As you know, Bitcoin happens to be the first and best-known cryptocurrency, and the Ethereum network comes in a close second. Just like Bitcoin, Ethereum runs on a blockchain, and it uses blockchain technology for a variety of innovative applications. Ether is the currency of the Ethereum network, and currently, there are around 121 million Ether, each worth around $2,500. While Ethereum is highly rewarding, it also involves high risk. This article will further discuss why Ethereum is risky and what every crypto investor should be aware of. So, keep reading to learn more.  

Is Ethereum a Safe Investment? 

Ethereum (ETH) happens to be the second-largest cryptocurrency by market cap, with around 121 million Ether. It is often described as a global computer that can be used by anyone, but controlled by none. As you may be familiar, Ethereum is most commonly used for decentralized finance (DeFi) and non-fungible tokens (NFTs). One of the key advantages of Ethereum is that it has a bigger market. Apparently, Ethereum powers not just a currency but a whole network of dApps and contracts, which is why it has more uses than Bitcoin. This is why it has potentially a much larger addressable market. This eventually led to a wider adoption and demand for Ethereum, thereby increasing its value relative to Bitcoin down the line. 

Ethereum has built-in features that limit the supply of Ether, and under the new system, every transaction burns a little Ether. If a lot of people use Ethereum, it will cause the supply of Ether to shrink, potentially pushing up its price. Apart from this, people running the network will have to lock up any supply of Ether, further limiting supply. While this is the case, Ethereum has several disadvantages, too. 

Understanding the Risks of ETH 

As you know, volatility remains a main feature of the crypto market. Note that over the last several years, Ether has been said to be more volatile than Bitcoin, and much more volatile than traditional equities. In mid 2025, the top 100 addresses held nearly 73% of all Ether, which is more than half of all Ether, tied to a staking contract. This enables users to deposit Ether into it to create a node that can validate Ethereum transactions. In case there is an issue with that contract, it could have an outsized impact on Ether’s price. As for the top accounts, if many users plan on selling it, it could also have an outsized effect on the price of Ether. 

Understand that there have been more than a dozen major software updates in the past decade, and occasionally, these updates cause forks, with some stakeholders going along with the software change and others not. This ends up creating confusion or splitting the value of the currency. Another risk factor regarding Ethereum is its limited scalability. Ethereum’s blockchain grows rapidly when more smart contracts and dApps are deployed. This eventually increases hardware demands on the network’s nodes, making it harder for individuals to participate and concentrate control in the hands of a few. This would end up making the network more complex and centralized. It also compromises its stability and security. 

Regulation is another looming wildcard because the cryptocurrency industry has come under growing regulatory scrutiny that could affect demand for Ethereum-based dApps. Additionally, the extension and demand for Ether weigh on its value. Note that cheaper and faster blockchains such as Solana and Binance Smart Chain are a challenge to Ethereum’s dominance. It is believed that Ethereum could lose market share despite its early lead if the developers and users migrate to these platforms. In case other networks become more popular, there would be less demand for Ethereum and, by extension, Ether, which would possibly weigh on the cryptocurrency’s price.   

Conclusion 

Like most cryptocurrencies, the price of ETH can rapidly fluctuate based on market sentiment. This is why investors can lose their entire principal investment quickly. Keep in mind that ETH has historically been more volatile than traditional equities and even Bitcoin.