Investments in cryptocurrency have attracted a lot of attention lately, in part due to the huge returns that some, such as Ethereum (ETH) have generated.
In this relatively new realm of cryptocurrency, Ethereum is certainly one of the main options. A recent Bankrate survey found that 49% of Millennials, 37% of Generation X and 22% of Baby Boomers are comfortable investing in crypto assets. In fact, an increasing number of people are considering cryptocurrencies in their retirement portfolios. Should Ethereum be part of your investment strategy and could it help you retire early?
Stratospheric rise
Since Ethereum launched in 2015, it has been a race to the top. When it debuted in August 2015, an Ether token was trading at $ 2,77 in value and immediately dropped to $ 0,75 the next day. Today, an Ether token is worth over $ 4.600.
So, if you had invested $ 100 in Ethereum in August 2015 at $ 0,75 per token, you would have bought about 134 tokens. Those 134 tokens would be worth around $ 600.000 today, as each is currently trading at a price of around $ 4.660 as of noon on November 30th. If you had invested in it when it was valued at around $ 1 per token, you would certainly be well on your way to retiring sooner. But there's no point in crying over spilled milk, as most people have.
Also, keep in mind that Bitcoin was at around $ 8.000 per token in early 2020 and less than two years later it's close to $ 60.000.
The question now is: should you invest in Ethereum and, if so, how much?
Can you count on it?
With just one token now trading at around $ 4.660, you don't have to invest that much. You can invest in Ethereum through exchanges or digital wallets for any amount you want, investing in a percentage of an ether coin.
However, investing in this relatively new asset class carries risks. While Ethereum is the second largest cryptocurrency in the world, there are many new competitors who will be looking to eat its market share with faster and more efficient platforms. However, it should be noted that Ethereum is in the process of developing Ethereum 2.0, which should make it more secure, scalable and sustainable.
There are also regulatory concerns, as the US Congress has mulled over the oversight of cryptocurrency, so future legislation or regulations could have an impact.
Investors should also be prepared for wild short-term volatility as this new sector remains highly speculative. On the other hand, the industry, and Ethereum in particular, shows great promise, as many believe that blockchain technology will play an important role in the future of the technology.
Given the uncertainty, it is not recommended to risk large portions of your Ethereum or any other cryptocurrency assets. But it could be something to consider as an aggressive growth option in a diversified portfolio. An allocation of up to 5% might be fine for those with a high risk tolerance, but don't invest more than you can reasonably afford to lose.
As for early retirement, investing in a diversified portfolio can get you there with patience and commitment.
