Contemplating a Purchase of Ethereum as its Value Drops Below $2,500?
As I draft this on a Monday evening, a single Ethereum (ETH 2.18%) coin is worth $2,482. The leading digital coin for smart contracts is currently dipping beneath the $2,500 threshold for the first time since late November 2021, making you over 15% in the red if you purchased Ethereum a year ago.
Even if you bought Ethereum in April 2021, you would still have taken a hit. In stark contrast, Bitcoin (BTC 0.22%) grew by 70% during this nearly five-year timeframe while the S&P 500 (^GSPC 0.26%) index increased by 43%.
Are we witnessing the end of Ethereum's prime phase, or is this the perfect opportunity to invest at historically low prices? Let's explore three key considerations. Addressing "no" to any of these questions would be bleak news for Ethereum's long-term prospects.
Is crypto just a passing fad?
Ethereum's existence could be short-lived if cryptocurrencies and blockchain networks are losing favor.
However, growth investing guru Cathie Wood anticipates Bitcoin (BTC) reaching $1 million within the next five years. Institutional investment firms are launching crypto-based Exchange-Traded Funds (ETFs), assigning a portion of their wealth management strategies to crypto assets, and undeniably, the current administration is looking to assemble a crypto-based stockpile similar to the gold reserves at Fort Knox. In summary, cryptocurrencies are being afforded greater significance today.
Yes, most investors are still focused on Bitcoin's consistent growth and preservation against inflation. But there's also the Ethereum ETFs, spearheaded by heavyweight Blackrock's iShares Ethereum Trust (ETHA -3.21%). This leads us to the next critical quandary.
Can Ethereum-style smart contracts play a significant role in crypto's future?
Even if cryptocurrencies have a promising future, is it possible that Ethereum will remain marginalized in the grand scheme of things? Does Ethereum hold a substantial role to play in the development of the crypto market's near future?
Bitcoin is essentially a simple digital asset,progressing primarily by recording transactions and providing a permanent solution to inflationary forces. But Ethereum is different. It was developed with the utility of smart contracts in mind - self-executing computer programs triggered by specific conditions. Ethereum, with the aid of data-feeding oracle coins like Chainlink (LINK 5.23%) and an increasing number of Ethereum-compatible financial apps, can perform bank-like functions. This is the foundation of the decentralized finance (DeFi) industry. Without Ethereum's smart contracts, we're likely to remain stuck with traditional banking - brimming with high fees, slow transactions, and limited operating hours.
But there are plenty of alternatives.
Is Ethereum still in the prime position to lead?
The Ethereum ecosystem is teeming with alleged "Ethereum killers," like Solana (SOL 1.59%) and Cardano (ADA 4.92%). They can execute transactions and smart contract processes faster than Ethereum, and some even offer lower transaction fees. With so many choices, does Ethereum risk becoming obsolete?
But Ethereum's developer activity has remained steady over a lengthy time frame, while Solana's project volume dropped significantly last spring and Cardano's is on a steadily downward trajectory. Essentially, Ethereum still rules the roost when it comes to smart contracts, and leading rivals haven't wrested away its crown just yet.
Additionally, the alternatives possess some catching up to do. Ethereum has had the advantage of building a developer community far before it's closest competitors, and neither Solana nor Cardano are fully compatible with the leading platform. This learning curve could hinder the progress of technologically superior alternatives.
There are also Ethereum-compatible platforms like Avalanche (AVAX 5.97%) and Polygon (POL 6.63%). However, Polygon is just a token on the Ethereum blockchain, and Avalanche's developer community is small. Neither pose any genuine threat to Ethereum's market dominance.
Is Ethereum a solid investment today, then?
Ethereum may have multiple pitfalls, but there are no imminent signs of these obstacles materializing. Circumstances can change over time, but remember that Ethereum is constantly evolving. It's consistently making significant technical improvements, aiming to reduce transaction times and costs without compromising security or usability.
These upgrades are running ahead of schedule, so much that the long-awaited implementation of sharding (distributing the blockchain network into multiple parallel systems) was called off.
I anticipate Ethereum to remain as the foremost provider of smart contract services beyond the long term. A few rivals may only make the market stronger, providing an incentive for technological progress to stay ahead of ambitious upstarts. Sheltered by an active developer community, Ethereum's price chart should ultimately surge towards new heights.
I can't guarantee that Ethereum will surge in 2025, or even in the next few years, considering the recent slowdown. Still, $2,500 seems like an attractive starting price for diligent investors.
In fact, I doubled my modest Ethereum holdings merely a couple of weeks ago at a slightly less appealing price of $2,730 per coin. Now I'm considering investing even more, at a more appealing price. Feel free to follow this playbook, unless you believe I'm mistaken about Ethereum's role in the long-term crypto market.
- Despite the current dip below $2,500, some financial experts, like Cathie Wood, are optimistic about Ethereum's potential, predicting it could reach significant prices in the future.
- If you're considering investing in Ethereum, you might find it appealing that the leading digital coin for smart contracts has a robust developer community, consistently working on reducing transaction times and costs without compromising security or usability.
- Institutional investment firms are showing interest in Ethereum, launching crypto-based Exchange-Traded Funds (ETFs) and assigning a portion of their wealth management strategies to crypto assets.
- While alternatives like Solana and Cardano offers faster transaction speeds and lower fees, Ethereum still leads the smart contract industry due to its developer activity, community size, and compatibility with other platforms.
