Diversification is mandatory when exploring the many different financial markets. With Vaultoro, trading Ethereum against Bitcoin and Dash would not be sufficient. The option to exchange ETH for gold and vice versa is a game-changer in the industry.
Ethereum Price Keeps Trending Higher
When the Bitcoin price skyrocketed to $40,000 earlier this year, Ethereum lagged behind by quite a margin. A bit strange, considering how Ethereum hit an all-time high of $1,440 when Bitcoin was just $19.700 in 2017. History doesn’t always repeat itself right away, nor do trading patterns. However, things have improved gradually since then, and Ethereum now trades near $1,300 again.
Several reasons contribute to the ongoing price evolution for Ethereum. Not only is there the ongoing upgrade to Ethereum 2.0 and staking, but the DeFi ecosystem is still firing on all cylinders. Furthermore, it was a matter of time until Ethereum followed Bitcoin’s price rise, even though it hasn’t been overly outspoken as of yet.
Ethereum 2.0 Is A Big Deal
One of the significant changes happening today is the ongoing rollout of Ethereum 2.0. Contrary to the miner-driven version, the next protocol upgrade will rely on Proof-of-Stake entirely. That also means a more significant portion of the circulating ETH supply will be used for this purpose instead of letting it reside in user wallets or across trading platforms.
It is essential to note the Ethereum 2.0 upgrade will occur across multiple phases. When the next stage goes live remains unclear. The developers are still actively working on this upgrade, as many different factors need to be taken into account. The upgrade process may take anywhere from weeks to months or even a year.
Despite this degree of uncertainty, many users are already staking Ethereum on the blockchain. At the time of writing, nearly 2.88 million Ether, or just under $4 billion, is in the staking contract. More transfers are coming in every day, as users want to earn passive revenue from doing so. Currently, one can make about 10% per year, equal to 3.2 Ether or $4,000.
The DeFi Sentiment
In the second half of 2020, Ethereum’s blockchain became home to decentralized finance or DeFi. It is still a relatively new industry, yet one that attracts a lot of attention. With dozens of projects running on the Ethereum blockchain, many people consider it to be the hub of finance altogether. A bold statement, yet one can understand where this sentiment comes from.
According to DeFi Pulse, the decentralized finance projects on Ethereum represent $27.44 billion in total value locked. That means all of these projects manage over $27 billion in Ethereum-based assets on behalf of their users. A substantial amount, as it represents another 7.2 million Ether taken out of circulation. Combined with the staking contract, that equals almost 11 million ETH – or just under 10% of the entire circulating supply – being inaccessible to traders.
Source: DeFi Pulse
One thing to keep in mind is how Ethereum-based DeFi only works with ETH or ERC-20 assets. There is no support for Bitcoin or other cryptocurrencies directly. A limiting factor in many’s eyes, yet it seems the industry is heading in the right direction. There are still plenty of scams to watch out for, however.
Bitcoin Isn’t Moving Up
Another contributing factor to the popularity of Ethereum today is how Bitcoin’s bull run has run out of steam. More specifically, the Bitcoin price is struggling to remain between $30,000 and $35,000. This creates an opportunity for alternative cryptocurrencies to start moving up in value on their own accord. It often takes a while for altcoins to move up against Bitcoin, and it usually requires a lengthy period of sideways BTC trading.
Keep in mind that Ethereum is the second-largest cryptocurrency by market cap today. Its combined valuation is $156.2 billion, which is still far behind Bitcoin’s $636.1 billion. The third currency on the list is USDT, a stablecoin pegged to the US Dollar, with a market capitalization of $26.36 billion.
Diversifying Risk Is Crucial
Even though many factors indicate bullish momentum for Ethereum today, no investment is without potential risks. Diversification of a portfolio is always a smart idea, even if that means buying into other markets entirely. Cryptocurrencies tend to note strong yearly performances, but putting all of your eggs into one basket can be problematic.
It is for this reason that Vaultoro will provide different Ethereum trading markets. Customers have been asking for ETH exposure for a while now, and they will be able to diversify accordingly. Not only will users trade Ethereum against Bitcoin and Dash, but there is also an ETH/XAU trading market. Tapping into the gold bullion market is always an option worth exploring, either as a neophyte or advanced trader.
Furthermore, there is still lingering uncertainty regarding the Ethereum 2.0 rollout process. The longer this upgrade takes, the more eager people will diversify their portfolios to hedge against price instability. Although the ETH price has moved up significantly in recent weeks, the market can always change course in a heartbeat.
Users who participate in ETH staking have to keep in mind they cannot move their funds until Ethereum 2.0 Phase 1.5 occurs. That is two phases from now, which is likely to take a year or more to arrive. Staking isn’t for everyone, as there may be other market opportunities along the way.
Is Ethereum Akin To Gold?
For years, people have drawn parallels between Bitcoin and gold. Both assets have a degree of scarcity and require energy-intensive work to be created. However, Bitcoin has a fixed supply cap, whereas gold quantities in the Earth’s crust remain unclear. More importantly, Bitcoin has shown much stronger price potential than gold, a trend that became very outspoken in late 2020 and early 2021. They are both appealing investment vehicles, however.
In that sense, one may argue Ethereum may be more akin to gold than Bitcoin is. Unlike Bitcoin, Ethereum has an inflationary supply, even though its emission schedule will decrease significantly once Ethereum 2.0 goes live.
In the price department, the values of Ethereum and gold are not that far apart either. There may be a bigger correlation between these two assets than Bitcoin and bullion ever shared. Among cryptocurrency enthusiasts, eternity will be debated, as Bitcoin is the dominant currency, just like bullion is the prevalent precious metal.
There is a lot to like about Ethereum – especially during the ongoing protocol upgrade – but it can also prevent traders from unlocking their portfolio’s full potential. Being able to exchange freely between ETH and gold bullion is a welcome addition for all cryptocurrency and precious metals enthusiasts.