Blackrock's iShares Ethereum Trust ETF (ETHA) tracks the spot price of cryptocurrency Ethereum (ETH). With an expense ratio of 0.25%, it's competitively priced in a crowded Ethereum ETF market. Some companies such as Fidelity offer a similar product with lower fees, but I've had success with Blackrock products so I'm sticking with the organization I'm familiar with. Much like the popular SPDR Gold Trust (GLD) which tracks the spot price of gold, the iShares Ethereum Trust is held in a stock brokerage account and protected by SIPC (Securities Investment Protection Corporation), unlike traditional crypto accounts which are not FDIC or SIPC insured. Although the ETF trades only during market hours, plus the pre and post market, its net asset values will increase and decrease 24/7. The only problem here for investors is that you can't increase or reduce your positions if opportunity presents itself off hours like you can with crypto exchanges.With the New York Stock exchange considering expanding hours to nights and weekends, it may not be long before all Securities and ETFs trade in an always on universe. But first, a little background.
In recent years, investors have experienced a similar implosion to the DOTCOM bust in the cryptocurrency market. This was brought on by the euphoria of get rich quick schemes, then everything came crashing down by the fraud of Sam Bankman-Fried and the failure and bankruptcy of his centralized cryptocurrency exchange FTX. Although crypto "blue chips" Bitcoin (BTC) and Ethereum have rebounded somewhat since the free fall began in late 2021 until mid 2022, alt coins have languished. Many down as much as 80% if they were lucky enough to survive. Although Blockchain and Web3 technologies are here to stay, they're not quite ready for prime time, or are they? In the past month, California's Department of Motor Vehicles put 42 million car titles on a blockchain to fight fraud. In addition, the banking industry is beginning to tokenize assets. Tokenization is when you digitize sensitive information such as social security numbers and account information to be placed on a blockchain. Lastly is the porn industry which now accepts crypto payments. Finance and pornography are usually ahead of the curve in adopting new technologies. Mainstream adoption is soon to follow.
I'm not new to cryptocurrency. I drank the crypto Kool-Aid in the early 2020's and opened a Coinbase (COIN) account during the market's steep decline when the carnage paused. I was trying to obtain a fair price for alt coins that had dropped 50% and more. After the lull, crypto prices kept dropping, so I was severely underwater with my speculative investment. If an asset drops 50% from its high and you buy it, you still lose half of your money if it drops another 25% from the pinnacle. I tried catching a falling knife when I thought the coast was clear and was subject to bad timing. One of my investments was Chainlink (LINK) , a utility coin that connects blockchains to external databases. I thought I had a winner with Chainlink and still believe it has a bright future, but it never got in gear during the current "crypto winter". I tend to keep my investments for at least five years if I believe in the underlying value of the company. The trouble with crypto is that you are susceptible to getting hacked and losing all your money. It kept me up at night even though it was a small part of my portfolio. I'm a Reddit enthusiast and saw too many crypto horror stories posted on the platform. Tokens lost during transfers or accounts being hacked. I recently closed my Coinbase account and put the proceeds into iShares Ethereum Trust. I'll stick with my old fashioned discount broker.
If you aren't familiar with Ethereum, it's a decentralized blockchain that allows users to do business via smart contracts. A secure digital ledger with no middleman. The mantra for Blockchain is "Code is the law", meaning technology will enforce the rules. Bottom line for Ethereum end users is that it saves money. No wonder established financial corporations are flocking to it. Plus, blockchain is the next iteration of internet database technology. You can't fight the future. The future always wins. Ethereum is the second largest cryptocurrency only behind Bitcoin in market capitalization. As of this writing, that market cap is approximately $309 billion, up almost 50% from the year prior. It's only going to get larger. It is the leading blockchain by monthly active developers so the grassroots programmers believe in it.
The only caveat I have with the technology is not if it will be adopted, but will it become a profitable investment? If you go back to the DOTCOM craze, the Linux Operating System was an open source technology that was supposed to be superior and universally deployed. Although it was a smashing success and maintains a dominant position in server operating systems, it wasn't profitable because it was open source. Red Hat, since acquired by IBM, was the only company that was successful.
Ethereum reached its all time high of $4,878 in mid November of 2021. It currently trades about $2,500 so it needs to double to get back to its previous price. There's no industry consensus for price prediction. The pundits primarily use technical analysis for price extrapolation, a valuation style I'm not wild about, but the algos that run the markets use technical analysis so I'm stuck with it. I used the AI app Perplexity to research Ethereum price predictions for 2030, and the ball park figure is about $10,000. You'd quadruple your money from today's price although some figures were much lower and some were excessively higher. You never know what happens when animal spirits get involved in the market. If I could quadruple my investment in five years, I would consider that a success.
No comments:
Post a Comment