The word “deflationary” is often used to describe Ethereum. But what does it mean?
In general, deflation is when the price of goods and services goes down over time. This is the opposite of inflation, which is when prices go up.
So, if Ethereum is deflationary, that means that the price of ETH will go down over time.
But why would this happen?
There are a few reasons. First, there is a limited supply of ETH. There will only ever be 21 million ETH in existence.
NOTE: Warning: Ethereum, like all other cryptocurrencies, is subject to extreme fluctuations in value which can lead to deflationary effects. It is important to conduct thorough research and understand the risks associated with investing in Ethereum before doing so. Additionally, there is no guarantee that Ethereum will remain a deflationary currency in the future. Investing in Ethereum should only be done after carefully considering the associated risks and rewards.
As demand for ETH increases, the price will go up. But as the supply is limited, at some point there will not be enough ETH to meet demand, and the price will start to fall.
Second, Ethereum is designed to be used as a platform for decentralized applications (DApps). These DApps will likely use ETH as a currency or “token” to function.
As more and more DApps are created, demand for ETH will increase. But, as with any currency, if there is more demand than there is supply, the price will go up.
So, what does all this mean for investors?
If you believe that Ethereum will be successful in its mission to become a platform for DApps, then you may want to invest now while the price is still relatively low. The price could go up significantly as more and more DApps are built on Ethereum.
But, if you think that the price of ETH may fall in the future due to limited supply and increased competition from other cryptocurrencies, you may want to wait to invest.
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In recent months, Ethereum has seen a tremendous amount of growth. This has led some to believe that Ethereum is due for a crash. However, there are several reasons why this is unlikely to happen.
Ethereum, the world’s second-largest cryptocurrency by market value, is a buy, say analysts at investment bank Goldman Sachs. In a note to clients Monday, the Goldman analysts said they expect ethereum to benefit from growing interest from central banks and corporations in using the cryptocurrency and its underlying blockchain technology.
“We believe Ethereum is benefiting from three distinct tailwinds: 1) a structural change in the cryptocurrency industry as crypto assets become more institutionalized; 2) a broadening set of use cases for Ethereum’s decentralized platform; 3) and technical improvements to Ethereum’s blockchain network,” the analysts wrote. The price of ether, the native cryptocurrency of the Ethereum blockchain, has surged more than 400% this year as corporations and financial institutions have shown increasing interest in using Ethereum’s blockchain to build new applications.
