Bitcoin is at a two-year high... Look around the corner... The Ethereum advantage... It's getting a big upgrade soon... The 'Surge' could send prices soaring... Learn more in Stansberry Innovations Report...
Editor's note: Today, we're bringing you a fascinating guest essay from Stansberry Research analyst Stephen Wooldridge II, who works on our Crypto Capital and Stansberry Innovations Report newsletters...
As Stephen explains, bitcoin has been making a lot of headlines – and new highs – lately. Since bitcoin is the world's most popular cryptocurrency, plenty of folks stop there when considering the crypto market.
But as he describes in this essay, if you look just past what's going on with bitcoin, you'll find another potentially lucrative opportunity in another major part of the $2 trillion crypto sector.
Stephen shares all the details today... from the ins and outs of this area of the crypto market and why it's so valuable, to the origins of the perhaps strange-sounding names given to various parts of the technology by developers who are creating it.
Bitcoin is making all kinds of headlines again...
Like my mentor, Crypto Capital and Stansberry Innovations Report editor Eric Wade, I (Stephen Wooldridge II) believe cryptos are in for a big rally this year. It's not just because of the bullish tailwinds behind bitcoin that you might already be familiar with.
Since the beginning of the year, the news cycle surrounding cryptos has been centered around the speculation about the Securities and Exchange Commission ("SEC") approving spot bitcoin exchange-traded funds ("ETFs") for trading. That approval came on January 10.
On the heels of that development, the crypto market has been buzzing with predictions about what 2024 will look like for the crypto market as a whole...
A little more than a year removed from the start of the FTX/Sam Bankman-Fried scandal that tarnished crypto's reputation, positive momentum is back in the industry.
Just yesterday, bitcoin's price hit $52,000, a two-year high...
That's already a roughly 250% gain from a low of less than $15,000 in late November 2023.
Some analysts say that bitcoin's upcoming "halving" – when crypto miners start receiving half as much bitcoin as payment for the computing power they provide – is going to set the stage for a rally unlike anything we've ever seen. They expect the reduced supply of new bitcoins to push the currency's price to new all-time highs (above the previous high of $65,000 in November 2021). And to an extent, I agree.
Meanwhile, skeptics claim that the bitcoin ETF news was overhyped. Yet others point to the possibility that later this year the results of the upcoming U.S. election cycle may raise questions about crypto's future in the United States.
These are worthy conversations to be having – because 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 trillion.
But there's an entire world of cryptos beyond bitcoin with promise, too...
And, today, I'm here to 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 with its specific utility and case for growth. But one stands above the rest...
I'm talking about Ethereum (ETH), which is the second-largest crypto by market cap. ETH makes up around 16.5% of the aforementioned total crypto market cap. It's trading around $2,800 as I write, also near a two-year high.
As a general comparison, bitcoin is an exchange-of-value blockchain. The main purpose of bitcoin, as it was designed, is to be used as a store of value, meaning it can be exchanged for goods and services based on this inherent value.
Bitcoin's value is directly affected by its scarcity, because 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.
Ethereum works differently...
Ethereum is still a blockchain, similar to bitcoin, but with 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, and also as fuel for the development of specialized applications built on top of the blockchain.
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 developing sufficient 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, meaning code that can self-execute commands based on inputs from real people or even other smart contracts. Inputs can range from sending a crypto to a specific address to pressing a button, similar to how you have to press buttons to get gas at a gas station or withdraw money from an ATM.
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 ("DEX"), 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, leveraging 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 centralized services, like 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's smart-contract technology has seen massive success...
Hundreds of thousands of tokens have been built on its chain...
Since its launch in 2015, many other blockchains that support smart-contract technology have also launched, and each one does things a little differently to separate itself from the competition.
In Crypto Capital, we regularly sort the best from the rest and recommend what we believe are the cream of the crop in crypto technology. We also provide regular updates and recommendations in Stansberry Innovations Report.
But since the dawn of cryptos, Ethereum has stood out as something special and remains the No. 2 crypto by market cap below bitcoin. Ethereum has a huge following of users, developers, and investors to back it up.
The Ethereum advantage...
The Ethereum blockchain has become such a staple in the crypto community that one of the most common features developers implement in new crypto projects and chains is compatibility with the Ethereum Virtual Machine ("EVM").
The EVM manages the state of the Ethereum blockchain, and any other blockchains that can use it, and enables Ethereum's smart-contract functionality. Essentially, it's the software that keeps Ethereum running, and Ethereum's popularity has almost made it a standard for DeFi development.
In other words, most new cryptos that come out these days, whatever function they intend to have, can build and develop protocols using the same language and underlying technology as Ethereum...
And new blockchains that are EVM-compatible start off with a big advantage over those that aren't, as it opens them up to Ethereum's massive user base and helpful community.
With Ethereum's success and adoption throughout all of the crypto community as a backdrop, some analysts believe a spot Ethereum ETF, like the bitcoin ones, is around the corner... getting approved as soon as May.
Just on Monday, the asset management giant Franklin Templeton disclosed it has applied with the SEC to offer a spot Ethereum ETF, joining firms like BlackRock and Invesco and six others that are already seeking approval.
Others claim we're still a long way from Ethereum ETFs happening.
But if they were to happen, much like the 11 bitcoin ETFs that recently launched, it would be a game-changer for investors looking to diversify or add crypto exposure, and it could open the floodgates for a huge variety of other crypto ETFs in the future.
But either way, 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 amid the ongoing price speculation surrounding BTC.
You see, while Ethereum is a once-in-a-lifetime innovation in technology, 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 back 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 (ETH) – the most popular blockchain for decentralized finance ("DeFi") – making a swap on an exchange can sometimes cost hundreds of dollars. The gas fee may even overshadow the amount you're swapping.
To address this, developers have been working on a massive Ethereum 2.0 upgrade – that is still in its early stages...
Ethereum underwent its transition to a new Proof-of-Stake ("PoS") consensus mechanism in late 2022. This was an upgrade designed to change Ethereum from its previous Proof-of-Work ("PoW") consensus model, like the one bitcoin uses, in order to fuel its mass adoption by making it more scalable and user-friendly. But this change only took it so far.
As we've discussed before in Crypto Capital and Stansberry Innovations Report, 2022's 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 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.
This is thanks to a novel "rollup" technology that bundles transactions together, allowing the network to process them more quickly. These new solutions will help avoid congestion on the blockchain as well as save users both time and money.
But in the Surge, Ethereum is taking it a step further by introducing the concept of Proto-Danksharding, which attaches rollup transaction data in the form of temporary "blobs" to Ethereum blocks. (The name refers to 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 for Ethereum end users. Eventually, Danksharding will move out of its "proto" phase to make Ethereum fully scalable and extremely economical to use.
Coming soon...
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 its "testnet" on January 17...
That means it's being heavily tested for a full release. Many developers believe it will launch by late this month or early March. The Dencun upgrade will increase Ethereum's transactions per second and scalability greatly, making it more widely available to investors and developers alike to increase Ethereum's utility and inherent value.
And more people using Ethereum means the cryptocurrency will command a higher price.
Should it rally to its previous all-time high of $4,815, which is possible, Ethereum's price stands to rise 70% 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."
(If you're wondering, these names are suggested by the developers who initially propose them, and they often have a sense of humor. Then the community at large votes on whether they believe the upgrades, names included, are a good idea or not.)
Here are the fine details of all the upgrades planned by developers for Ethereum. As I said, only the "Merge" has happened already...
The point is, these upgrades will bring Ethereum into its finalized state of Ethereum 2.0, making it scalable for a mass audience while maintaining its security and decentralization. But along the way and before all of these proposed upgrades are all fully realized, I expect Ethereum will already 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, with speculation about spot ETF approvals. Ethereum's price is up 20% alone in the past month and could soar much higher, whether those listings happen or not.
The mere improvements in the Ethereum network alone are worth betting on.
So the time to consider adding exposure to Ethereum is now...
The chance to catch the biggest upside is to have exposure before upgrades like the Surge cement Ethereum's place as the top crypto for building practical applications.
How to do it? Well, for more detail on Ethereum's upgrades and what to expect over the next few years, check out our latest exclusive research on the next cutting-edge innovations in crypto technology.
If you don't already subscribe to our work at Stansberry Innovations Report or have access as a Stansberry Alliance member, click here to learn more and get started today. In a free presentation, Eric Wade, one of the foremost experts in crypto (and again, my mentor), shares details on the latest developments in crypto today.
He even shares a story and photo about the time he tracked down Ethereum founder Vitalik Buterin. Soon after, Eric recommended Ethereum to a small group of people who had started following his lead. Back then, you could have bought in for $90.
A lot has happened in the crypto world since then, and Eric has been at the forefront of all the developments and trends. I was pleased to come work with him a few years ago and keep subscribers informed on all things crypto – bitcoin and beyond.
Again, click here to learn more. You can watch, listen to, or read a transcript of Eric's outlook for free. And you'll have the opportunity to access a one-year subscription to Stansberry Innovations Report for as little as $49 – and with a no-risk 30-day trial built in.
A subscription also comes with a comprehensive special report featuring Ethereum-related tokens, plus other cryptos, that we consider buys right now (along with a full portfolio of conventional stock recommendations in the technology world). And don't worry, if you've never touched a crypto before, we give step-by-step instructions for how to get started.
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In today's mailbag, feedback for Ten Stock Trader editor Greg Diamond, who has been working late nights lately as he analyzes the turning point in the markets he has been expecting... (Click here to learn how to subscribe.) Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.
"Greg, Wow!! Seriously you are the most amazing technical analyst I have ever followed. You nailed [Tuesday's] sell off big time.
"I have been with Ten Stock Trader from the absolute beginning and you continue to fascinate me with your analysis and predictions.
"Thanks to you, [on Tuesday] I scored a nice profit while completely sidestepping a serious sell-off. Keep up the good work and I appreciate those sleepless nights you put in working.
"Btw I hope your wife and kids appreciate you as much as I do for maybe different reasons. Lol. I am sure they see you working so much. I'm a loyal customer and am with you till the end as I have a lifelong subscription. Thank you Greg very much." – Subscriber Marc D.
Good investing,
Stephen Wooldridge II
Los Angeles, California
February 15, 2024