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Ethereum is the most exciting project in all of cryptocurrency. Period. Its smart contracts enable blockchain to be a disruptive technology across many industries. We see it now with defi, but this is only scratching the surface, and the price of ether is poised to go up, up, up as adoption and use cases increase.
Let’s look at the current state of things.
While I'm writing, the price of ether (ETH) is just above $2,000, which is about half its all-time high of $4,000. Ethereum’s market cap is at $250 billion compared to Bitcoin’s $634 billion.
There’s a lot of emphasis and attention on the short-term beating that cryptocurrency markets have been experiencing — this accounts for the 50% fall that ether took from its all-time high — but zooming out, we find that there is still tremendous upward momentum. ETH was just $300 in July 2020; should anyone be disappointed to see it “down” to $2,000 one year later?
The future is bright. August will bring the London hard fork. This upgrade is expected to reduce fees, which has been a huge growth inhibitor. (And consider the growth Ethereum has seen despite these fees!) The move to proof of stake will further reduce fees in the coming months, and then attention can turn to improving scalability via known layer-2 solutions like rollups and sharding.
And let’s not forget Vitalik Buterin, Ethereum’s visionary co-founder. He’s imploring the community to move beyond copying and cloning existing defi apps to make more of the same and instead innovate and push into new territories. He calls out social media and identity as areas that are ripe for takeover. He aspires greater things for Ethereum than to line his own pockets, and he will drive the community toward those aspirations.
It’s already seen incredible gains, but there’s plenty of room to grow. That’s what makes Ethereum an exciting opportunity right now — and there are several ways to capitalize on its current state. Before I get into those, I’d like to remind you that I’m not a financial advisor, and this isn’t financial advice. I’m a crypto hobbyist/enthusiast, and I’m sharing my perspectives for your entertainment.
Okay, this first method isn’t very exciting, but it’s low risk and guaranteed to make you money as long as the price of ether goes up. It’s the classic crypto formula: buy crypto, hold it, make money.
I mentioned before that ETH was $300 a year ago. That means you’d be sitting on a 700% gain right now. If you buy now at $2,000 and it returns to its all-time high of $4,000, that would be a 100% gain. If Ethereum passes Bitcoin’s current market cap value of $634 billion, its price would be around $5,000. If the market cap goes to $1 trillion (a milestone Bitcoin has already touched), the price will be $8,000 — 400% more than today.
As long-term goals, these feel conservative, so hodling is a perfectly valid strategy for making money.
Ethereum’s move to proof of stake gives holders an opportunity that Bitcoin doesn’t offer: staking. Validators replace miners, and validators are rewarded for confirming transactions. Validators provide tokens as collateral, and the network selects which validator gets to confirm each transaction. More tokens means a higher chance of being selected, and being selected more means more rewards. Holders who do not wish to be validators can delegate their coins to validators to earn a share of rewards.
Proof of stake is live on Ethereum’s testnet, which means that even now, while the mainnet is still proof of work and reliant on miners, holders can stake their tokens to begin earning rewards.
Being a validator yourself requires 32 ETH, which most people don’t have, but there are more accessible ways to stake with less. Coinbase and Kraken, for example, allow you to stake ETH to earn about 5%, but your coins will be locked until the next phase of the Ethereum 2.0 roadmap.
My preferred staking option is with Guarda, and there are two ways to do it. You can take your ether directly to them and exchange 1:1 for GETH, or — better — you can swap ETH for GETH on Uniswap at rates ranging from 1:1 to 1:1.5.
Guarda delivers staking rewards to GETH holders each month by depositing them directly to your wallet, which is fun and something I look forward to. Like Coinbase and Kraken, you can’t redeem GETH for ETH 1:1 until the next phase of Ethereum 2.0, but you can swap GETH for ETH on Uniswap at any time if you wanted, albeit at a rate less than 1:1.
Guarda deposits staking rewards each month
Staking gives you an extra ~5% on top of the growth in value of ETH itself, and the GETH swap can give you an extra “one-time bonus” as long as you’re willing to hold until you’re able to swap back to ETH 1:1 through Guarda.
A third option is to store your ether in a place where it will gain interest, and there are many options. Celsius, BlockFi, and Nexo are the big names that come to mind, and they all operate the same way: deposit funds, earn yield.
These companies often seem to attract controversy, though, and their rates fluctuate but stay close to staking rates (4–6%). The advantage is that there’s no conversion, so your ETH stays ETH, and it’s easier, in my opinion. A good staking hybrid approach is to use these interest-earning accounts as a staging area. Earn interest as you accumulate ETH, then withdraw to your wallet once you have enough that you want to stake.
If you don’t want to stake, but you’re also concerned about the legal dark clouds gathering above Celsius and BlockFi, give Gemini a look. I love the Winklevosses regulation-minded approach. Their Earn accounts will only get you about 2%, but their willingness and desire to play by the rules means less risk for investors.
It should come as no surprise that defi projects can help you increase your holdings, and there are countless ways to do it. I’ll offer you two ways to do it, and ironically, they are both on Harmony rather than Ethereum due to Ethereum’s current high transaction fees.
Harmony made an interesting decision to not “wrap” tokens coming from Ethereum or Binance Smart Chain to a common token. Instead, you have other-chain-specific versions. USDC that comes from Ethereum can be thought of as ethUSDC, whereas USDC that comes from Binance Smart Chain will be bscUSDC.
When you provide asset pairs to liquidity pools, there is a risk of impermanent loss when the values between the two assets diverge too much. However, Harmony’s decision to treat tokens from different sources as different assets creates a situation where you can provide an asset pair of the “same” asset, allowing you to collect fees from users that are swapping between the two.
ViperSwap has cleverly decided to incentivize providing liquidity to these pools in a feature they call BridgePools, and their Ethereum BridgePool currently has an APR of approximately 35%.
The Ethereum BridgePool on ViperSwap
To participate in this BridgePool, you must first obtain equal amounts of Ethereum-based ETH (1ETH) and BSC-based ETH (bscETH), then deposit them to the 1ETH-bscETH liquidity pool. At this point, your holdings will already be growing due to fees from swaps, but you can deposit your liquidity pool token to the BridgePool to earn additional rewards in the form of VIPER tokens.
Of course, that’s the risk here: we don’t know what the value of VIPER will be or how it will compare to ETH. Still, you can take those VIPER rewards and convert them to ETH, then compound, stake, or do whatever else you please.
ViperSwap’s BridgePools are an interesting option, but a more “traditional” defi approach is to provide liquidity with a different token — exposing yourself to the aforementioned risk of impermanent loss — in search of even greater rewards. In that spirit, I also offer SushiSwap on Harmony as a wonderful option.
Sushi’s 1ETH/WONE pool is incentivized with both SUSHI and ONE rewards. One of the goods-and-bads of cryptocurrency is that the whole market tends to move together, like a school of fish. Smaller projects are subject to higher volatility. So, while ETH dropped 50%, tokens like Harmony’s ONE fell 66% from its high of $0.21 to $0.07, and SUSHI’s at $8 from its high of $23.
If you share my optimism for these projects, though, there is a tremendous opportunity. The 1ETH/WONE pool has an approximate APR of 90% right now, paid in SUSHI & ONE, on top of fees earned from 1ETH/WONE swaps.
The 1ETH/WONE farm on SushiSwap
Let’s make a few assumptions and crunch some numbers. First, let’s assume that all three of these projects will re-gain 50% of their lost value from their all-time highs in the next 3 months and that the Sushi farm APR will remain static.
If we invest $2,000 into this pool, it will be split into 0.5 ETH and ~14k ONE. The 90% APR will net about $450 in rewards, split into about 28 SUSHI and 3.2k ONE. So, at the end of 3 months, we’d have 0.5 ETH, 17k ONE, and 28 SUSHI.
I’m convinced that Ethereum is bound to change many aspects of the world as we know it. We already see its impact in the realm of banking and finance, but social media, identity, insurance, law, government, real estate, and countless other areas and industries will be disrupted. It’s still early, though, and ether is cheap compared to what I believe it will become — and that means there’s an opportunity.
There is undoubtedly a risk, too. No returns are guaranteed, and the right set of restrictions or events could send it all crashing to the ground. The same could be said for any investment.
If you have an appetite for the risk, the rewards could be great. Buying and holding could easily turn into 2–4x. Staking the assets could bring you 5% gains that could rival stock market expectations, even if ETH’s value remains the same. Or you could be bold and invest aggressively into defi and potentially win big.
In my opinion, the best strategy is to diversify across the approaches, liked you’d do with a traditional financial portfolio. It depends on you and your goals. I know there will also be people who think crypto is a giant Ponzi scheme or that Ethereum won’t work because there’s no hard cap; that’s okay, too — maybe it isn’t for you.
The real question to ask yourself is whether or not you believe in Ethereum’s vision. If you do, investing is a no-brainer. If you don’t, or you aren’t sure, take time to learn first. It’s still early. It’s not going anywhere. The opportunities will be around for a while.