A recent report from blockchain metrics and data tracker Glassnode reveals that 90% of all Ethereum addresses are now in profit. Not since January 2018 have so many Ethereum holders been in profit, as the cryptocurrency catapulted through the $700 resistance level.
The growth has resulted in many questioning whether Ethereum may present the best risk/reward crypto going into 2021. While Bitcoin (BTC) has also been experiencing stratospheric gains lately, it’s shockingly high price could deter first time investors. For those new to crypto, Ethereum could represent the kind of attractive investment that still has lots of space to grow.
Institutional investors that have been buying up millions of Bitcoins lately are now beginning to look towards Ethereum as a potential diversification coin. With another 50% of gains to be made before it hits a new all-time high, institutions see a lot of potential in the leading smart contracts cryptocurrency. Several key developments that have come into play this year are helping to drive this rally.
Decentralized Finance (DeFi) on Ethereum
DeFi has been all the rage this year, with yield farming projects like yearn.finance (YFI) and Uniswap (UNI) exploding in popularity. With the vast majority of these projects running as ERC20 tokens on the Ethereum blockchain, the network has naturally gained as a result.
Yield farming is a method of generating income by lending and borrowing cryptocurrency on decentralized exchanges. It’s similar to staking, but with more interaction and the possibility of greater returns. The huge popularity of yield farming has created massive liquidity pools for Ethereum, helping to facilitate buying and selling on the network.
Ethereum 2.0 Staking
The Ethereum development team has been busy this year rolling out ETH 2.0, which moves the project onto a proof-of-stake (PoS) blockchain protocol and provides several innovative improvements. Most notably, Ethereum holders can now stake their ETH on the network allowing them to make passive interest.
After the launching of the initial phase of ETH 2.0 on December 1 this year, the amount of Ethereum locked in the staking contract has grown to $1.2 billion according to Dune Analytics. This shows strong faith in the project and a highly dedicated user base, helping build trust from institutional investors.
CME Futures for Ethereum
However, despite all other developments, possibly the most important update is the announcement that the world’s most diverse derivatives marketplace, CME Group, will launch an ETH-based futures product in February 2021. After the same group made a similar announcement about Bitcoin Futures in December 2017, the coin catapulted to a high of nearly $20,000.
An Ethereum-based futures product is attractive for institutional investors, as it helps them to better manage risk. This is a huge boost for the coin and will undoubtedly result in large gains going forward.
“..we believe the addition of Ether futures will provide our clients with a valuable tool to trade and hedge this growing cryptocurrency,” said Tim McCourt, CME Group Global Head of Equity Index and Alternative Investment Products.