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Ether
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== Risks == As with any investment, investing in Ether carries a level of risk. Overall, based on the Ether's adjusted beta (i.e. 1.80), the degree of risk associated with an investment in Ether is 'high'. Here, to estimate the adjusted beta, we used the iShares MSCI World ETF to represent the market portfolio; and in terms of the time period and frequency of observations, we used five years of monthly data (i.e. 60 observations in total), which is supported by a study and is the most common choice. The beta value in a future period has been found to be on average closer to the mean value of 1.0, and because valuation is forward-looking, it is logical to adjust the raw beta so it more accurately predicts a future beta. In addition, here, we have assumed that for an investment to be considered 'high' risk, it must have a beta value of 1.5 or more. Further information about the beta ratings can be found in the appendix section of this report. The key risks can be found below. For us, currently, the biggest risk to the valuation of the investment relates to the strong competition from other blockchain platforms and traditional platforms (i.e. competition risk). # '''Volatility:''' Cryptocurrencies, including Ether, are known for their high price volatility. Prices can rapidly increase or decrease within a short period, influenced by factors like regulatory news, technological developments, market sentiment, and broader economic factors. This volatility can result in significant gains or losses. # '''Regulatory Risk:''' The regulatory environment for cryptocurrencies is still evolving and can vary significantly by country. Changes in regulations, such as those related to trading, taxation, or the legality of cryptocurrencies, can impact the value and legality of holding or using Ether. # '''Technology and Security Risks:''' Ethereum, like all blockchain technologies, faces risks related to security breaches, hacking, or software flaws. While the Ethereum network is considered secure, vulnerabilities have been exploited in the past, particularly in DApps and smart contracts built on Ethereum. # '''Market Liquidity:''' While Ether is one of the most liquid cryptocurrencies, cryptocurrency markets can still experience liquidity issues. During periods of extreme market volatility, it might be difficult to buy or sell large amounts of Ether without affecting the market price. # '''Dependency on Ethereum’s Success:''' The value of Ether is closely tied to the success and adoption of the Ethereum platform. Issues like delays in network upgrades, scalability problems, or a failure to sustain developer and user interest could negatively impact Ether's value. # '''Competition:''' The blockchain and cryptocurrency space is highly competitive. The emergence of newer blockchain platforms offering similar or superior features could potentially diminish Ethereum's market share and impact the value of Ether. # '''Scalability and Network Congestion:''' Ethereum has faced challenges with network congestion and high transaction fees, particularly during periods of high demand. While the ongoing upgrades (Ethereum 2.0) aim to address these issues, there is a risk that these problems could limit adoption and use. # '''Environmental Concerns:''' Prior to Ethereum's transition to Proof of Stake (PoS), its Proof of Work (PoW) consensus mechanism raised environmental concerns due to the high energy consumption. Although PoS significantly reduces this concern, the perception and regulatory implications of environmental impact could still pose risks. # '''Macro-Economic Factors:''' Cryptocurrencies can be influenced by broader economic factors, such as inflation rates, interest rates, and economic downturns. These factors can affect investor appetite for risk and lead to increased volatility in the crypto market. # '''Lack of Traditional Investment Protections:''' Unlike traditional investments, cryptocurrencies typically do not offer dividends, voting rights, or other protections. The regulatory framework is still evolving, which means there might be less recourse for investors in cases of fraud or theft.
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