Editor's note: This column has been updated to disclose the writer's advocacy of blockchain technology--the underpinning of all crytocurrencies--and a Consumer Financial Protection Bureau warning about these investments.
In the last few months, the revolutionary blockchain platform Ethereum and it's token (cryptocurrency) Ether, has seen some massive gains. Ethereum was as low as $8 in July 2016 and $17 in March 2017. Ethereum (ETH) has since seen highs of over $220. The past year total gains for Ethereum are over 1,500% as of the time of posting.
Many people are left thinking that this is a bubble based on some short term up and down activity. But, you have to keep in mind that Ethereum being up almost 1,000% in the last few months, a 10-40% drop is not necessarily a significant negative. In fact, according to many of the experts who I talked to this is perfectly healthy. I've done quite a bit of analysis and research on the topic, had conversations with some of the leading experts in the world, and have been following cyrptocurrencies since early on. It should be noted here that I am an advocate of blockchain technology.
According to Derin Cag, Founder of Richtopia, "There is no industry in the world without a bubble. There are ups and there are downs. Looking at Ethereum, it has not yet reached a level of maturity for any drastic downward bursts until at least 2019. Ethereum is a foundational blockchain platform on which other new blockchain platforms get established."
Editor's note: Bitcoin and digital currencies, as with any investment, may involve the risk of loss. The Consumer Financial Protection Bureau has warned that virtual currencies, including Bitcoin, carry "significant risk" to consumers.
Cag continued, "Some exciting blockchain startups already using Ethereum as a basis includes Slock.it, Augur, Gnosis, Humaniq, BitNation, Melon and Aragon, to name a few. In addition, Ethereum does not have anonymous founders. In fact, it has leading blockchain visionary Vitalik Buterin along with MIT Computer Science graduate Ming Chan and others. Furthermore, Ethereum has a corporate support network called the Enterprise Ethereum Alliance, which already works with Accenture, AlphaPoint, BNY Mellon, Credit Suisse, Deloitte, ING, J.P. Morgan, Microsoft, National Bank of Canada, Santander, Intel, Thomson Reuters, Samsung, UBS and Toyota among others to address major global issues."
So what does this all mean and what does the future for Ethereum and cryptocurrency, in general, look like?
I again went to one of the leading cryptocurrency experts Derin Cag for some answers.
Cag explained, "According to the World Economic Forum (WEF), the blockchain ecosystem will store 10% of the world's GDP ($101 trillion) by 2025. At the time of writing, the total market capitalization for all blockchain tokens combined is $75 billion. If the WEF is correct, this means the total market capitalization will be $10.1 trillion by 2025. The predictable areas blockchain technology is set to transform cover financial services, insurance, cybersecurity, elections, energy, logistics, identity, legal, governance, and healthcare, for example. In conclusion, if the estimates by the WEF turn out to be accurate, the expected growth for the blockchain ecosystem should be approximately 13,333% within the next eight years. Anything above this percentage construes a bubble, hence we still have a long way to go."
If you are considering buying ETH, LTC, XRP, BTC or any other cryptocurrency, here's a good technical analysis of the current prices. Although, I think these could shoot up pretty quickly from here.
If you aren't familiar with Ethereum yet, Ethereum is the platform that issues the Ether (ETH) cryptocurrency. Ethereum and Ethereum Classic are not the same. Ethereum (ETH) is the official cryptocurrency of Ethereum. Ethereum Classic (ETC) is essentially an unofficial spin-off run by others that aren't involved in the actual Ethereum Project.
Ethereum is like Bitcoin but also very different. It does have the cryptocurrency element, but it is also a platform for so much more. For the sake of this article, and a simple way of thinking about it, Ethereum does for programming and code what Bitcoin does for finance and financial transactions. Ethereum also does what Bitcoin does. But Bitcoin does not do what Ethereum does, in whole.
At the end of the day, nobody really knows exactly what will happen. This article or anyone's article for that matter should not be taken as investment advice, and you should always do your own research and due diligence.