Is it Too Late to Invest in Ethereum in 2021? Should I Invest Now or Wait?

Ethereum has had a rise that has caused it to appear on the radar of many people not into cryptocurrency. The price jumped from around $300 to over $4000 in a span of a month. 

This was mostly driven by DeFi and good news regarding the release of Ethereum 2.0. The exact reason why the price increased is a little beyond the scope of this article. 

Instead, we will focus on whether or not it is “too late” to invest in Ethereum. We will give a hint, it is not too late to invest in Ethereum. 

In fact, it is still early if you want to invest in Ethereum, believe it or not.

3 Reasons Ethereum Is Not Anywhere Near Its Peak

Here are the top three reasons that Ethereum is not anywhere near its peak. All these points focus on the fact that Ethereum is still a blockchain under development. 

That is to say that the project has not come anywhere close to accomplishing its goals nor reached any level of real adoption by the masses. 

DeFi Has a Very, Very Long Way to Go

The first thing with Ethereum is that the project is not simply the currency and blockchain like Bitcoin.

No, there is an entire ecosystem that exists on the Ethereum blockchain. This ecosystem is called DeFi (short for decentralized finance). And the entire purpose of DeFi is to replace the entire centralized financial system with a financial system that exists on the Ethereum blockchain

It has had some success with decentralized cryptocurrency exchanges, but the entire ecosystem is still not anywhere close to replacing the centralized financial system. The total adoption of DeFi amongst the general public is likely under 1%. Most of that 1% were born after 1985, if we had to guess.

Detractors and FUDsters will claim that is a huge negative of DeFi. However, this technology is only a few years old. The same could be said about the internet in the early 1990s or even late 1980s. It was almost exclusively used by those under 30 years old.

Just like Rome, the centralized financial system was not built in a day. It will take a somewhat long time (about a decade) for the centralized financial system to begin to falter due to pressure from DeFi. 

This is great because it means there is still a lot of room for growth in the sector. It also means that Ether can rise in price dramatically because that is used to pay gas fees on Ethereum. Basically, if DeFi is popular, then users must pay gas fees in Ether. That will drive demand for Ether and drive the future price.

Ethereum 2.0 Will Increase The Price of Ether

It is no secret that Ethereum has high gas fees. 

It has been a problem with the blockchain for the past four years. And nothing the development team has done has really fixed the problem. 

That isn’t because of a lack of talent, either. It’s just really difficult to have a scalable, decentralized, and secure blockchain. 

It is actually called the blockchain trilemma because it is so difficult. 

Anyway, Ethereum 2.0 is the planned move of Ethereum from a PoW consensus model to a PoS consensus model. PoS stands for proof of stake. 

It means that users can stake their Ether in order to validate transactions on the blockchain. This does not require mining and as such greatly reduces the gas fees and congestion of the blockchain. 

It does raise some concerns about decentralization, though. But decentralization does not appear as an issue that concerns the vast majority of people based on the success of the very centralized Binance Smart Chain (BSC). 

To summarize, Ethereum 2.0 will lower gas fees. Lower gas fees will increase the popularity of DeFi on Ethereum, which will further drive an increase in the price. 

Ethereum 2.0 is planned for release at the end of 2021 or beginning of 2022. 

NFTs Are Just Getting Started

NFTs (short for non-fungible tokens) are cryptocurrency tokens that are unique (read: non-fungible). They exist on Ethereum as ERC-721 tokens. 

Anyway, the possibilities with NFTs are endless because users can create an NFT for anything. The current popular uses for NFTs are digital art, original songs, original video clips, and unique items in blockchain games.

The price of NFTs have absolutely gone crazy over the past month. CryptoPunks, a digital art NFT collection, has had punks sell for hundreds of thousands of dollars. 

This is only the beginning with NFTs, too. The real use for NFTs will come when real estate transactions and fractional ownership of music begin taking place with NFTs. 

Just like DeFi, using NFTs requires paying a gas fee in Ether. This will drive demand for Ether, which will increase the price of Ether in the future. 

Should I Invest In Ethereum in 2021 or Wait?

We cannot see the future. 

This makes it difficult to say whether or not you should invest in Ethereum in 2021. 

What we can say is that Ethereum should increase in popularity over the next few years. An increase in popularity always leads to an increase in price. 

With that in mind, the price will most likely increase compared to the price today. 

However, predicting whether or not there will be a major bear market between the price increase is the difficult part. 

This is why we recommend dollar cost averaging into Ethereum. For those that do not know, dollar cost averaging refers to purchasing the same dollar amount of an investment at regular intervals. 

For instance, you could purchase $100 of Ethereum every week until you have invested $10,000 into Ethereum. Sometimes you will pay a lot for Ethereum and sometimes you will get a good price. But the price should average out to a good enough price. 

Dollar cost averaging is done to flatten your cost basis. Though it does sometimes result in having a higher cost basis than you could have possibly had. 

Closing Thoughts

That should answer the question about whether or not you should invest in Ethereum in 2021. 

We know that it might sound like you are late, but that is because you are immersed in the cryptocurrency industry. Most people do not know about NFTs, DeFi, or the huge impact that Ethereum 2.0 will have on the blockchain. 

If you know about all that stuff now, then you are early to the Ethereum party. The popularity of Ethereum will absolutely explode after the release of Ethereum 2.0. DeFi and NFTs will continue to march upwards due to the lower gas fees.

To summarize, you are early to Ethereum. But you might not realize it until a few years when a lot of these protocols become more popular. 

Is it Too Late to Invest in Ethereum in 2021? Should I Invest Now or Wait?