Ethereum May Be Down, But It’s Far from Out

Whether you think of cryptocurrency as well worth your dime or a waste of time, you simply cannot deny the charm of Ethereum (CCC:ETH-USD). Its Russian-Canadian inventor, Vitalik Buterin, was all of 19 when he launched it. And as all teenage crypto geniuses are wont to do, he picked a name with anime roots. The elusive gem “ethereum” is the central object of desire in the Japanese film “Castle in the Sky.” Even the blue, diaphanous logo bears more than a passing resemblance to the jewel that powers a mysterious, abandoned, stratospheric Shangri-La.

A stack of ether or ethereum coins on a gold background.Source: Shutterstock

Not that Ethereum is the stuff of cartoons today, kiddies. As of 2018, it became the second most value cryptocurrency behind the mighty Bitcoin (CCC:BTC-USD). Year-over-0year, its value has multiplied nearly seven times. Yet Ethereum has also been on a slide of late. Since hitting a sky-castle peak of nearly $1960 on Feb. 19, it has returned to Earth somewhat, down 26%.

As with all cryptos, you can view this price action two ways. At one pole, this kind of volatility signals a potential avalanche, and you absolutely don’t want to get financially buried. Cryptocurrencies are cryptic. Without a central government to back them, it’s nearly impossible to predict the short-term movements. But on the other hand? Patience, my friend.

Ethereum Is Just as Volatile as Bitcoin

Ethereum may be as far from a value investment as you can get. But really, you have to hold it for some time to realize its true financial benefits. Uh oh. Warren Buffett must be choking on his Dairy Queen cone by now. But it’s true.

When you look at Ethereum’s two-year trailing history, it has rocketed some 1000%. That means simply that fans of this crypto should hide from any screaming, breaking headlines for months at a time. As much as I may love being a pundit-in-progress, the financial media is not necessarily your friend.

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Otherwise, you’re in for some nasty bouts of doubt and anxiety. Ethereum has hit dizzy heights before: It surpassed the $1300 mark in January 2018. But by mid-December 2018, it was priced just above $80. It was a wild, nauseating kind of year. Imagine trying to explain to your sweetie why you took out a second mortgage to bet on Ethereum. Or your ex-sweetie, more likely.

Not All Cryptos Are Alike

While that’s a pretty good imitation of a Bitcoin swan dive, we absolutely cannot paint all cryptocurrencies — let alone these two — with a broad brush. Besides the obvious, wild difference in coin price with Bitcoin, Ethereum has another role that sets it apart.

Mainly and perhaps most importantly, Ethereum has a “stability” of sorts. (Please don’t hurl X-rated epithets at me if 2018 took you to the cleaners.) That is, Ethereum is the most actively used blockchain, which means it provides the top platform for the “smart contracts” that many businesses use.

Think of these contracts as entries on a digital ledger that cannot be altered, hacked or fudged without tremendous difficulty. Believe me, we could go deeper than deep into this. But in studying cryptocurrencies for close to seven years, I’ve found even the experts often have trouble explaining blockchain in layman’s terms.

Second Place Is a Good Place

This kind ubiquity might explain why Ethereum is the proud Number Two in the crypto-verse. Its market capitalization is now exceeds $170 billion. Granted, that can and likely will dip over the next few months.

That brings us to the short-term concerns that every prospective and current investor should understand. As another  InvestorPlace columnist, Will Ashworth, commendably notes, Ethereum isn’t exactly immune to market history.

And that history teaches us that meteoric gains are often the prelude for the kind of “buy high” mentality every investor should avoid. Ethereum is still near its all-time peak. Ethereum Envy, if you’ve currently got a case of it, could pulverize your portfolio if you over-leverage.

Here’s another thing: Market timing is a horrible idea to start with, so do not under any circumstances try to time this thing. Just get in, commit to your own selling price and/or time horizon, and fire away.

Does it sound like I just recommended Ethereum as an investment? Why, yes I did. I have yet to dive into the crypto world myself and every day that goes by, I regret the decision. If Ethereum’s price dips some more, I believe it will mark a great buying opportunity for you and me both.

As for the selling opportunity? You’ve got to hang in there, truly. And since you’ve got time, why not read up on Vitalik Buterin? He’s got a personal website, and under the “Fun” section he has something that’s truly fun for Ethereum Einsteins. It’s a piece called In-person meatspace protocol to prove unconditional possession of a private key.

Worse than a Dad joke by Stephen Hawking, you say? At 27, Buterin is worth in excess of $100 million. And he is laughing all the way to the cryptobank.

On the date of publication, Lou Carlozo did not have (either directly or indirectly) any positions in the securities mentioned in this article.

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