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What is Ethereum And Should You Invest in This Cryptocurrency?

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Ethereum is the second largest cryptocurrency by volume and the most widely used blockchain in the world, but its many uses can create a much bigger learning curve than Bitcoin for new investors.

“Ethereum serves two purposes. First, it functions as money and can be a store of value,” said Bill Noble, senior technical analyst at Token Metrics, a cryptocurrency analysis platform. “But Ethereum is also like a freeway for decentralized finance.”

Instead of creating value as “digital gold” like Bitcoin, Ethereum is a software platform that runs on a blockchain. Users can interact with the platform through Ether, the Ethereum-linked cryptocurrency – or buy and store it as a store of value. Ethereum is widely used by developers, but there are also people who invest in the crypto so that its potential is worth more over time.

What is ethereum

Ethereum was invented in 2015 by programmer Vitalki Buterin after Bitcoin.

“He realized that bitcoin was like a calculator, designed to do one thing, and it does it really well, but you can’t do anything else with it,” said Ollie Leech, learning editor at Coindesk, a cryptocurrency news agency.

So Buterin created Ethereum, a blockchain network with an associated cryptocurrency called Ether (ETH) with the potential to do far more.

While you can buy and trade Ethereum as an investment like Bitcoin, it is also a software platform that developers can use to create new applications – often cryptocurrency or otherwise designed to make buying, selling, and using cryptocurrencies smoother. Like the ones on your phone, these apps can be anything from rental apps to payment platforms.

Think of Ethereum like a smartphone, says Leech. Developers can build apps on smartphones, much like they can build apps on Ethereum. While cell phone apps have more universal applicability these days, Ethereum apps are more aimed at crypto users. Using the example of a borrowing app, a developer could create the app that other crypto users in turn could use to borrow and borrow.

“Everything is powered by this idea of ​​smart contracts,” he says. A smart contract is a program that runs autonomously on the Ethereum blockchain, says Leech. Smart contracts fulfill all functions that a third party would normally have to perform.

For example, people can complete direct transactions over the network. Peer-to-peer lending is becoming increasingly popular on Ethereum right now, says Leech. A credit app developed on the Ethereum network enables individuals to lend money to one another without involving a bank.

The smart contracts that power these apps are basically just algorithms that perform a certain function when certain conditions are met. In the case of peer-to-peer credit, the contract triggers the outcome (the lending of the money) if the collateral is deposited in the correct wallet or in the correct account. Possible benefits of using a smart contract over a traditional lender include speed of execution, the absence of human error or bias, and lower fees.

Other uses of Ethereum

Like other popular cryptos, Ethereum was built on the principles of decentralized funding as the products and services that live on Ethereum are available to anyone with access to the internet.

The smart contracts allow developers to create decentralized applications that can serve various purposes. These applications include financial instruments like cryptocurrency exchanges, decentralized lending platforms, and data services like Matcha, which scans multiple cryptocurrency exchanges for the best prices. But there are also categories of dapps for things like buying and selling digital artwork, games, and developer technology.

The open source concept of Ethereum enables developers to build completely new cryptocurrencies on it, such as Chainlink and XRP, which are known as tokens. Some of these assets come in the form of various cryptocurrencies that you may have heard of, such as Tether (USDT), Uniswap (UNI), or USD Coin (USDC).

But cryptocurrencies aren’t the only digital assets that can be created on Ethereum – recently, NFTs, or non-fungible tokens, are another example of something created using Ethereum. These digital tokens are operated by Ethereum and are used to represent ownership of unique items, according to the Ethereum website.

Ethereum vs. Ether

Developers have to pay a fee to the Ethereum network to create new tokens or decentralized apps on the network. You make these payments in Ether, the home currency of Ethereum. According to Noble, this fee is also known as “gas”.

Gas is the price to use the system, such as taking the subway to take the train. Ether is the cash you would use to buy your Metrocard. Think of it “like tolls that you have to pay to get things done and trade on Ethereum,” says Noble. Different promotions are worth different amounts of Ether, and the fees get higher as more people join the network.

These gas prices, and all the uses developers pay to research them, help explain the rise in the value of ether over the years. As more and more developers try to develop things on Ethereum, they have to buy more ether to pay gas fees, which in turn increases the price of ether. Ethereum investors are betting on the continued use of the most widely used blockchain and the potential of their applications for the future.

Gas fees are also one of the biggest barriers to Ethereum’s growth potential, according to Noble. But an ongoing update to the network, Ethereum 2.0, tries to address the problem. The update won’t have any impact on investors or Dapp users, it will only affect developers, according to the Ethereum site.

If you want to invest in Ethereum, buy Ether. An ether token is currently trading for around $ 2,700. Similar to how you would invest in Bitcoin, investing in Ethereum means buying and holding the token (ether) in the hopes that it will increase in value over time.

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Cryptocurrency

What does it mean for the future of cryptocurrencies?

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The Reserve Bank of India (RBI) recently said it is working towards a phased implementation strategy for the central bank digital currency (CBDC). While the move was welcomed by industry stakeholders, some statements from RBI have raised concerns about the future of virtual currencies (VCs) like Bitcoin, Ether and Dogecoin.

CDBCs are digital currencies issued by a central bank and generally take a digital form of the country’s existing fiat currency such as the rupee.

In a webinar organized by the Vidhi Center for Legal Policy, T. Rabi Sankar, deputy governor of RBI said Thursday, “CBDCs are not only desirable because of the benefits they create in payment systems, but they may also be necessary to keep the public in an environment of volatile private VCs. “

Another statement read: “Another driver is making virtual currencies available to the public that offer the legitimate benefits of private virtual currencies while avoiding the harmful social and economic consequences of private currencies.”

In the past, RBI Governor Shaktikanta Das had also voiced concerns about cryptocurrencies.

According to Ajeet Khurana, founder of Genezis Network, a think tank for crypto startup investing, adopting CBDCs from a point of view of preventing people from participating in VCs will not help anyone, including RBI.

“CBDC is a phenomenal technological advancement for the Indian rupee, but it should be seen in response to the need for higher technology, greater functionality and peer-to-peer interaction, rather than something that VCs take a property and then call it is superior, “added Khurana.

Meanwhile, industry executives believe that crypto assets can coexist with sovereign digital currencies.

“The assessment of the introduction of CBDC by the RBI is definitely a positive sign. Such a move can very well bring the Indian rupee into the league of global digital currencies. Even private currencies and CBDCs can coexist at a very early stage, as if we were to identify them as an asset class, “said Ashish Singhal, CEO and co-founder of CoinSwitch Kuber.

One argument for the need for coexistence is that crypto assets like Bitcoin and Ethereum are different types of assets with use cases other than digital currencies. For example, Bitcoin can exist in the economy as a store of value for a lot of gold, and it is the regulation of other crypto assets that will benefit investors, businesses, and the future Indian economy.

“We believe that India, as a democracy, will have open discussions to dispel concerns of the central bank or any other entity. Crypto and blockchain are powerful futuristic tools and we are optimistic that the government will develop guidelines that will enable all Indians to participate in this technological revolution, ”said Avinash Shekhar, Co-CEO of ZebPay.

According to experts, the introduction of CBDC by RBI is a significant step, and the positive impact is that it will help demonstrate the true value of cryptocurrencies or blockchain. However, VCs can still play a role.

“Cryptocurrency or a blue public blockchain like Bitcoin and Ethereum are not yet regulated by any regulatory authority. Hence, a central bank digital currency may not be accessible, while in the case of Bitcoin it can be accessed by anyone from anywhere in the world, “said Gaurav Dahake, Founder and CEO of Bitbns.

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How to invest bitcoin in IRAs for retirement

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Nicolas Economou / NurPhoto via Getty Images

To Matthew Roed, social security looks a lot less promising than the money he hid in his BitcoinIRA.

Roed is a registered nurse who lives in Golden Valley, Minnesota, and says he spent 16,000 hours researching everything related to Bitcoin. His conclusion? Investing in the cryptocurrency is key to a good retirement, and the best way to do it is with a tax-free, self-managed individual retirement account, or IRA.

“With Bitcoin legally classified as owned by the US government and my crypto being inside an IRA, I knew I would greatly reduce my taxable expenses due to the exponential growth,” said Roed.

At today’s prices, the risk has so far been worth it.

The MBA graduate, father and husband initially invested $ 30,000 in his BitcoinIRA. Right now he says his retirement portfolio is up to $ 250,000,

Even though it fell below its high of $ 500,000, Roed still feels vindicated in his belief that Bitcoin is the future.

“Nobody wanted to listen to me back then, not even my own family,” he said. “I got withdrawn and used my frustration to push more and more to get involved in this market.”

RN Matthew Roed of the Courage Kenny Rehabilitation Institute in Golden Valley, Minnesota.

Matthew Roed

BitcoinIRA

BitcoinIRA was launched in May 2016 and offers investors the tax benefits of an IRA as well as the returns of a risky and rewarding alternative asset class. It is similar in nature to other IRAs, except that it is funded not by gold, cash, and bonds, but rather by Bitcoin.

The company has more than 100,000 individual account holders, including customers who are only 18 years old. But Chief Operating Officer Chris Kline tells CNBC that 75% of account holders are 45 and older. “It’s not a game for young children anymore,” he said.

BitcoinIRA doesn’t just trade in Bitcoin. It now has a long list of cryptocurrencies, including Ethereum and Litecoin.

Campbell Harvey at Duke University believes diversification is the right decision.

“Having a portfolio that is exposed to a single crypto like Bitcoin doesn’t make sense because while Bitcoin is currently the most important, its share of the total capitalization of cryptos has decreased over time. There are so many other tokens out there, “Harvey said.

When CNBC first profile BitcoinIRA in 2017, it was serving $ 6 million in transactions for 700 account holders. This month it exceeded $ 1.5 billion in all-time transactions.

There were also far fewer crypto-retired players. The market is now inundated with options.

A recent survey of financial advisors shows a clear shift towards cryptocurrencies. Of the 500+ financial advisors included in the report, 14% said they use or recommend cryptocurrencies to their clients now, up from less than 1% in 2019 and 2020.

The IRA custodian Kingdom Trust offers users the ability to diversify into 20 different cryptocurrencies. CEO Ryan Radloff tells CNBC that $ 2 billion of the $ 17 billion it holds for customers is now in cryptocurrency. That’s $ 350 million a year ago.

“The number of people interested in adding Bitcoin to their retirement plans is growing exponentially,” said Radloff. “People don’t want zombie retirement accounts that only allow you to invest in three target funds. They want more choice in what to do with their hard-earned money, and they want access to hard assets that will increase “in value over the long term.”

IRA vs. Roth IRA vs. 401 (k)

Crypto-backed retirement portfolios may grow in popularity quickly, but there are still some major limitations.

For one, while there are several ways to invest your savings for retirement – be it an employer-sponsored 401 (k) or a Roth IRA – very few of these vehicles actually allow for an alternative asset like gold or crypto.

Because of this, self-directed IRAs are the primary retirement tool for holding crypto, explains Shehan Chandrasekera, CPA and head of tax strategy at crypto tax software company CoinTracker.io.

As the name suggests, you open an account with a custodian, make all investment decisions and your income is tax-exempt until you retire. Kingdom Trust and BitcoinIRA both follow this model.

“When it comes to retirement accounts, it is currently Bitcoin IRAs, IRAs, IRAs,” said Tyrone Ross, CEO of Onramp Invest. Onramp sells software that helps financial advisors track clients’ cryptocurrency investments.

“Because it’s considered property by the IRS … that’s why you see the IRA self-directed space explode,” Ross continued. “There are a lot of regulations that have to be met before you get into the 401 (k) room.”

There are exceptions. A small 401 (k) provider called ForUsAll announced last month that it is now allowing attendees to split up to 5% of their retirement savings into 50 different crypto assets, including Bitcoin, that will be held and managed by Coinbase.

Companies like BitWage and Digital Asset Investment Management are also trying to incorporate crypto into traditional employer retirement plans.

But Chandrasekera says that “in general, 99% of the 401 (k) plans don’t offer bitcoin services,” so there is still a way to go before bitcoin hits mainstream retiree platforms.

For example, Fidelity tells its clients that retail brokers cannot buy or sell cryptocurrencies on Fidelity, although theoretically they can get into Bitcoin trading through crypto-related companies that trade in the public markets. The same goes for Charles Schwab.

Read more about cryptocurrencies from CNBC Pro

Volatility risk versus tax savings

Roed spoke to CNBC after completing a 14-hour night shift. In those hours after work, the rehabilitation staff nurse spends most of her time researching ways to invest in cryptocurrencies.

One reason he chose BitcoinIRA had to do with the company’s staking program. Roed lends his bitcoins to third parties in exchange for an annual percentage rate of return (APR) for the risk. “That’s about 2% a year,” he said.

This helps offset the $ 240 annual account fee plus the average transaction fees of 1% to sell and 5.5% to buy.

Kline says customers can see up to 6% annual percentage return on cash and cryptocurrencies, which helps offset fees.

Another important consideration? Bitcoin’s volatility.

The world’s most popular cryptocurrency trades at around half its value in April.

“We don’t see this volatility in the stock market, for example,” said Harvey.

“It is naive to believe that Bitcoin will just keep rising. There will be a limit and people need to think about that carefully, ”he said.

In addition to the risks of volatility, the Securities and Exchange Commission has also warned of the risk of fraud in participating in self-directed IRAs that trade in cryptos.

But Kline remains optimistic. He led CNBC through a case study of a customer who bought about $ 1.5 million worth of bitcoin in April 2020 when the token was trading at about $ 7,335. At today’s value, his investment is worth well over $ 6 million.

BitcoinIRA case study

date quantity Unit price Total bought Current unit value Current total value
April 9, 2020 193,295 BTC $ 7,335 $ 1,417,859 32,416 6,265,850

But ultimately, Kline says it’s the tax break that makes BitcoinIRA a slam dunk for those looking to trade cryptos.

If an average income taxpayer were to sell his Bitcoin today, he would not pay any taxes on the crypto held in his BitcoinIRA. If it were in a Coinbase account, the same person would pay a short-term capital gains tax of 22% or a long-term stake of 15%.

“Pretty straightforward quantitative reasoning for placing an asset like Bitcoin in an IRA environment,” said Kline.

FIX: This article has been updated to show that nurse Matthew Roed spent 16,000 hours researching cryptocurrencies, not 160,000 hours. It also clarifies that 75% of BitcoinIRA account holders are 45 years or older.

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Cryptocurrency

Ethereum, Litecoin, and Ripple’s XRP – Daily Tech Analysis – July 24th, 2021

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ether

Ethereum gained 4.99% on Friday. After gaining 1.43% on Thursday, Ethereum ended the day at $ 2,125.81.

A bullish start to the day saw Ethereum climb to a mid-morning high of $ 2,094.46 before turning back into reverse.

Ethereum broke the first major resistance level at $ 2,065 before falling to an intraday low of $ 1,948.68 in the late afternoon.

The reversal caused Ethereum to break the first major support level at $ 1,967.

However, when Ethereum found late support, it rebounded to a late intraday high of $ 2,131.51.

Ethereum broke the first major resistance level and the second major resistance level at $ 2,105, ending the day at $ 2,120.

At the time of writing, Ethereum is down 0.34% to $ 2,118.50. After a mixed start to the day, Ethereum rose to an early morning high of $ 2,131.48 before falling to a low of $ 2,107.64.

Ethereum left key support and resistance levels untested early on.

For the coming day

Ethereum would have to avoid the $ 2,084 pivot to bring into play the first major resistance level at $ 2,173.

However, for Ethereum to break out of Friday’s high at $ 2,131.51, it would require support from the broader market.

Aside from an extended crypto rally, the first major resistance level and resistance at USD 2,200 would likely limit any uptrend.

In the event of a large-scale crypto rally, Ethereum could resist a pullback at $ 2,300. The second major resistance level is at $ 2,221.

A drop in the $ 2,084 pivot would bring the first major support level into play at $ 2,037.

However, apart from a lengthy sell-off, Ethereum should stay away from under $ 1,900. The second major support level at USD 1,948 should limit the downside.

Look at the technical indicators

First major support level: $ 2,037

Pivot level: $ 2,084

First major resistance level: $ 2,173

23.6% FIB retracement level: $ 3,369

38.2% FIB retracement level: $ 2,740

62% FIB retracement level: $ 1,725

Litecoin

Litecoin rose 2.93% on Friday. After gaining 2.44% on Thursday, Litecoin ended the day at $ 124.28.

The story goes on

After a mixed start to the day, Litecoin fell to the intraday low of $ 117.06 in the late afternoon before moving.

Litecoin found support at the first major support level at $ 117 and rose to a late intraday high of $ 125.06.

Litecoin broke the first major resistance level at $ 123 and ended the day at $ 124.

At the time of writing, Litecoin was up 0.21% to $ 124.54. A mixed start to the day resulted in Litecoin falling to an early morning low of $ 123.91 before rising to a high of $ 124.79.

Litecoin left key support and resistance levels untested early on.

For the coming day

Litecoin would have to avoid the $ 122 pivot to bring the first major resistance level into play at $ 127.

However, for Litecoin to break out of Friday’s high at $ 125.06, it would require support from the broader market.

Aside from an extended crypto rally, the first major resistance level would likely limit any uptrend.

In the event of a prolonged breakout, Litecoin could test the resistance at $ 135. The second major resistance level is at $ 130.

A fall through the $ 122 pivot would bring the first major support level into play at $ 119.

However, apart from another lengthy sell-off, Litecoin should stay away from below $ 110. The second major support level at $ 114 should limit the downside.

Look at the technical indicators

First major support level: $ 119

Pivot level: $ 122

First major resistance level: $ 127

23.6% FIB retracement level: $ 178

38.2% FIB retracement level: $ 223

62% FIB retracement level: $ 296

Ripple’s XRP

Ripple’s XRP rose 2.62% on Friday. After gaining 3.99% on Thursday, Ripple’s XRP ended the day at $ 0.60913.

A bullish start to the day caused Ripple’s XRP to soar to an early morning high of $ 0.60858 before going into reverse.

Ripple’s XRP fell below the first major resistance level of $ 0.6104 and slid to a late afternoon intraday low of $ 0.57556.

To bypass the first major support level at $ 0.5688, Ripple’s XRP rebounded to a late intraday high of $ 0.61004 before falling again.

The first major resistance level at $ 0.6104 pushed Ripple’s XRP back at the end of the day.

At the time of writing, Ripple’s XRP is down 0.21% to $ 0.60787. A mixed start to the day resulted in Ripple’s XRP rising to an early morning high of $ 0.61171 before falling to a low of $ 0.60469.

Ripple’s XRP left key support and resistance levels untested early on.

For the coming day

Ripple’s XRP needs to avoid the $ 0.5982 pivot to bring the first major resistance level into play at $ 0.6209.

However, support from the broader market would be required for Ripple’s XRP to break above this morning’s high at $ 0.61171.

Aside from an extended crypto rally, the first major resistance level would likely limit any uptrend.

In the event of another breakout, Ripple’s XRP could test resistance at $ 0.65 before pulling back. The second major resistance level is at $ 0.6327.

A fall through the $ 0.5982 pivot would bring the first major support level into play at $ 0.5864.

However, aside from another lengthy sell-off, Ripple’s XRP should stay away from levels below $ 0.55. The second major support level at $ 0.5638 should limit the downside.

Look at the technical indicators

First major support level: $ 0.5864

Pivot Level: $ 0.5982

First major resistance level: $ 0.6209

23.6% FIB Retracement Level: $ 0.8533

38.2% FIB Retracement Level: $ 1.0659

62% FIB Retracement Level: $ 1.4096

Please let us know what you think in the comments below.

Thanks, Bob

This article was originally published on FX Empire

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