Hedging Your Ethereum Investment

A New Chapter

The Merge marks a new chapter in the evolution and progression of Ethereum. Although, some would not necessarily consider a shift to POS progression. Either way, it signals a new phase, and hopefully one that will be beneficial. I personally began to average out of ETH between $4500 and $3500. This is where I chose to rebalance my portfolio. At one stage, ETH was my largest allocation, making up more than 40% of my portfolio. This was becoming a little too risky for me, as I am a firm believer in diversification. I am still holding some ETH. However, as I have mentioned in recent weeks, various concerns regarding Ethereum have encouraged further allocation to projects such as Solana and Avalanche.

The heavy centralization of Ethereum is a massive concern for me, although not many investors seem to be too concerned about it. It all depends on who those entities are, and who they are aligned with. For all we know, Jamie Dimon could be one of them. Although I doubt it, it does however reveal how vulnerable Ethereum has now become. When almost half of the node operators can be counted on one hand, it’s a concern. To me, this is a cautionary signal and one that I am going to respect.

Proceed With Caution

This doesn’t mean that it’s now time to abandon ETH and move on to new investment opportunities. What it does however suggest is, perhaps it would be wise to hedge your Ethereum investment by allocating a small percentage to alternative layer 1 projects. Solana and Avalanche have been my chosen investments, as well as Cardano. You also have to consider that after such a highly anticipated event, also comes a bit of an anti-climax. It’s as if the market has to look in the mirror each day and recite, “Don’t forget to be bullish on Ethereum today”.

I am not “hating” on Ethereum but rather objectively analyzing and discerning the psychology of the market. On a positive note, it is also extremely difficult for any asset to perform well in these market conditions. However, if a negative event were to unfold that could be directly linked to the centralization of Ethereum, it would create a significant problem. A problem that would most likely cause many “decentralization lovers” to look elsewhere. You have to consider both positive and negative outcomes. Simply feeding on “bullish narratives” and ignoring potential risks and shortcomings is unwise. It’s not being negative, it’s being realistic.

ETH Still Holds The Crown

Ethereum is however still the most popular choice, as the base layer for a new and emerging economy that is being built. To be ignorant of this would be somewhat foolish, in my opinion. I suggest, rather hedging your bet with a few solid alternatives. Another important aspect to remember is even if ETH steals the show, there will be other layer 1s that will also perform relatively well alongside ETH. With this in mind, hedging your bet makes a lot of sense.

Solana continues to experience demand, despite ongoing outages. Why? Well, quite simply, the inconvenience is considered irrelevant by the market, in comparison to the variety and value Solana provides. This makes a very strong case for Solana. Most people focus on the negativity of the outages, when in fact they should be viewing how the market is choosing to respond. This is the most important aspect.

Final Thoughts

Please don’t confuse my caution with negativity. I believe ETH will go on to accomplish greatness. However, when concerns arise, I will do my best to protect and hedge my investment. This is my personal approach, and should not be considered investment advice. Thanks for the visit! See you next time!

3 Comments on “Hedging Your Ethereum Investment

      • Awesome! So glad to see your reply! Your content is great… looking forward to seeing more of it in the future on gFam.

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