Fund managers warn: Why Ethereum is, in spite of DeFi-Boom no profitable investment – Coin Update

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Ethereum – the network, not the crypto-currency has seen in the last few weeks a huge increase in acceptance and use.

Blockchain analysis company Santiment reported that the number of addresses exceeds the network to 100,000 per day. This is slightly less than the 116.000 per day were achieved since the beginning of the year, but still impressive.

Santiment explains further:

“The network growth metric of Ethereum has increased since the beginning of 2020, rapid, and yesterday created 237% more addresses than 1. January 2020 (and ~+200%, which is the moving average today compared to back then).“

However, not all are convinced that the Blockchain, the underlying crypto-currency ETH is a profitable investment.

ETH – still not a viable Option?

Steven McClurg, and Leah woods, CIO and VP of portfolio management of Expontial Investments, gave recently an explanation for why Ethereum is not viable. Is not to say: why Ethereum as an investment is profitable.

According to the analysts, the high-Ethereum-gas costs, caused by the high level of acceptance could be the Achilles ‘ heel of the network. A fundamentally weak network should correspond with a relatively low ETH price.

“The the cost of gas inherent problems have led to an Overload, which has a negative Power represents the externality. The Overload of Ethereum has led to a poor user experience, especially for a Trader in this very volatile environment, since your debt can be liquidated, financed positions, before they can act.“

This is especially relevant today, as the Ethereum-blocks 95% full and the “Gas”Rates are extremely high.

The high fees are only one of many other reasons why the executives of Exponential Investments think so.

You also have a further confluence of Trends. Two of these Trends are as follows:

ETH does not have a fixed monetary policy, such as Bitcoin, which makes their long-term Inflation is unknown.Ethereum investors do not have the “HODL”mentality as BTC investors.

Ethereums the greatest Trend has weaknesses

Further evidence for the expectation that Ethereum performed may be poor, the risks to which it is exposed to a DeFi. DeFi is also available as a decentralised funding and is considered to be one of the leading use cases of the Blockchain.

The idea is that, should come in the leading case of application of Ethereum to a standstill, the benefits of ETH are limited or relatively low.

Kyle Samani of Multicoin Capital explained that Ethereum-DeFi has problems with latency. Multicoin Capital is a crypto-Venture – and Hedge-Fund focused on decentralized Finance.


“You just can’t build the trading systems on a global scale for many users on POW-chains. It just doesn’t work. High latency -> all kinds of negative effects of the second order. Therefore, I think that we are for the time being, close to a Plateau for DeFi – measured in ETH-terms (not in USD), until the core latency problems are solved.“

Samani is referring with his remark on the relatively high fees of crypto-currency and the long block times of 13 seconds seeds. The 13-second block time prevents the developers of Blockchains to develop financial systems that mimic the Fiat world.

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About the author

Eve Manning

Eve Manning

A native Texan, Eve first started out as a Finance Analyst and later realized that her true passion was not in trading but in writing. She leverages her experience in the Finance industry to analyse and write in-depth news articles covering the Cryptocurrencies, Economy & Finance industries.

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