Ethereum in 2017: Was It Really a Good Investment?
The question of whether investing in Ethereum back in 2017 was a good move brings us to the crux of the matter: is Ethereum an investment or merely a trade? Economically speaking, investments need to cover the fundamental principles of the market. Cryptocurrencies, like Ethereum, often present a conundrum when it comes to categorization due to their speculative nature.
Why Ethereum Cannot Be Simply an Investment in 2017
Many experts would argue that ETH is closer to a trade rather than an investment. The primary reason is that Ethereum's value is heavily influenced by market speculation and its adoption as a medium of exchange. Investments have to be built on sustainable economic fundamentals, earning potential, and long-term value propositions. However, Ethereum, at its core, relies more on its utility and community involvement for its value.
Three Reasons Why Ethereum Was a Particularly Good Investment in 2017
Ethereum had a flurry of developments in 2017 that made it a compelling choice for investors who understood the potential and were willing to take on the associated risks.
1. ETH ETF Approvals
The regulatory climate for digital assets was largely uncharted territory back in 2017. However, a significant milestone was the potential for Ethereum to gain an exchange-traded fund (ETF). The application by BlackRock, a well-respected financial firm known for having a 99.9% success rate in ETF applications, hinted at a growing acceptance of digital assets in traditional financial markets. This development could have given investors a more stable platform to trade Ethereum and protected them against volatility.
2. Becoming Deflationary
Ethereum was already beating Bitcoin in terms of supply management when the EIP-1559 (Eth2) upgrade was implemented. Since then, Ethereum has become deflationary with net issuance being negative. This is a counterintuitive but extremely positive trend for investors, as it indicates a reduction in the total supply, which can lead to appreciation in value.
3. Upcoming Major Upgrade
The EIP-4844 is a major upgrade that has the potential to transform the way Ethereum operates. This upgrade is designed to improve the layer 2 (L2) solution, which will significantly reduce transaction costs. By making Ethereum more accessible and cheaper to use, the upgrade could lead to greater adoption and thus higher demand for the cryptocurrency.
Fast Forward: From 2017 to Now
Cryptocurrency markets have undergone a significant evolution since 2017. Back then, the financial landscape was largely unregulated, and the rise of initial coin offerings (ICOs) made the space highly speculative. It was a bit of the Wild West, with a lot of room for both success and fraud.
By 2023, the regulatory framework and investor base have become more stable. Ethereum has faced increased competition but continues to hold a strong position in the decentralized finance (DeFi) ecosystem. The smart contract capabilities and decentralized applications (DApps) remain key features that investors find valuable.
Conclusion: A Cautious Optimism
Investing in Ethereum back in 2017 was indeed extraordinary, with the potential for spectacular returns. However, it was a high-risk, high-reward proposition. Today, the game has changed. While the growth spurt days might be long gone, Ethereum remains a key player in the decentralized world. The future looks promising, but it's important to proceed with a cautious approach and a clear understanding of the risks involved.