Editor's note: Bitcoin has grabbed the attention this year... But it's not the only crypto investors should be watching. Today, we'll turn things over to our colleague Stephen Wooldridge II – an analyst on the Crypto Capital team – to explain why. In this piece, adapted from a February Stansberry Digest, Stephen explores another corner of the crypto market that could see massive gains soon...
The Overlooked Crypto 'Surge' You Should Understand By Stephen Wooldridge II, analyst, Crypto Capital
Bitcoin has been making all kinds of headlines... And for good reason. Just last month, bitcoin's price hit $73,000, an all-time high. That's already a roughly 387% gain from a low of less than $15,000 in late November 2023. Bitcoin is still king of the crypto landscape. What is formally referred to as bitcoin's native coin, BTC, makes up half of the total crypto market cap of around $2.4 trillion. But an entire world of cryptos exists beyond bitcoin. And today, I'll share a few reasons to be bullish about the biggest part of it. Tens of thousands of alternative crypto coins ("altcoins") are out there, and possibly more not yet widely recognized. Each has its specific use and case for growth. But one stands above the rest...
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I'm talking about Ethereum (ETH), the second-largest crypto. ETH makes up around 15.4% of the total crypto market cap. It's trading above $3,000 as I write, near a two-year high. As a general comparison, bitcoin is an exchange-of-value blockchain. The main purpose of bitcoin is to be used as a store of value, so it can be exchanged for goods and services. Bitcoin's value is directly affected by its scarcity. There will only ever be 21 million BTC in the world. It's baked into its code to happen over time, with the final BTC coin being created in the year 2140. In the meantime, as we get closer to that maximum supply, demand for more BTC will push its value higher among those who hold or want to hold it. But Ethereum works differently. It's still a blockchain, similar to bitcoin. But there are some key differences... Again, BTC is mainly an exchange of value and incentivizes people to mine the coin and secure the network. By contrast, ETH is used to secure the blockchain through "staking" mechanisms that lock it up. It's also used to develop specialized applications built on top of the blockchain. You see, Ethereum is like a playground for crypto developers. It lets them launch their own Ethereum-hosted cryptocurrencies – called "tokens" – without needing to create and run their own blockchains. That process would require building security and scalable technology from the ground up... as well as spending resources to run expensive equipment and garnering enough interest to make the blockchain fully decentralized, secure, and viable. Put simply, these tokens have the security and decentralization features of Ethereum while each having its own functionality. These include tokens linked to decentralized finance ("DeFi") applications... stablecoins like Tether (USDT) that are pegged to the U.S. dollar... the Basic Attention Token (BAT) that pays you for watching ads on the Brave Browser... or the Decentraland (MANA) token that powers an entire metaverse of virtual land plots. This functionality is automated by smart contracts. That means the code can self-execute commands set in advance, quickly and efficiently. For example, say you want to trade some ETH for another crypto, such as a crypto pegged to the U.S. dollar like USD Coin (USDC). You'd head to a decentralized exchange, type in how much ETH you want to trade, and sign a transaction (which is a fancy way of saying push a button in an app or through your browser). This swap will happen automatically, without the need for any third-party approval. That's all thanks to the automated nature of smart contracts. And unlike other automated online transactions, blockchain technology allows you to fully own the assets in your wallet (or account) in a decentralized way... meaning that no one else is given access. Unlike traditional banks or digital-payment companies, blockchain is hacker-proof, fully transparent, and run by the community that uses it. No one can lock you out of your account, charge you surprise fees, or gatekeep your information and transaction history. You have full control. Ethereum has been a massive success since it launched in 2015. Hundreds of thousands of tokens have been built on its chain. Many other blockchains that support smart-contract technology have popped up over the years... But Ethereum has always stood out as something special. It has a huge following of users, developers, and investors to back it up – which of course gives its blockchain an advantage over others. And now, something massive is on the horizon for the Ethereum blockchain... It's a hefty upgrade called the "Surge." And as the name suggests, I believe it'll push the crypto market's value even higher as everyone wonders what's next for ETH. You see, Ethereum is a once-in-a-lifetime innovation in technology... But it's not perfect. It's slow compared with traditional finance, it's expensive to use, and it's not scalable for adoption on a massive scale. Perhaps you've experienced this yourself. When Ethereum trading is experiencing heavy volume, sometimes "gas fees" – much like trading fees – can soar. And transactions can take much longer than usual. As I wrote in a 2022 Digest... You see, every transaction on a blockchain costs a fee. This "gas" fee goes to miners or validators who keep the blockchain running. This fee is paid even when a transaction fails. Gas fees can vary wildly by hour, transaction, and blockchain. For example, on Ethereum... making a swap on an exchange can sometimes cost hundreds of dollars. The gas fee may even overshadow the amount you're swapping. To fix this, developers have been working on a massive Ethereum 2.0 upgrade – one that's still in its early stages... Basically, Ethereum has been making some changes. First, it changed its consensus mechanism – which is how it guarantees the authenticity of its transactions – to a new Proof-of-Stake ("PoS") model in late 2022. Before that, it used a Proof-of-Work ("PoW") model (like the one bitcoin uses). The main thing to know is that this move was designed to fuel Ethereum's mass adoption. It made it more scalable and user-friendly. But this change only took it so far. Ethereum's 2022 upgrade – known as the "Merge" – made the blockchain more secure and energy efficient. It also made the ETH token a deflationary asset, reducing its supply in the long run and bringing more buyers to the crypto market. And now, the first part of Ethereum's next big upgrade, the "Surge," may be fully released sometime in the next couple of months... The Surge is set to bring Ethereum's transaction fees significantly down, while increasing its transactions per second from 30 to 100,000 and beyond. It's all possible thanks to a novel "rollup" technology that bundles transactions together. This way, the network can process them more quickly – saving users time and money. Plus, in the Surge, Ethereum is taking this a step further by introducing the concept of Proto-Danksharding... This attaches rollup transaction data in the form of temporary "blobs" to Ethereum blocks. (The name comes from the Ethereum researchers who proposed the idea: Dankrad Feist and a developer who goes by the pseudonym "Protolambda.") This data only lasts for one to three months. But the result is that transactions become more efficient and much cheaper. Eventually, Danksharding will move out of its "proto" phase to make Ethereum fully scalable and extremely economical to use. While the full release of the Surge across the Ethereum network still has no official release date, the first part of this upgrade, called "Dencun," launched on March 13... The Dencun upgrade gave a huge boost to Ethereum's transactions per second and scalability. It has made Ethereum more widely available to investors and developers alike... which increases Ethereum's utility and inherent value. And more people using Ethereum means the cryptocurrency will command a higher price. If it rallies to its previous all-time high of $4,815, Ethereum's price stands to rise 56% from where it is today... And it may move much higher. In the future, Ethereum has more rhyming upgrades lined up – specifically, the "Scourge," the "Verge," the "Purge," and the "Splurge." These upgrades will bring Ethereum into its finalized state of Ethereum 2.0, making it scalable for a mass audience... But along the way – and before all of these proposed upgrades are fully realized – I expect Ethereum will become a household name in the mainstream, similar to bitcoin. We're already seeing momentum around the world's second-largest crypto by market cap, as investors wait for the U.S. to approve Ethereum spot exchange-traded funds. Now that bitcoin funds have been approved, that's looking more likely. But Ethereum's price could soar much higher, whether those listings happen or not. And the improvements in the Ethereum network alone are worth betting on. So don't wait for upgrades like the Surge to cement Ethereum's place as the top crypto for building practical applications. Now is a good time to consider adding exposure to Ethereum. Good investing, Stephen Wooldridge II
Editor's note: Friday could be the biggest day in crypto history. According to Crypto Capital editor Eric Wade, the once-in-four-years event that will take place on April 19 could spark the largest crypto mania to date... And bitcoin won't be the only winner. Eric believes three tiny coins could soar up to 5,000% as a result of this change. This isn't an opportunity you want to ignore... Click here to learn how to position yourself today. Further Reading It's easy to feel overwhelmed by the crypto universe. You might think it's too "complicated" to invest in. But that shouldn't be a reason to ignore it today. In fact, crypto's complexity is partly what creates the opportunity for investors... Read more here. The crypto markets have climbed to new highs this year. Some folks are starting to think a pullback is likely, according to one measure. Here's what investors are missing about this signal – and the risk they should be focusing on instead... Learn more here. |
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