After a disastrous 2022, crypto has experienced a remarkable rally in recent months. Ethereum (ETH -4.21%) is currently up by more than 60% since the beginning of the year, with its price hovering at around $2,000 per token.
This rebound, though, has many investors feeling conflicted. Some are optimistic that perhaps this crypto winter is beginning to thaw and we're on the verge of a bull run. At the same time, though, it's hard not to feel discouraged after the past year, and many people are worried this rally is only temporary.
So just how safe is crypto right now? And should you invest in Ethereum while it's still below the $2,500 price point? Here's what you need to know.
Is Ethereum a safe investment?
When it comes to crypto, there are never any guarantees. The entire industry is still speculative at the moment, so nobody knows for certain where things will stand a year or a decade from now.
That said, Ethereum is one of the safer options within the crypto space. With a market cap of around $234 billion, it's a juggernaut in the industry, making up roughly one-fifth of the entire crypto market.
It also remains far and away the most popular smart-contract platform, specifically when it comes to decentralized finance (DeFi). But it's also the most popular network for nonfungible token (NFT) marketplaces and metaverse applications, giving it impressive diversification within the crypto space.
Perhaps most importantly, though, Ethereum's developers have proven that they're committed to making consistent improvements to the network. Last year, the blockchain successfully pulled off The Merge, transitioning it from a proof-of-work protocol to the far more energy-efficient proof-of-stake system.
Most recently, Ethereum completed the Shanghai and Capella updates, allowing investors to withdraw their staked crypto and improving the network's consensus mechanism. Both of these updates are critical for Ethereum's long-term growth, helping make this crypto giant even stronger.
Risks to consider before you buy
Whether or not you should invest in Ethereum will depend on your risk tolerance and long-term outlook.
Crypto, in general, is a higher-risk investment because of its speculative nature. Ethereum is one of the strongest players in the field, but if the crypto sector as a whole doesn't succeed over time, it will be tough for even powerhouse investments to survive.
Also, there's a good chance we'll see a lot more volatility in the short term as the industry continues to find its footing. If you're a long-term investor, these fluctuations shouldn't affect your strategy, but they can still be difficult to stomach. Before you buy, consider whether you're willing to ride out the ups and downs in the face of more volatility.
Ethereum may be a crypto titan with plenty of advantages, but there are never any guarantees in this industry. Before you buy, consider the risks of investing in cryptocurrency to decide whether it's the right fit for your portfolio.
