After a disastrous 2022, this year is starting off on a more positive note for the crypto market. Many cryptocurrencies are seeing their prices surge, and Ethereum (ETH -2.08%) is currently up by more than 34% since the beginning of the year.
If you've been waiting for the light at the end of the tunnel during this crypto winter, this upswing is promising. But it's unclear how long it will last, especially as many economists are still predicting a recession.
Is now the right time to invest in Ethereum? Or should you hold off a while? It depends on a few factors.
Is Ethereum a safe investment?
Crypto, in general, is a high-risk investment because it's still speculative. Even the experts can't say for certain whether it will succeed over the long term or not, and there's always a chance that the entire sector may not survive.
That said, Ethereum is one of the strongest players in the crypto field. It's not only the second-largest crypto behind Bitcoin, but it's also the most popular blockchain for various decentralized applications -- from decentralized finance (DeFi) projects to non-fungible token (NFT) marketplaces to metaverse uses.
Of course, Ethereum isn't perfect and still struggles with slow transaction times and high gas fees. But developers have several upgrades in the pipeline that will help improve the blockchain, which is reassuring for investors.
The case for buying now
When you're deciding whether to invest now or wait, it's important to keep a long-term outlook. Crypto shouldn't be viewed as a "get-rich-quick" scheme but can potentially make you a lot of money over time.
For example, even though Ethereum's price is down more than 66% from its peak in late 2021, it's still up roughly 115% over the past five years and a staggering 54,000% since its inception in 2015.
In other words, if you had invested just five years ago, you would have more than doubled your money by now -- and that's despite the crypto meltdown over the past year.
Whether Ethereum will see those types of returns again is uncertain. But because its price is still significantly down from its all-time high, now could be a smart time to buy at a discount. Even if Ethereum doesn't experience earth-shattering returns, getting even close to its peak again could result in substantial earnings.
When you may want to avoid investing
Despite its advantages and potential for growth, Ethereum isn't for everyone -- and there are a few reasons you may want to avoid it for now. For one, it's still a high-risk investment. Crypto's speculative nature means there's always a chance that you could lose money. If that's a major concern for you, this investment may not be the best fit.
Also, only invest if you can afford to leave your money in the market for the foreseeable future --- ideally, at least several years. As the last year has proven, crypto can be extremely volatile in the short term. If prices fall again and then you need to withdraw your money, you could end up selling your investments at a steep loss.
Finally, make sure you're keeping a long-term outlook when investing in crypto. While it's possible to earn substantial returns in a matter of weeks or months, you're more likely to see positive total returns by staying invested for several years. There's no safe way to make a lot of money overnight, and if you're trying to get rich fast with crypto, you're likely to be disappointed.
Ethereum has been having a strong year so far, but the future is still uncertain. If you believe in its long-term potential and are willing to hold your investments over the next several years, now may be a smart time to buy.
