THE price of Ethereum soared to a record high of $3,000 yesterday afternoon, in turn quadrupling its value in 2021.
But what exactly is Ethereum and why is it going up in value? We explain what you need to know.
But first, a word of warning: buying cryptocurrencies as well as stocks and shares is a very risky business.
Investing is not a guaranteed way to make money, so make sure you know the risks and can afford to lose the cash.
Cryptocurrencies are highly volatile, so your cash can go down as well as up in the blink of an eye – you can lose all the money you put in.
Plus, some products and cryptocurrency services are very complex to understand. You should only invest in things you understand.
There is also no guarantee that you'll be able to convert cryptoassests back into cash, as it may depend on the demand and supply in the existing market.
Fees and charges may also be higher than with regulated investment products.
We know that crypto firms may also overstate the returns or understate the risks. Be careful.
What is Ethereum?
Ethereum is a cryptocurrency that was released in 2015. It's the second largest after Bitcoin.
In fact, some experts believe it has the potential to one day overtake Bitcoin as the dominant coin in the market.
5 risks of crypto investments
THE Financial Conduct Authority (FCA) has warned people about the risks of investing in cryptocurrencies.
- Consumer protection: Some investments advertising high returns based on cryptoassets may not be subject to regulation beyond anti-money laundering requirements.
- Price volatility: Significant price volatility in cryptoassets, combined with the inherent difficulties of valuing cryptoassets reliably, places consumers at a high risk of losses.
- Product complexity: The complexity of some products and services relating to cryptoassets can make it hard for consumers to understand the risks. There is no guarantee that cryptoassets can be converted back into cash. Converting a cryptoasset back to cash depends on demand and supply existing in the market.
- Charges and fees: Consumers should consider the impact of fees and charges on their investment which may be more than those for regulated investment products.
- Marketing materials: Firms may overstate the returns of products or understate the risks involved.
It was founded by eight people, one of which is 27-year-old cryptocurrency "celebrity" Vitalik Buterin.
Ethereum is also a ledger technology – using “blockchain”, like Bitcoin – that companies are using to build new programmes.
A blockchain is where encrypted data can be transferred securely, making it nearly impossible to duplicate or counterfeit.
This ledger is the foundation of any cryptocurrency transaction.
E Toro writes that cryptocurrency allows people to trade currency or assets digitally outside of any government or bank.
Why is it going up?
Ethereum has rocketed in value over the course of this year.
Yesterday it reached a record-breaking high of $3,000 – up nearly 1,500% since this time last year.
It has climbed even further today to $3,305 at the time of writing according to CoinMarketCap.
It came following a report that the European Investment Bank (EIB) could launch a digital bond sale on the Ethereum blockchain network.
The startling rise means Bitcoin is no longer the cryptocurrency king after being outshone by underdog Ethereum.
Investors are betting that ether will be of ever greater use in a decentralised future financial system.
The cryptocurrency enjoyed record highs every day last month.
On April 1, Ethereum started at $1,958 (£1,404) and rose to $1,978 (£1,419).
James Quinn, managing director at Q9 Capital, a Hong Kong cryptocurrency private wealth manager, said Ethereum's rise is also down to a number of other factors.
These include improvements made to the ethereum blockchain, and agrowing shift towards “DeFi”, or decentralised finance, which refers to transactions outside traditional banking for which the ethereum blockchain is a crucial platform.
Brits are being warned they risk losing all of their money if they invest in bitcoin and other cryptocurrencies.
It comes after a ban on some crypto-related investment products.
From Dogecoin and Litecoin to Bitcoin – here are the different cryptocurrencies explained.
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