Source: PaxForex Premium Analytics Portal, Fundamental Insight
It's undeniably impressive how Ethereum has evolved as an investment. At the time of writing, its price has surged by over 52,000% since its public launch in July 2015. However, this remarkable journey hasn't been without its share of turbulence. Ethereum presently stands at a price 68% below its all-time high, a peak reached in November 2021.
The question arises: Is it a prudent move to invest in this leading cryptocurrency while it's trading below $2,000? Let's weigh the arguments both in favor and against this decision.
One compelling reason to consider buying Ethereum at its current price is its significantly reduced valuation. The exuberance surrounding crypto markets during the 2021 bull run drew widespread enthusiasm, leading to concerns of speculative bubbles. Since then, the market has experienced a degree of normalization, potentially presenting an opportunity for prudent investors.
The surge in interest rates in 2022 had a notable impact on both stock and crypto markets, triggering a prolonged downturn in digital assets. Nevertheless, Ethereum has shown resilience and growth this year, even amidst market challenges.
All else being equal, investing at a lower price point is often a sound strategy. If Ethereum follows the anticipated trajectory, the potential for upside gains is more significant compared to purchasing at a higher price. This scenario may well apply to Ethereum in the current market conditions.
Many investors maintain a bullish outlook on Ethereum due to its transformative potential, particularly in the realm of decentralized applications (dApps). Ethereum's smart contract capabilities have paved the way for various use cases to develop over time.
Despite a cooling-off period in activities related to decentralized finance protocols and non-fungible tokens, Ethereum continues to be a frontrunner in these innovative domains. Consequently, when the market rebounds, as it has in the past, the demand for the blockchain and a flourishing dApp ecosystem could experience renewed growth.
Ethereum's transition to a proof-of-stake consensus mechanism over a year ago garnered significant support. This transition resulted in a reduction of the network's energy consumption by more than 99%, aligning with the goals of sustainability and environmental responsibility.
While Ethereum's price journey has been remarkable, it remains essential for investors to conduct thorough research, assess their risk tolerance, and consider their investment horizon before making decisions. Cryptocurrency investments, including Ethereum, can be highly volatile and are influenced by a range of factors, including market sentiment and regulatory developments.
However, there are compelling reasons that might deter investors from buying Ethereum, even with its current price below $2,000. Cryptocurrencies can be incredibly volatile, which may not suit the risk tolerance of some investors. This concern is particularly relevant for those who are nearing retirement or already in their retirement years. Owning Ethereum can expose a portfolio to extreme valuation fluctuations, which could be emotionally challenging to endure.
Another point of contention is the perceived lack of necessity for Ethereum. Some critics argue that it's a solution in search of a problem. Consider the financial services sector, for instance. Decentralized Finance (DeFi) holds the promise of eliminating intermediaries, potentially resulting in more competitive pricing and rates for consumers. However, the opaqueness and complexity of the DeFi space, as seen in the failures of major crypto firms, have raised doubts about its practicality. The existing financial system, for all its flaws, adequately serves the needs of most people, potentially reducing the demand for DeFi services.
Ethereum's path is also riddled with regulatory uncertainties. The question of whether it qualifies as a security remains unresolved. If the Securities and Exchange Commission (SEC) were to classify Ethereum as a security, it would be subject to comprehensive reporting requirements and heightened public scrutiny.
Additionally, there's a possibility that Ethereum may not return to its previous all-time high. The exuberance that characterized the crypto market in 2021 could be a one-time occurrence, leaving investors with an uncertain outlook.
While some investors may be intrigued by the potential of Ethereum and consider starting a small position, it's crucial to approach this investment with a critical mindset. Avoiding the cryptocurrency altogether or awaiting further developments might be a prudent choice. As with any investment, it's essential to align your investment decisions with your financial goals, risk tolerance, and time horizon.
As long as the price is above 1550.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 1687.32
- Take Profit 1: 1750.00
- Take Profit 2: 1875.00
Alternative scenario:
If the 1550.00 level is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 1550.00
- Take Profit 1: 1460.00
- Take Profit 2: 1400.00
