Velocity could make Ethereum a bad investment, but still a great technology
I recently sold 70% of my Ether (the built-in cryptocurrency of the Ethereum platform) after I came to doubt its promise as an investment— although my optimism about its potential as a technology remains as high as ever. This might sound paradoxical, but it isn’t.
The key realization I had is that there is a good chance Ether won’t behave like shares in a company, but will instead behave like the currency of a country. If you want to invest in the U.S. economy, you should buy stocks in U.S. companies, not hold U.S. dollars. Holding a fiat currency is a bad investment because it’s inflationary. It decreases in value over time. I’ve begun to suspect the same might be true of some cryptocurrencies, like Ether. If you want to invest in the Ethereum economy, holding Ether might not be a viable way to do that.
Unlike Bitcoin for instance, the supply of U.S. dollars increases indefinitely year after year, with no hard limit. With a fixed supply of Ether, some investors assume Ether will be deflationary. It will retain value, and even appreciate in value. Fixed supply is by no means a foregone conclusion for Ether; it’s a topic of active debate. But even with fixed supply, Ether might still depreciate in value.
