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Ethereum (ETH) is perhaps the most technologically advanced cryptocurrency in the world. Hundreds of unique projects with their tokens have been created on its blockchain. It is on the basis of this cryptocurrency that many of the most popular technologies have appeared – for example, NFT, DeFi, GameFi.
The potential and versatility of this digital asset could not go unnoticed in the crypto community. That is why ETH has rapidly become one of the top cryptocurrencies in terms of capitalization, and today, in terms of this indicator, it is second only to “digital gold” – bitcoin.
What is Ethereum?
Ethereum is a decentralized platform for creating applications, a kind of virtual computer. The internal cryptocurrency of the project is the ETH token. Thanks to the support of smart contract technology, users can run their own applications on the Ethereum blockchain.
What are smart contracts? These are intelligent and automatic software systems capable of performing their powers or functions without human intervention. For example, if a company in our usual world wants to find a contractor to perform some work, its managers will have to study the offers on the market, weed out obviously unacceptable options, assess the reputation of applicants, receive commercial offers, negotiate, agree on conditions, etc. As a result, the time required to conclude a contract – from the moment the decision is made to search for a contractor to the signing of an agreement – may be several months.
However, this whole tedious process is becoming a thing of the past thanks to the advent of smart contracts. And this is how it works: one party sets the necessary conditions for the execution of work, the schedule for their acceptance and payment, and the smart contract independently chooses the most profitable option with the highest reputation in the market. Then the algorithm conducts approval and confirms the conclusion of the transaction. And all in a matter of minutes. In the future, the same smart contract will monitor the fulfillment of all conditions and automatically calculate after the end of the work.
And since smart contracts operate on the blockchain, it is impossible to make unauthorized changes (read, falsified) to them. Due to the undeniable advantages of this solution, today many companies use Ethereum technologies in their business processes. These include S7, Lufthansa, UNICEF, PayPal, Nvidia, Shell, Samsung, Alphabet, Amazon, Microsoft, Alibaba, JPMorgan and many others.
How much is ETH worth today?
Ethereum price change over the year. Source – Coinmarketcap
The outgoing year 2021 had a positive impact on the cost of Ethereum. If at the beginning of December 2020 the ETH token was traded in the region of ₽40,000–45,000 ($ 610), today its price has grown to ₽340,000–350,000 ($ 4,700).
As of December 2, 2021, the weighted average price of one token of this popular cryptocurrency was about ₽334,000 ($ 4,550). The historical maximum price peak was recorded on November 10 this year at the level of ₽357,500 ($ 4,890). One can only rejoice for the lucky ones who managed to buy ETH at the start of his network in October 2015 – at ₽30 ($ 0.40) per token.
How do I get Ethereum?
Today, you can get this cryptocurrency in two ways: buy or get it through mining. Yes, the sharp rise in prices for video cards and their absence in retail is caused precisely by the activity of ETH miners. These enterprising people are just buying up almost all the top video adapters – instantly and at any price.
For those who do not want to invest in the purchase of equipment or do not have the necessary capital for this, the option of buying ethereum is available. This can be done both on a cryptocurrency exchange and in an online exchanger. The operation will only take a few minutes.
How to make money with ETH?
We have already found out that the second most important cryptocurrency in the digital world is extremely promising. But how to make money on it? There are at least a few options:
- launch of a startup on the Ethereum blockchain.
Let’s consider each of these methods in more detail.
Miners “mine” Ethereum using their PCs, constantly busy with certain calculations. Within the infrastructure (or ecosystem) of the cryptocurrency, they act as validator nodes that maintain the entire network, verify transactions and monitor the integrity of the blockchain.
They are rewarded for their “work” in the form of ETH tokens. The more powerful the equipment a miner has, the more Ethereum he can earn. That is why cryptocurrency miners constantly need new video cards – the more of them in work, the higher the earnings.
During periods of crypto winter, when the price of cryptocurrency is minimal, miners with an expensive “socket” are forced to stop their farms due to a drop in the profitability of mining. But during the “thaw” – when prices take off – the demand of miners for new devices also grows. This creates a shortage of video cards – a key component of any Ethereum mining farm. And the increased demand with an open supply deficit provokes an increase in prices for components.
That is why it is impossible to find video adapters above average and top performance levels in stores during the day with fire. And even if they go on sale, their cost exceeds the manufacturer’s recommended value by 200% or more. And the prices for used devices in the secondary market have also increased 2-3 times.
For mining, experienced miners are interested in the following models of video cards:
- AMD: RX 470, 480, 570, 580, 5600, 5700, 6600, 6700, 6800, Radeon VII;
- nVidia: GTX / RTX 1060, 1070 (Ti), 1080 (Ti), 2060, 2070, 2080 (Ti), 3060, 3070, 3080, 3090.
They are not deterred even by the abnormally high prices for these devices. On average, in a growing market, the purchase of a video card is fully paid off by mining in 6-12 months, and then there is a net profit.
But you should be careful here, since any cryptocurrency is characterized by high volatility. Consequently, at any moment its price can fall by 30-40-60% – in just a few days. Competent miners do not put coins for sale until the market enters the growth stage. They are ready to wait for the right moment for years.
It is worth considering such an important fact: after a while, Ethereum mining will switch to the PoS algorithm, and the need for specialized equipment will disappear. This type of mining requires only a PC connected to the network with an electronic cryptocurrency wallet running on it. The balance must be at least 32 ETH, and in order to receive the reward, these funds must be “frozen” on it. The transition to a new version of the blockchain with a PoS algorithm, according to Ethereum founder Vitalik Buterin, should take place next year.
The concept of making money on Ethereum through trading is trivial: we buy as cheaply as possible, sell as expensive as possible. There are many strategies for investing in cryptocurrencies, but to understand their essence, you need to delve deeply into the essence of exchange trading. For the common man, it is enough to learn the basics of two strategies:
- short-term trading;
- long-term investment.
If you look at the dynamics of changes in the value of Ethereum since its inception, we can conclude that sooner or later the price of this cryptocurrency will grow several times.
Historical graph of Ethereum price changes. Source – Coinmarketcap
Here are the brightest periods in the life of an asset:
- until January 2016, the cost of the ETH did not exceed $ 1;
- after 3 months, the level was taken at $ 14 per token;
- in April of the same year, the cost of the cryptocurrency dropped to $ 7;
- reaching a new maximum of $ 20 in June;
- by the end of the year, a slow slide to $ 7;
- a sharp rise to $ 50 in March 2017;
- in June of the same year, the milestone of $ 400 per token was practically taken;
- then within a month it fell to $ 157;
- swings in the region of $ 250-380 until November 2017;
- On January 13, 2018, a new all-time high of $ 1,400 was taken;
- then crypto winter began – and the cost of ethereum dropped to $ 90 in a year;
- For 2 years, the cryptocurrency was trading in the corridor from $ 150 to $ 400;
- at the end of 2020, a period of rapid growth began, the price of the token stopped a step away from the $ 5,000 level: only $ 110 was not enough to break it.
The study of price dynamics leads to three conclusions:
- Ethereum price increases over time and in the long term;
- the value of the cryptocurrency is subject to strong fluctuations;
- the periods between new highs become longer.
Therefore, a future trader should understand which trading option suits him best: long-term or short-term. In the first case, the cryptocurrency is bought on a fall – when its rate sinks by at least 50% of the historical maximum. And then you can forget about it for several years – or until a new historical level is taken.
You can also make money on daily / weekly price fluctuations, and they happen very often. The risk of entering the market at the wrong time in this case is higher, but the potential earnings will also be impressive.
This option for making money on Ethereum is the most difficult – it requires deep knowledge in the field of blockchain technologies. In addition, you need a unique idea that can attract the attention of investors.
We have all heard about how interesting projects raise millions of dollars in no time. But without a thorough study of the idea, ways of its implementation and without a powerful team of like-minded people, you should not count on success in launching a startup.
Experts are confident in the growth potential of ETH in 2022 – at least to the level of $ 5,000. And according to the most optimistic scenarios, the cost of Ethereum can reach the level of $ 10,000. However, the state of affairs in the cryptocurrency market largely depends on the dynamics of bitcoin. If the tailwinds for the first cryptocurrency don’t weaken, the rest of the market will rise as well.
Pantera Capital director Dan Morehead believes that by 2030 the value of the second largest cryptocurrency by capitalization could reach six-figure dollars. Brian Schuster – CEO of Ark Capital – is more cautious in his forecasts. He suggests that by the end of the decade, ETH will rise in value to $ 100,000.
Most experts agree that Ethereum will be able to maintain its existing positions in the cryptocurrency market in the coming years. After the next crypto winter, this cryptocurrency in the future is able to show a multiple growth in comparison with the previous highs.
However, investing in Ethereum – as with any cryptocurrency – carries a high level of risk. Therefore, investing in the digital asset market is permissible only after a thorough analysis of the strengths and weaknesses of this investment and taking into account all the possible consequences of such a decision.
Disclaimer. Investing in any financial asset carries the risk of losing capital. Nothing in this text can be considered investment advice or an offer to buy / sell any financial instruments. For all his actions in the stock market, each investor bears full responsibility independently.
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