Many people are asking whether Ethereum is money or not. As the official Ethereum price went up 3000 percent in recent months the question top of mind of many people is whether Ethereum will continue to rise, and, eventually, become an alternative type of money (like gold for instance).
Note that the 3000 percent rise is amazing but our long term Ethereum price forecast is $1000, a threefold rise from today’s price, based on a qualitative and quantitative forecasting method. So we still do not see a major top at this point in time.
Back to Ethereum versus fiat money. In people’s minds, Ethereum, just like any other cryptocurrency, is virtual, likely “too” virtual. That makes it hard to understand. However, almost all fiat money is also virtual nowadays, and many people forget that … well, actually, it is not that they forget but the government does everything to sustain the perception that (fiat) money is safe and honest.
The reality is different though. The idea that fiat money is honest money is a big farce; it exploits a major misperception of many people. The vast majority of people continue to believe that “their money” on “their bank account” is safe. It is not. All money in the bank is electronic currently, and the money in physical format is just a very small fraction of what exists on bank accounts.
The proof is there as seen on below chart. The red line represents M2 which basically is a measure of the money supply that includes base money plus cash and checking deposits plus savings deposits, money market securities, mutual funds. The point is that M2, which includes “your money” held on “your bank account” is largely deviating from base money (the monetary supply which is said to be finite).
Ethereum is registered on the blockchain. Each Ether is a know block in a ledger on the blockchain. Every coin of Ether has a unique code and is known on the whole network. It is really assigned to a certain person or entity. Moreover, the owner decides whether he/she wants to stay anonymous or whether is Ether (block) can be made public.
How much more sound can money be?
Fiat money may have theoretically a finite supply, but the reality is that central banks decide whatever they want and they believe is good when it comes to the money supply. In the last two decades the monetary supply has risen in a parabolic fashion, with an unimaginable acceleration since the 2009 crisis.
The monetary supply in the U.S. (base supply), represented by the blue line on above chart, makes the point. Technically, the monetary supply will be finite, but the reality is different as evidenced by the the chart.
It is clear that the current fiat money system is not as sound as cryptocurrencies like Ethereum. If fiat money was registered, similar to cryptocurrencies, then would we not see confiscation as we have seen in recent years (think Cyprus, Greece, and the likes).
The biggest drawback of Ethereum is potential security holes, which, arguably, will become less of a risk over time as more and more participants more (in an open source fashion) to make Ethereum a more secure platform.
So once Ethereum’s security improves we see this as a much more honest type of money than fiat money.