Between 2020 and 2021 several companies started to buy bitcoin as a way to protect themselves from possible monetary inflation, this flooded with mountains of money the first crypto that won funds by contributing billions, millionaires and billionaires acquiring the cryptocurrency. Now, a new digital asset is in the sights of companies and institutional investors.
Earlier this week, Canadian fintech Mogo announced it had purchased 146 ethers (ETH) for an average price of $ 2,780. The company said it plans to keep at least 5% of its balance in crypto.
And this is not the first time the company has ventured into the cryptocurrency market, previously Mogo bought 19.99% of Canadian digital asset platform Coinsquare.
For Mogo president and CFO Greg Feller, the purchase of ethereum and previous investments in bitcoin reflect the company's belief in the “long-term potential of blockchain technology and its position as a central component of a next generation financial technology platform ”.
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But not only is it investing in ether, the Chinese giant Meitu acquired 15,000 units of the cryptocurrency for $ 22 million in early March this year, it had already purchased 379 bitcoins for $ 17.9 million.
What is the rationale behind this investment?
The idea of a company allocating fiat money in crypto could seem crazy 10 years ago, however, with the impression of central bank money, devaluation of fiat currencies against new assets, it is increasingly clear that cryptocurrencies are a protection against these risks to companies' cash.
The idea is that the value of these assets will grow as much or more than the state devaluation. Bitcoin, for example, was voted the best investment of the decade and its price has risen more than inflation and the debasement of the state currency by 24,000% since 2008.
And what is the idea behind ether?
Ether is Ethereum's main asset and essential for its functioning. The digital asset is less like gold and more like digital oil for the financial market. With ether you can run smart contracts, decentralized exchanges, liquidity pools and a myriad of decentralized applications.
This digital oil will become more scarce in the coming years, due to an update that will burn ether for each transaction. What's more, the equivalent of $ 3 billion in ether is stuck in Ethereum 2.0, a massive update to the protocol.
The upside of ether seems to be greater than that of bitcoin, in fact, in the last 12 months, digital “oil” rose 1520%, while digital gold “only” 517%. If part of our economy migrates to the gears of the blockchain, then it makes sense to buy the oil that will move it.
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