Some traders assume that Bitcoin (CCC:BTC-USD) is the gold standard among cryptocurrencies. There might be merit to that claim, but let’s keep an open mind. Ethereum (CCC:ETH-USD) also deserves a place in your crypto portfolio — and you can buy some at a discount, as the price of Ethereum dropped hard recently.
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Don’t get me wrong – the price is still higher than it was a year ago. Actually, you could say that about the most popular cryptocurrencies in general, since they tend to move together.
So, why should you invest in Ethereum in particular? As we’ll explore, this digital token could actually exhibit a level of stability that Bitcoin doesn’t.
Establishing stability is important because cryptocurrency is sometimes considered to be too speculative to take seriously as an investment. Now, let’s start off with a little bit of technical analysis and see if we can detect any noteworthy price patterns.
A Closer Look at the Ethereum Price
It’s amazing to consider that around a year ago, during the onset of the novel coronavirus crisis, the Ethereum price actually fell below $100.
In hindsight, we now know that $100 would have been a terrific buy-up price. We might never see that price again, and prospective ETH owners must now consider whether to buy it in the quadruple digits.
The price didn’t reach $1,000 in 2020, but Ethereum did achieve that milestone in early January of 2021. And on Feb. 20, the price briefly touched the important $2,000 price point.
But then, a sharp multi-day pullback happened. On the morning of March 1, the price was slightly above $1,500.
There didn’t seem to be any Ethereum-specific news that would cause such a sharp price drop.
Evidently, a bout of profit taking occurred within the broader cryptocurrency space, and that seems to have impacted the price of ETH.
A Surprisingly Stable Coin
If Bitcoin has a reputation for volatility, then perhaps Ethereum should be known as a more stable cryptocurrency.
It’s true that both Bitcoin and Ethereum are decentralized digital tokens, and that they’re both based on blockchain technology.
However, ETH is known for storing smart contracts, which are basically programs that run on the Ethereum blockchain.
And, according to researchers Ayana T. Aspembitova, Ling Feng and Lock Yue Chew, that’s not the only thing that sets the currency apart.
In a journal article titled “Behavioral structure of users in cryptocurrency market,” the researchers observed behavior-based differences between the two most popular cryptocurrencies:
“… being the first cryptocurrency, bitcoin has been widely used for speculative purposes… the behavior of ethereum users is observed to be more stable as these users are more optimistic of the market. In contrast, the behavior of the bitcoin users tend to fluctuate according to the trend of the market, with a loss of optimism when the market goes down.”
A State of Profit
That’s an outcome which some folks might not have expected. Yet, I must admit that in my observation of Bitcoin versus Ethereum, the latter token does seem to exhibit less price volatility.
And here’s some more research to add to your arsenal. As reported by Nairametrics, the number of Ethereum Percent Addresses in a state of profit was recently recorded to be 96.374%.
In other words, slightly more than 96% of the circulating ETH supply is currently in a state of profit. And, that number represents a one-month low.
So, even after a major price correction, it’s probably safe to conclude that the majority of Ethereum holders are profitable. I’ll acknowledge that if you chased the price near $2,000, your timing wasn’t necessarily ideal.
Yet, there’s hope for a full recovery. You should expect volatility for any cryptocurrency. Thankfully, Ethereum might be less risky than some other coins.
The Bottom Line on Ethereum
Price fluctuations will occur, and that’s a normal part of cryptocurrency investing.
If anything, the price drop in ETH should be viewed as an opportunity. And among the most popular digital tokens, Ethereum could perhaps be a comparatively stable holding.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.