Ethereum's "bubble" and "investment potential"
In the past few days, there has been an argument in articles on the Internet: the current price of Ethereum has great hidden worries. This view believes that the current price of Ethereum is mainly due to the prosperity of DeFi, but it believes that the current prosperity of DeFi does not have a solid demand as a foundation. The current prosperity is mostly based on speculation. Once this speculative demand shatters, The entire prosperity will disappear like the ICO back then, so the current price foundation of Ethereum is not solid and unsustainable.
In my opinion, this point of view sees some risks, but does not see a broader qualitative change. I think that although the current price of Ethereum is related to DeFi, to some extent it is a sign that Ethereum has proved itself to be the king of the public chain.
1. Is DeFi crazy right now?
DeFi is a new thing, but it did not appear this year, but it started as early as 2017, and after nearly three years of dormancy and development, it broke out on a large scale this year. I think the most fundamental reason for its outbreak is that decentralized exchanges like Uniswap have greatly improved the user experience and greatly optimized the operating process, which has caused it to be different from what it used to be, which has led to a large number of projects being able to trade freely. List the currency, thereby attracting speculators to participate.
This is indeed a bit like the ICO of the year, but at most it is just like the situation when the ICO just broke out, but the heat is far from the level when the ICO was crazy. At present, it is only experienced players participating, and a large number of novice players are still watching outside the door. The most obvious sign is that all kinds of baiting projects have not yet become popular on a large scale, and there are only occasional imitations of star projects.
Therefore, if DeFi is currently very hot, it is at most only the initial stage of the bubble, and it is far from crazy. It is hard to predict what kind of future DeFi will develop and what will happen, but I think it will continue for at least half a year. Because so far, we can still see all kinds of new projects that are really creative. When there are no creative projects, but only a large number of air coins, that is the time when the DeFi bubble is about to burst.
Therefore, DeFi's boost to the price of Ethereum will continue for a while.
2. The siphon effect caused by the king of the public chain
In fact, apart from DeFi, I think the more important point is that the current price of Ethereum reflects the subconscious recognition of investors in the entire industry for the king of the Ethereum public chain, which has caused a siphon effect in Ethereum, and investors have abandoned what they were once optimistic about. This kind of public chain makes the funds concentrate on Ethereum.
Whether it is DeFi or the expectation of Ethereum 2.0, in my opinion, it essentially means that after the test and development in the past few years since the big bear market in 2018, people have gradually realized that Ethereum is the real king of public chains . Its competitors have fallen behind in the process of repeated hot spots and hype. The threshold formed by Ethereum is getting higher and higher, and it is almost difficult for other public chains to have any chance to cross this threshold.
We might as well look back at the history through a few data. Below I show the top ten digital currencies on January 7, 2018, January 6, 2019, and January 5, 2020:
From these three pictures, we can see the clear changes in history:
In January 2018, among the top ten digital currencies that were considered competitors of Ethereum were: ADA, NEM, Tron, Stellar Lumens and IOTA (EOS had not yet been born).
And one year later, in January 2019, the most promising EOS was added to the top ten Ethereum competitors, and ADA, NEM, and IOTA were eliminated.
Another year later, in January 2020, among the top ten Ethereum competitors, only EOS remained, and all the so-called "competitors" were eliminated.
And now, among the top ten Ethereum competitors, even EOS has been eliminated, leaving only ADA, which has returned to the light.
in this case,
in this case,Of course, investors will no longer disperse funds to invest in other public chains, but will definitely focus on Ethereum. And this is the most fundamental, the most driving force and the most sustainable factor.
Of course, there are still some investors who have illusions about other public chains, but I think these investors will wake up sooner or later, and they will rush to the express train of Ethereum, so the price of Ethereum will continue to rise.
3. The current price is less than one-third of the historical peak
In the big bull market in 2017, the price of Ethereum was as high as nearly $1,400. The current price of $400 is less than a third of the previous peak, so in any case, in my opinion, this price is hardly a big worry. Even if an accident does happen and Ethereum falls back again, it will be a good thing for us long-term investors-we have more time and opportunities to make regular investments.
