Interest in Ethereum has risen to new heights. In Google, the search by Internet users with the keyword “Ethereum” increased by more than 150% in terms of online search. This is due to the large growth of crypto assets in the third week of February, when they reached a new historical high, and now it is recovering its position after a rebound.
What to expect from Ether?
If more than $ 37 billion is locked in DeFi, and this space is dominated by the cryptographic blockchain, will the price of ETH double in 2021 because of the future of decentralized finance?
Ethereum may double in price, and in 2021 it may overcome several stages. According to Shivam Thakral, chief executive Officer of BuyUcoin, Bitcoin is consolidating, and this is the main reason why Ether is reaching record value. Investors expect that ETH will become the second most popular cryptocurrency, as well as the second most popular by market capitalization, in order to get a big return on their investments in the long term.
What has caused so much excitement and expectation in the eyes of cryptocurrency traders when it comes to Ethereum is its dominance where many people believe the global economy is driven by decentralized finance.
Unlike Bitcoin, which had its fans before the pandemic as its biggest driving force, and which attracted new investors thanks to the huge influx of pension schemes, investment funds, and university endowment funds into the recovery of financial markets after the public health crisis, Ethereum relies on the strength of the number of successful protocols that run on its platform.
David Grider works as a strategist at the limited liability company Fundstrat Global Advisors and believes that the best risk / reward investment game in cryptocurrency is Ethereum, because it does not depend on a single protocol, whether it is asset returns, decentralized insurance or a new token. Ether will determine the price of assets.
Mr. Grider also added that Ethereum will grow more than sevenfold, to $ 10,500, and if we follow what this crypto strategist said, then ETH will more than double and bring huge returns to investors, which can be used as profits, or serve as a hedge against other risky assets.
Moving forward, decentralized finance will take over. Alan Lane, Chief Executive Officer (CEO) of San Diego-based Silvergate Bank with $ 2.6 billion in assets, is an ardent advocate of decentralized finance. Lane believes that DeFi can make the financial system more sustainable, efficient, and democratic.
Many people believe that the few financial executives on Wall Street, and their alliances with the European Central Bank, control all decisions about the future of money, which deprives the average person of financial freedom in relation to hard-earned paper currency.
Mr. Lane also added that “when traditional financial services are made available via a public blockchain without permission, such as the BTC blockchain or the Ethereum 2.0 platform, anyone with access to the internet and a smartphone can send, receive, and store money through a digital wallet.”
As we all know all too well, there are millions of people who are under-covered by banking, and DeFi can go a long way to providing access to financial services for such groups to help them contribute to the global financial economy.
Ethereum: What is it?
Ethereum is an open-source blockchain platform that developers can use to create their own decentralized applications (dApps), ranging from decentralized exchanges, to decentralized insurance and yield aggregators.
It has smart contracts that allow users to set conditions for executing a transaction. Ethereum’s own token is called Ether (ETH), and it is widely used for transactions on the blockchain network.
Ethereum’s secure blockchain technology can help revolutionize the education, e-commerce, social media and telecommunications, law, and healthcare industries.
What is decentralized finance?
Decentralized finance (DeFi) is a term that encompasses the vision of a financial system that functions without banks, clearing houses, or insurance companies (intermediaries) and is managed by smart contracts.
DeFi applications or protocols seek to provide the same services as Centralized Finance (CeFi), traditional financial systems such as banks), but in a transparent, global, and unresolved manner.
- Ethereum’s Decentralized Finance Protocols Compared to Traditional Banks (Centralized Finance)
Traditional banks are centralized (CeFi), and digital applications and protocols are decentralized (DeFi). A good example can be attributed to the functions of commercial banks (centralized organization) and the functions of DAPPS (decentralized applications).
Commercial banks thrive on a single business model, which is to accept deposits from customers and use some of these deposits as loans to other customers.
The elementary cornerstone of all financial systems that are known to function effectively is borrowing and lending. Through this, account holders receive incentives because they provide financial markets with some form of capital (liquidity) and in return receive a return on their investment (interest) on an asset that would otherwise remain dormant.
On the other hand, DeFi applications allow unknown participants to lend and borrow money in large amounts without any banks, clearing houses or insurance agencies (intermediaries). In line with supply and demand, DAPPS brings together borrowers and lenders to automatically set interest rates.
Anyone in the world, wherever they are at any given time, can interact with these apps.
Caitlin Long, Chief Executive Officer and founder of de novo Avanti Bank, which is based in Cheyenne, Wyoming, believes that traditional financial institutions understand that something important is happening in the financial sector through DeFi. She made it clear that the typical cross-border system we are used to runs through six different institutions: two central banks, two correspondents, a sending bank and a receiving bank.
As is clear from the words of experts who have been involved in the financial game for a long period of time, there can never be a simple process. This is because there are so many intermediaries, and going through these instances means extensive regulation and compliance, which delays the process and makes lending and borrowing relatively stressful.
- Investment banks (centralized) and yield aggregators (decentralized)
Investment banks play a big role in making money-based decisions. Investment banks are known to thrive on a business model that includes advisory services based on financial transactions. Investment banks also assist in asset management, as well as in creating and trading complex financial products. In a nutshell, the bridge between investors and large organizations is investment banks.
Investment banks help government and commercial organizations to advise on how to deal with their financial problems, and also help them in obtaining financing, whether it is the issue of bonds, derivative products or stock offerings.
An excellent example is investment financial institutions such as Goldman Sachs and JP Morgan, which, through their asset management department, manage huge portfolios of insurance companies, pension funds and other businesses. Investment bank experts select the right mix of stocks, real estate trusts, and other profitable investments for their clients.
On the other hand, Decentralized Finance (DeFi) has protocols such as Yearn Finance and Harvest. Yearn Finance (standalone protocol is an aggregator of returns on Ethereum that searches the DeFi space for the best returns and automatically places investments for its users).
This frees investors from the burden of having to conduct research using numerous applications (dApps) on the Internet, or conduct fundamental physical and digital analysis of corporations to know which organization offers the best products that provide the maximum return on their investment.
- Centralized and Decentralized exchanges
The main function of exchanges is to organize the trading of various assets between two or more participants, such as foreign currency, stocks, and cryptocurrency. Cryptocurrency exchanges are online platforms where traders can buy, sell, or exchange cryptocurrencies for traditional (fiat) or digital currency.
Exchanges can convert cryptocurrencies into other cryptocurrencies, as well as cryptocurrencies into major state-backed currencies.
The exchange of cryptocurrencies for fiat currencies, such as US dollars, euros, rubles, or pounds sterling, is directly linked to centralized finance. This is because cryptocurrency holders will have to use Binance or Coinbase (which are centralized exchanges) to exchange cryptocurrencies with each other.
On the other hand, the advent of decentralized exchanges (DEX) with Uniswap allowed cryptocurrency holders to exchange their tokens without leaving the cryptocurrency space.
So, is Ethereum a good investment with its DeFi protocols?
Ethereum is a good investment, because it is based on the same investment principles that consist in portfolio diversification.
Ethereum succeeds in diversifying and thus relies not on Ether, but on projects that have a strong user base, and also help to solve some problems in a decentralized way in a centralized financial system.
Blocktown Capital founder James Todaro believes that Ethereum will more than double in size. In a statement, he said, ” Ethereum will be worth more than $ 9,000 in the near future.”
Brian Schuster of Ark Capital sees Ethereum as the first cryptocurrency to break the $ 100,000 price milestone by 2024 due to a potential revolution across the digital world as it aims to transition the current Web 2.0 to Web 3.0. At the same time, Schuster predicts that ETH will surpass BTC as the cryptocurrency with the largest market capitalization, as well as price.
Managing partner at Moonrock Capital, who is also a co-founder of Blockfyre, Simon Dedich also says that Ether will grow this year, and will soon exceed the $ 9,000 mark. His analysis primarily focuses on the fundamentals that could lead to the smart contract blockchain becoming the second cryptocurrency to surpass the $ 1 trillion market cap.
According to Prime XBT, the price of Ethereum at the end of 2021 will be $ 25,000.