Written by Norman Isaac Mwambazi

World’s second-largest cryptocurrency, Ethereum, surges past $4,000 for the first time

The world’s second-largest cryptocurrency known as Ether soared past $4,000 Monday to hit a new all-time record high. According to …

The world’s second-largest cryptocurrency known as Ether soared past $4,000 Monday to hit a new all-time record high.

According to Coin Metrics, Ether, which is the digital token of the Ethereum blockchain, rose nearly 7% in the last 24 hours to $4,141.99 as of 3:40 a.m. European Time. Ether now has a total market value of $476.3 billion, less than half bitcoin’s $1.1 trillion, which is the largest cryptocurrency in the world.

For years, ether has been in Bitcoin’s shadow and although it still has a long way to go to catch up with it, it has seen parabolic gains in recent months as investors look to other cryptocurrencies for returns. As Bitcoin fell over 2% in April, ether saw a 40% rise in the same month and according to CoinMarketCap, the entire crypto market is now worth over whooping $2.5 trillion on the back of growing interest in the space.

The rise of interest in cryptocurrencies has been recently fuelled by the involvement of mainstream investors and some corporate buyers. In February this year, automaker Tesla bought $1.5 billion worth of Bitcoin and the following month, the company’s CEO Elon Musk announced on Twitter that you consumers can now pay for Tesla cars by Bitcoin. Major Wall Street banks like Morgan Stanley and Goldman Sachs among other big financial companies are also exploring the possibility of providing their wealthy clients with Bitcoin exposure.

All these see the digital coin as a potential hedge against inflation as central banks around the globe print money to inject into their economies s relief from the deficiencies caused by the COVID-19 pandemic.

Although Bitcoin keeps rising and attracting big investors and companies, some investors are not yet convinced that cryptocurrency is a viable investment asset, and still have second thoughts bout adding it to their portfolio.

Michael Hartnett, Chief Investment Strategist at Bank of America Securities, said bitcoin’s surge signals the “mother of all bubbles,” while Stephen Isaacs of Alvine Capital said there are “no fundamentals with this product (Bitcoin), period.”

Ethereum vs. Bitcoin

Ethereum and Bitcoin are similar because they are both digital currencies but they have their differences.

Programmer Vitalik Buterin, 27, founded Etheruem in collaboration with several other software developers in 2013. The Ethereum network lets people build applications on top of it and uses Ether s its native currency.

Investors in Bitcoin see it as a store of value just like gold and hedge against inflation, but this is not the case with Ethereum, which aims to create some type of decentralized internet with no central authority controlling it.

Ethereum has formed the basis for an increasingly popular trend in crypto known as “decentralized finance,” which aims to recreate traditional financial products with blockchain technology, the distributed computer system that underpins many cryptocurrencies including Bitcoin, Dogecoin, among others.

Ethereum is also benefiting from the current rise of Non-Fungible Tokens (NFTs). NFTs are digital assets designed to represent ownership of unique virtual items like sports memorabilia, art, and photos among others. Many NFTs, such as CryptoPunks, Hashmasks, CryptoKitties, and NBA Top Shot mong others run on the Ethereum network.

Criticism

As with almost everything in the world, Ethereum is also facing criticism. This is mostly from environmentalists who claim that crypto mining uses a lot of power, which leaves a significant amount of carbon footprint on the climate. Bitcoin has also received the same criticism.

There is currently a lot of congestion on the Ethereum network as it undergoes an ambitious upgrade that will, in theory, allow for faster transaction times and reduce the amount of power required to process transactions.