During the second half of 2020, we saw a growing interest in cryptocurrencies from institutional investors and big capital. However, all the attention of the whales, as well as all the attention of the public, was fixed on Bitcoin (BTC). Today, we will look at why Ether (ETH) is a more attractive asset and why this cryptocurrency should become the “first cryptocurrency” for every investor.
Let's start with the numbers: ETH’s growth since its March 2020 low after the coronavirus-induced market crash has been 1,200%, whereas BTC has only grown around 700%. ETH’s growth since its March 2020 low after the coronavirus-induced market crash has been 1,200%, whereas BTC has only grown around 700%. Of course, against the backdrop of record highs for Bitcoin, whose price reached $ 40,000, the rise of Ether to $1,400 does not seem so impressive. Moreover, the market capitalization of ETH is five times less than the volume of the BTC market. But what is more important for an investor: nice numbers and records of an asset from a portfolio or high income?
There are very strong reasons to believe that Ether will continue to rise in price in 2021 and bring more profit to investors than the “most famous cryptocurrency,” Bitcoin.
Demand among developers
Ethereum is the number-one platform for building blockchain projects and launching decentralized applications. The chart below displays the number of unique ERC-20 tokens traded during the first years since the launch of the Ethereum network. And despite the fact that the rate of expansion of the market for blockchain startups has slowed down since the initial coin offering bubble burst in 2018, their total number is still growing.
And even despite the fact that Ethereum has serious competitors — such as Tron, Polkadot, Cardano, Cosmos and Tezos — Vitalik Buterin's cryptocurrency platform continues to be a leader in this direction.
Growing transaction volume
During 2020, more than $1 trillion worth of transactions were recorded on the Ethereum blockchain. These figures exceed the transaction volume of payments giants like PayPal, which is used by over 350 million users and has with average volumes that do not generally exceed $200 billion per quarter.
Also, keep in mind that each transaction generates network fees paid in ETH. And since the network's growth rates are still high, we can confidently expect the continuation of the “bullish” trend of ETH. In any case, interest in cryptocurrency is increasing, as is the number of active wallets, the number of transactions on the network and the average transaction size.
Development of the DeFi sector
Despite Bitcoin's leadership in the cryptocurrency market, Ethereum remains the leader of the young decentralized finance industry. Highly popular in the summer of 2020, DeFi lending and staking projects continue to grow, attracting new investments.
The total value locked in decentralized finance since the beginning of 2020 has grown nearly 3,300%, from $687 million to $23.2 billion. And it is Ethereum that is the main platform for the creation and launch of most new DeFi projects and stablecoins.
The emission of stablecoins is constantly growing, as digital assets backed by the value of less-volatile fiat currencies are a very convenient tool for quick settlements between users, for forming trading pairs on crypto exchanges and for saving capital from high volatility in your crypto wallet.
Separately, we should talk about the interest of institutional investors in decentralized finance. While the chaos in the DeFi market nearly eroded institutional confidence in the potential of blockchain in the financial sector in the summer of 2020, public companies continue to show interest in the new asset type.
In August 2020, Archax and Algorand revealed plans to develop tools for introducing DeFi among institutions. And in the fall of 2020, it became known that xSigma, a subsidiary of the Nasdaq-traded ZK International, is working on the development of DeFi services and is preparing to launch a decentralized exchange for trading stablecoins.
We all remember what big investors' attention to Bitcoin led to last year, right? Now, it looks like other areas of the cryptocurrency industry are in for the same, and some of them are directly related to Ethereum. And the main advantage of Ethereum lies in the versatility of its technology and its growing community.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.