Ether (ETH) is one of the most popular cryptocurrencies globally. It is the native token of the Ethereum blockchain and is the second-largest cryptocurrency by market capitalization. Many wonder if this token is still a good investment amid a crypto market slump in 2023; this article will answer the question.
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What Is Ethereum?
It is a decentralized blockchain network that powers smart contracts. It was conceptualized in 2013 by a team of software developers and launched the following year. Ethereum grew viral shortly after its launch and clinched a high market value. It’s currently the second-most valuable token by market capitalization, only surpassed by Bitcoin.
The Ethereum blockchain powers many decentralized apps, including peer-to-peer lending, staking, games, crypto exchanges, etc. Ether is the native token for transacting on apps built on this network.
Major Ethereum Developments
Ethereum’s competitive edge lies in being the most popular blockchain for software developers. It has the largest network of decentralized applications, making it the favorite blockchain for crypto enthusiasts. Anyone who uses decentralized apps has likely interacted with one developed on the Ethereum blockchain.
Ethereum price is widely tied to the network’s popularity. The more decentralized apps developed on this network, the higher the demand for ETH, leading to a price increase. Similarly, the fewer apps developed on this network, the lesser the demand for ETH, leading to a price slump.
Why Has ETH Price Dropped In 2023?
ETH price dropped in 2023 because of less liquidity in the global crypto sector. This liquidity contraction isn’t limited to crypto. It has affected all assets, including stocks, bonds, commodities, real estate, etc.
You can trace the global market slump back to the 2020 Covid pandemic. The early stages of the pandemic caused uncertainty and confusion, and businesses braced up for hard times. In response, central banks worldwide infused a lot of liquidity into the markets and lowered interest rates.
The European Central Bank and the U.S. Federal Reserve gave banks easier access to loans. The loans were, in turn, handed to investors that spent them buying up as many assets as they could. Global asset prices increased, and Ethereum reached an all-time high of $4,891.70 in November 2021.
In 2022, central banks began tightening loan access for consumer banks and significantly hiked interest rates. Investors didn’t have access to relatively easy loans as before, causing a global liquidity slump. Ethereum’s price fell alongside many other digital tokens.
Is ETH Still A Good Investment?
We’ve mentioned that Ethereum is the most popular blockchain with software developers. If you believe crypto is here to stay, then Ether is also here to stay and is a good investment for the long term.
Demand for Ether will remain high as long as developers keep building new apps on the Ethereum blockchain and expanding existing ones. It is the official token for transacting with apps built on the blockchain, and people will keep buying it to transact with such apps if they remain popular.
The crypto sector has been through many ups and downs. It reached all-time highs in 2021 but slumped in 2022 to 2023. The global economy is becoming more stable after a period of shock, and ETH’s price has slightly recovered.
Ethereum might not go higher in the short term, but it’s a potential good investment for the long term.
Disclaimer: This content is not investment advice and does not constitute an offer or solicitation to purchase an asset. Any investment carries risk, and past performance does not guarantee future performance. Investors must perform their research before making any decisions.