raise money from the community to develop their projects,“ explained Jörg von Minckwitz, CEO of blockchain-based payment service Bitwala, “and most of them use Ethereum to raise money. The result is that many people buy Ethereum to be able to invest in the projects and many of the ICO projects hold the money afterwards in Ethereum. That drives the price up.”
The Enterprise Ethereum Alliance (EEA)
Then there is the Ethereum cheerleading group, the Enterprise Ethereum Alliance (EEA), which brought in another 86 giant companies last Tuesday including JP Morgan, Microsoft, and Merck. Others on the 116-member list include Toyota which handles some $260 billion of yearly revenue, Samsung, which manages some $300 billion income a year, The Depository Trust & Clearing Corporation (DTCC), which tousles trillions, and the San Francisco Stock Exchange. All use Ethereum for its smart contracts technology.
According to Wealthy Daily.com, a digital money-making consultancy, “The EEA may be the leading reason why Ethereum has gone up 57 percent since [May]. There is a tremendous amount of investor and corporate backing behind this technology. And that promises long-term success in the digital currency space.”
South Korea Driving Trade
Much of the trading volume in Ethereum at the moment, around 38 percent, is coming from China, Japan and South Korea, with mom and pop investors lured by bitcoin’s 100 percent surge this year against an Asian stocks benchmark of 17 percent over the same period.
“All major Asian exchanges, including ours, are currently overwhelmed by the sudden growth in our client base and trading activity,” Aurelien Menant, founder and CEO of Gatecoin, a regulated bitcoin and ethereum exchange based in Hong Kong, told CNBC.
“Specifically, requests for more ether trading pairs seems to be a common theme,” he added.
As an investor, you may want to consider that Ethereum is not as well established as Bitcoin and as such, may be a riskier investment. Bitcoin, critics point out, has first-mover advantages, while Ethereum, faster and more flexible though it is, can always be cloned. Already, Ethereum-type clones like Shift (SHF) and LiteEthereum are tentatively making their appearance.
Experts also fear a bubble with Ethereum climbing so high it’s bound to tumble. The price of Bitcoin, for example, slumped from more than a $1,100 in Dec. 2013 to less than $200 in Jan. 2015. And Ethereum itself enjoyed bouncing around, last May. Cryptocurrency? “Volatility” is your second name.
Sure, cryptocurrency is doing well this year, but the next few years could see a return to economic stability which may lower the demand for the blockchain. Investors will return to traditional investment mediums, and cryptocurrency values will deflate. For the moment, of course, Ethereum is good to go. Analysts predict that ethereum could either snag the $250-plus bracket which would make it more expensive, or dip to $200 levels which opens a buying opportunity for you. Either way, you may want to hold onto that ether as it barrels its way upwards.