Hello everyone!

Welcome to the thirteenth edition of my newsletter! Every Saturday I’ll be sending out a quick newsletter on how to master crypto. I write about mindset, trends and analysis.

Today, I focus on the altcoin boss: Ethereum.

Ethereum

It's quite amusing: Bitcoin now has its own NFTs (Ordinals), but their value often is displayed alongside the BTC price in ETH!

ETH is the currency that everyone in the crypto world understands. Ethereum is the money of the internet.

Ethereum was proposed by the 19 years old Vitalik Buterin in late 2013 and officially released on July 30, 2015.

It consistently holds the position of the second-largest cryptocurrency by market capitalization, after Bitcoin.

Ethereum is renowned for introducing smart contracts, self-executing contracts with terms written directly into code.

Roadmap

Although Ethereum is already an ancient coin in crypto terms, it is constantly evolving. Many of you probably heard about the merge, when it switched from Proof-of-Work to Proof-of-Stake last September.

That means one thing above all: the energy costs are 99.9% lower than before and about 50,000 times lower than with Bitcoin! An important characteristic for the future in an increasingly greener society.

Further innovations are also planned for the future. They originally had all fancy names, but they are probably not being used anymore.

Supply

It is one of the simplest market laws: when the supply of a commodity (or security :P) decreases, the price increases.

The EIP-1559 update from August 2021 includes a burn mechanism that makes Ethereum deflationary. The supply of Ethereum is decreasing and will continue to decrease in the future.

Furthermore, only about a quarter of the circulating coins have been staked so far. For Solana and others, that number is more than double.

If Ethereum approaches that level over the next few years, the supply will continue to decrease.

The implication for the price, as demand continues to rise in parallel over the next years, is evident.

Demand

Because, unlike the declining supply, the demand is rising.

Even though the gas fees on Layer 1 are very expensive, Uniswap, Blur, or major Layer 2 solutions like Arbitrum, are runing on Ethereum.

And Layer 2 solutions make the fees much cheaper by batching transactions and validating many transactions simultaneously in one block.

Moreover, there is a significant increase in interest from institutional players. VanEck has a bull case price projection of over $50k for one ETH, not to speak about Cathie Wood ($160k).

Aside from some intermittent dips, ETH had a market cap of approximately 20% of the total crypto market cap in recent years. That is, as a green alternative to Bitcoin, naturally intriguing for institutional investors.

Because for how long can one plausibly justify to people that Bitcoin requires more electricity for its validation process than a country like Ukraine? And this, where Ethereum can do more?

In this context, the term "flippening" keeps emerging. There are indeed some in the crypto world who consider it inevitable that Ethereum will eventually displace Bitcoin as the largest cryptocurrency, for the reasons mentioned earlier.

Besides, there are also the Bitcoin maxis who believe in nothing other than Bitcoin. Only the future can tell who is right.

Risks

In addition to this very bullish outlook for Ethereum, there are also risks. Currently, there are efforts in the US to regulate the DeFi sector "like a bank."

A blow to DeFi would also impact Ethereum. Furthermore, the USA still lacks proper regulation for crypto in general, and with the newly introduced staking, Ethereum is inching closer to being considered a security. How this discussion with the SEC unfolds is intriguing for the entire crypto world. However, other countries, like the EU, have created more positive regulations.

Moreover, the applications for BTC ETFs by BlackRock and others make one thing clear: big money wants to invest in crypto. And when they want to do so, they will eventually get their way.

Twitter Reads

With my best regards and wishes, I hope you have a wonderful weekend.

Marco Johanning

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And if you have any questions, I’d happy to help. Just reach out to me on Twitter.

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