The price of Ethereum (ETH) has recently been on an upward swing, as it just recently hit a record high of about $4,800 per token, a 900% rise over the past year.

While there is no way of knowing for sure how ETH will do in the future, there is a possibility it can surpass $5,000 per token in the near future. Could that mean it is time to invest now? Here is what you should know.

Is it smart to invest in Ethereum?

Crypto, in general, can be a high-risk investment. It is extremely speculative at this point, which means nobody really knows for certain whether it will succeed or fail over the long run. Crypto has only been in existence for a little over a 10 years, and it is too early to tell just how much staying power it really has.

That said, ETH does have a great deal of potential, and it is one of the toughest players in the crypto industry right now.

The ETH blockchain is one of the most well known blockchains for decentralized applications, for example, non-fungible tokens and decentralized finance. These decentralized applications require the use of ETH’s native token, Ether. Which means that if any of these decentralized applications become widely adopted, Ether’s use will increase and its price could explode.

Also, Ethereum is currently in the process of upgrading from a proof of work mining protocol to what is known as a proof of stake (PoS) protocol. The PoW protocol is extremely energy-intensive, as it uses high-powered computers solving intricate puzzles to validate transactions on the blockchain. This kind of protocol is also slower than proof of stake, which results in slower transaction speeds.

ETH 2.0 is expected to be completed sometime in 2022, and once that occurs, not only will it require about 99% less energy, but it will also have the ability to process transactions much faster. This could give it a big advantage over rivals such as Bitcoin that still use a proof of work protocol.

Possible downsides to take into consideration

Ethereum might be a strong investment, but it is not perfect. Before you invest, it is important to recognize the potential disadvantages as well as making sure you know what you are getting into.

New cryptos are being created quickly, and ETH could face some tough competition. There are already some so-called “ETH killer” cryptocurrencies, such as Cardano (CRYPTO:ADA), that intend on capitalizing on Ethereum’s weaknesses.

Nobody knows for sure where ETH is headed, but if you are ready to invest in crypto, it could be a strong option. Just be sure you are aware of the pros and cons of this investment to decide whether it is the right choice for you.

Author: Scott Dowdy

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