Analysis: Ethereum will become a major asset for investors in 2021

In the second half of 2020, we have seen a growing interest in cryptocurrencies from institutional investors and big businesses. However, the attention of whales and the public has been focused on Bitcoin (BTC). Today, we will explore why Ethereum (ETH) is a more attractive asset and why this cryptocurrency should be every investor’s “first crypto”.

Let’s start with the numbers: Ethereum prices have risen 1,200% since the March 2020 lows following the coronavirus-induced market crash, while Bitcoin has only risen around 700%. Of course, Ethereum’s rise to $1,400 doesn’t seem that impressive in the context of Bitcoin’s all-time high of $40,000. Moreover, Ethereum’s market cap is five times less than Bitcoin’s as of today. But which is more important to investors: beautiful numbers and a track record of assets in their portfolio, or high income?

There is every reason to believe that Ethereum will continue to rise in 2021 and bring investors more profits than the “most famous cryptocurrency” Bitcoin.

Developer needs

Ethereum is the number one platform for building blockchain projects and launching decentralized applications. The chart below shows the transaction volume of the only ERC-20 token in the first few years since the launch of the Ethereum network. Although the market expansion of blockchain startups has slowed down since the burst of the initial coin offering bubble in 2018, their total number is still growing.

Even though Ethereum has strong competitors such as Tron, Polkadot, Cardano, Cosmos, and Tezos, Vitalik Buterin’s Ethereum platform remains the leader in this direction.

Growing transaction volume

In 2020, the transaction volume recorded on the Ethereum blockchain exceeded $1 trillion. This figure exceeds the transaction volume of payment giant PayPal, which has more than 350 million users and generally does not exceed $200 billion in transactions per quarter on average.

Also, remember that network fees generated by each transaction are paid in ETH. And since the network's growth rate remains high, we can confidently expect the "bull" trend of ETH to continue. In any case, interest in this cryptocurrency is increasing, as are the number of active wallets, the number of transactions on the network, and the average transaction size.

The development of DeFi industry

Despite Bitcoin’s leadership in the cryptocurrency market, Ethereum remains the leader in the young decentralized finance space. DeFi lending and staking projects, which were extremely popular in the summer of 2020, continue to grow and attract new investments.

Since the beginning of 2020, the total value locked in DeFi has increased by nearly 3,300%, from $687 million to $23.2 billion. Ethereum is the main platform for the creation and launch of most new DeFi projects and stablecoins.

The issuance of stablecoins continues to grow as low-volatility fiat-backed digital assets are a very convenient tool for fast settlements between users, forming trading pairs on crypto exchanges, and saving money from the high volatility of cryptocurrencies.

In addition, we should talk about the interest of institutional investors in DeFi. Although the chaos in the DeFi market in the summer of 2020 almost undermined the confidence of institutions in the potential of blockchain in the financial field, listed companies continue to show interest in new asset types.

In August 2020, Arcax and Algorand announced plans to develop tools for the introduction of DeFi among institutions. In the fall of 2020, it became known that xSigma, a subsidiary of ZK International, traded on the Nasdaq, was working on the development of DeFi services and was preparing to launch a decentralized exchange for trading stablecoins.

We all remember what happened last year when large investors paid attention to Bitcoin? Now, it looks like the same thing happened to other areas of the cryptocurrency industry, some of which are directly related to Ethereum. Ethereum’s main strengths are the versatility of its technology and its growing community. (Cointelegraph)