Cryptocurrency prices may have taken a beating over the last few months, but that just means that the best investments are now on sale.
Ethereum (ETH -0.05%) is one of the most popular cryptocurrencies, but it's important to know what you're getting into before you buy. If you're considering investing in Ethereum, there are a few figures that can help you decide whether it belongs in your portfolio.
Ethereum is currently priced at roughly $3,400 per token, which is down from its all-time high of more than $4,800 late last year.
While its price did fall by nearly 48% between November and mid-March, it's currently on the upswing. That could make right now a smart time to buy, as its price is still substantially below its peak. If another surge is on the way, now is a good chance to buy the dip and then reap the rewards down the road.
2. $415 billion
Ethereum's market cap is currently around $415 billion. It's the second most popular crypto behind Bitcoin (BTC 0.10%), which has a market cap of around $880 billion.
Over the last few years, Ethereum has slowly been gaining market share from Bitcoin. It's currently the most popular network for decentralized applications (dApps) like non-fungible token (NFT) marketplaces and decentralized finance (DeFi) projects. If it continues growing in those areas, it could creep even closer to Bitcoin, potentially even overtaking it someday.
Of course, all cryptocurrency is still speculative right now, including Ethereum. While it does have promising features (particularly in the dApp space), it's not guaranteed to succeed. However, its steadily increasing market share is a good sign for the crypto.
One of the biggest hurdles Ethereum is facing right now is its sluggish transaction times. Currently, it can process around 13 transactions per second, which is nowhere near fast enough to handle the increased activity. (For reference, Visa can reportedly process around 24,000 transactions per second.)
However, the network is currently in the process of transitioning to a proof of stake (PoS) protocol. This will essentially alter how transactions are verified, making Ethereum far faster and more affordable for users. In fact, once the upgrade is completed, Ethereum could potentially handle up to 100,000 transactions per second.
This upgrade isn't expected to be completed until sometime next year, which is a long time in the crypto world. But if the update is rolled out smoothly, Ethereum will have a significant advantage over its competitors and its price could surge.
Is Ethereum a good investment?
Ethereum has plenty of advantages in the crypto space, but it's not right for everyone.
Cryptocurrency, in general, is a better fit for investors with a higher tolerance for risk. Because crypto is still speculative, nobody knows for certain how it will perform over time -- or whether it will even exist in a decade or two. If Ethereum fails, you could lose everything you've invested. So before you buy, consider whether this is a risk you're willing to take.
Even if Ethereum does succeed in the long run, it will likely be a bumpy road along the way. Like all cryptocurrencies, it has experienced extreme volatility in the past. In the last year alone, it's lost roughly half its value on two separate occasions. Before you invest, be prepared for more volatility -- particularly as Ethereum's update is rolled out.
Now that crypto is beginning to rebound, it can be a smart time to take advantage of the prices while they're still relatively low. Ethereum is one of the strongest players in the crypto market, but be sure you're aware of the risks involved, too. By considering the advantages and disadvantages of this investment, it will be easier to decide whether it's a good fit for you.