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Once again, tech prowess wins the minds of analysts: Ethereum heads for crypto supremacy

Andrew Saks, Tuesday, 11 January 2022

Bitcoin may well have started the whole entry into the mainstream of cryptocurrencies, and fueled the massively speculative market that has now got most of the world interested, but there is more to cryptocurrency than just unbacked, speculative and high risk chance-taking.

Without doubt, if all cryptocurrency had amounted to some 12 years after Bitcoin first hit the markets is a speculative gamble, it would never have reached the levels of popularity that it has, which in some areas of the digital financial markets sector, border on dominance.

Even Tier 1 investment banks such as Goldman Sachs and JP Morgan have spent years analyzing cryptocurrency, predicting its direction and looking at future Bitcoin values and blockchain technology use cases, and many large institutions have invested vast sums of capital into cryptocurrency-orientated projects. Major derivatives exchanges in Chicago such as CME Group and ICE, both as old as the commodities market itself, have begun offering cryptocurrency-denominated products.

One of the main reasons for this is separate from the huge fluctuations in prices combined with the decentralized nature of Bitcoin, as investors and traders increasingly view it as a world standard for the empowerment of many digital financial markets of the future, but the other reason is far more sensible: technological advancement.

Moving the entire financial system forward at a time in which online, entirely digital business is entering its most developed point in history is the main point of interest, and it is where the clever money has been going for some time now.

For this reason, Ethereum is the main cryptocurrency asset of interest, largely due to its extremely sophisticated blockchain underpinnings which support smart contracts and protocols which have the ability to revolutionize the way in which all manner of transactions are conducted from lending, to investment, and even removing intermediaries from vast, complex financial transactions, reducing the cost and time taken in settling institutional business.

Even investment banks which have a huge percentage of global FX trading market share such as HSBC have begun to use blockchain technology for settling trades, cutting out the benchmark firms that have been used and recommended by central banks and regulators for many years.

Now, Ethereum is having its heydey. Just as inventor Vitalik Buterin has his head down working tirelessly on the new upgraded ETH2 version of the digital currency which will feature greater smart contract capability, maverick commentators are coming out of the woodwork and saying Ethereum is looking set to be the digital currency of 2022, and potentially may overtake Bitcoin in value.

That is some claim, however given that Ethereum has a totally different position in the financial world than Bitcoin, it should perhaps be viewed not as a Bitcoin rival, but as a different type of instrument altogether.

Bitcoin is purely a store of value or a digital asset, whereas Ethereum is a technological tool to bring all kinds of new dimensions to the financial ecosystem.

Yesterday, whilst Bitcoin sustained a dramatic crash that took it below $40,000 in value once again, Sussex University's Carol Alexander came up with a prediction that Ethereum may overtake Bitcoin in value this year.

In the British media, Ms Alexander said that Web 3.0, the third version of the internet that experts claim will incorporate decentralisation based on blockchains, will favour cryptocurrencies Ether, DOT, ADA and SOL.

This is certainly in line with the thoughts of a large number of tech-focused financial markets analysts and crypto advocates.

In the era of Web 3.0, smart contracts and automated settlement of deals away from the middle-men of the past will be a key function, and this is where Ethereum has its ace card.

Ethereum is at $3,138 this morning, however let's also bear in mind that some top analysts at major banks have been predicting $100,000 values for Bitcoin over the past year, so the jury is still out!

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