If there’s anything cryptocurrency investors know by now, it’s that the price of coins can fluctuate wildly. For example, in November, Ethereumit’s (ETH 1.38% ) the price used to close at $5,000, but its value has fallen in recent months.
With inflation at a 40-year high and the Federal Reserve set to raise interest rates starting this month, some investors are growing concerned about more speculative investments like crypto. -currencies.
But with Ethereum’s price now well below $3,000, some investors are probably wondering if now is the right time to buy this digital token. I think so, and here are two reasons.
1. Ethereum is still as useful as ever
As with most investments, when the value of a stock or cryptocurrency drops, investors should ask themselves why. If the answer to this has more to do with investors changing sentiment and not because something has fundamentally changed with their investment, then it’s probably still a good time to keep the investment (or start a position) .
In the case of Ethereum, nothing has changed with the coin or its blockchain that makes it less useful than it was months ago.
Of course, the price fell, along with many other cryptocurrencies and growth stocks, as investors processed news of rising inflation and potential interest rate hikes that led them to seek more stable investments.
If Ethereum’s price eventually rebounds once investors feel comfortable reinvesting their money in higher-growth investments, buying the digital coin now — at a discount — might be a wise move. .
2. Ethereum is about to get even better
The Ethereum blockchain is already the dominant system for many decentralized finance (DeFi) applications. Up to 70% of DeFi applications run on the Ethereum blockchain.
While this is impressive, some other blockchains have taken DeFi market share from Ethereum over the past two years. The good news for Ethereum investors is that its blockchain is about to get even better.
The blockchain will officially transition from a proof-of-work system to a proof-of-stake system in the coming months, making it faster, more efficient, and cheaper than it is now.
This is because instead of using tons of computational power to create new coins (as is the case with proof of work), the proof of stake system will allow crypto owners to use coins like deposit to mine coins.
This will speed up the mining process, reduce congestion to get mined coins, and thus make using Ethereum faster with lower transaction fees.
This upgraded version, formerly known as Ethereum 2.0, will likely help the blockchain better compete with its rising rivals and could help add value to its digital currency.
Keep this in mind when buying Ethereum
Investors should be aware that owning cryptocurrencies, including Ethereum, carries some risk. Crypto investors tend to react heavily to the news cycle, which can drive prices up and down quite dramatically.
But despite the volatility, Ethereum has a lot of potential in the coming years as it continues to be a fundamental part of DeFi and its blockchain becomes faster and more efficient. With the price of Ethereum now well below its past highs, now could be the perfect time to start a position in this digital currency.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.