The crypto market soared in 2024 but Ethereum (CRYPTO: ETH) lost some steam in the second half. Looking back from February 25, the smart contract platform is down 27% since the middle of last summer. Bitcoin (CRYPTO: BTC) gained 48% in the same span.
Ethereum bears worry about a rising tide of competing cryptocurrencies, often able to execute those smart contracts faster and cheaper than Ethereum. There's also a plethora of layer 2 tokens around the Ethereum core, designed to speed up the main network's performance. But on the downside, pessimists see these helpful tokens sucking monetary value out of Ethereum itself. And the unimpressive market performance inspires another round of negative commentary and Ethereum pessimism. Technical analysis can be a self-fulfilling prophecy sometimes.
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Long story short, the Ethereum doubters have their reasons.
Ethereum's potential according to Cathie Wood
But Ethereum still has some big-name champions. Famed growth investor Cathie Wood is a well-known Bitcoin bull, but she also sees good things ahead for Ethereum investors. Her market research team recently said that Ethereum's market cap could reach $20 trillion in 2032 and $1 trillion by the end of 2025.
That's an extremely bullish attitude. Ethereum's market cap is $297 billion today, so it would have to more than triple in price to reach that short-term goal.
Patience is a virtue for Ethereum investors
As a longtime Ethereum owner myself, I'd gladly settle for a much lower valuation bar in 2025. I'm actually not even very interested in big gains this year. Ethereum is a long-term holding in my view, and patient investors with very long holding periods should do well with this innovative digital asset.
Some expected exchange-traded funds (ETF) to make a big difference, allowing the inflow of dollar-based wealth into the Ethereum asset. But the Ethereum-based ETF approvals arrived in July 2024, Ethereum prices dipped more than 30% over the next two weeks, and the largest fund, iShares Ethereum Trust (NASDAQ: ETHA), only has $3.6 billion of assets under management seven months later. That's a drop in the bucket next to its sister fund, the iShares Bitcoin Trust (NASDAQ: IBIT), with $55.3 billion of assets. The difference in fund sizes is much larger than the gap between the underlying cryptocurrencies.
Again, I'm fine with that. Slow or negative returns in 2025 give me more time to buy Ethereum coins at a reasonable price, after all.
From smart contracts to DeFi: Ethereum's promising plans
You see, I agree with Cathie Wood's long-term assessment in principle. Again, Ethereum doesn't have to become a $20 trillion asset, but I do expect it to gain value over time.
Cathie Wood's research team says that Ethereum should stand out among other cryptocurrencies in the long run. It's not only a powerful smart contracts platform, but also perhaps the best way to earn dividend-like staking rewards in the crypto world. As such, Ethereum is a frontrunner to become the preferred income-generating investment among all digital assets, for the long haul.
So you get a "hybrid" asset with value-storage and dividend-like properties. If and when decentralized finance (DeFi) solutions overturn the traditional banking world, Ethereum also has a head start on the competition with a large and engaged community of DeFi developers.
Taken together, these qualities make Ethereum a fantastic long-term investment in my eyes -- and Cathie Wood agrees.
As for the leading anti-Ethereum arguments, I'm not too worried:
- I would argue that any financial market is only healthier with some robust competition on the scene. Robust rivals like Solana and Cardano should largely help Ethereum's backers stay focused on running a great cryptocurrency and smart contracts system, staying ahead of the hungry challengers.
- The helper coins were literally made to give Ethereum a boost, and their native tokens are barely touching the core network's market value. The 7 largest layer 2 solutions add up to $9.0 billion in total market value. That's less than 3% of Ethereum's market cap.
- I don't take technical analysis seriously. Chart squiggles can't tell you anything meaningful about what comes next, especially in an emerging industry like the crypto market. It's all about building real-world value with strong products and services (for stocks in ordinary businesses) or useful features and solid security (for cryptocurrencies).
The recent market pullback from risky investment ideas has driven Ethereum's already reasonable buy-in price even lower. I doubled my modest Ethereum holdings two weeks ago and now I'm tempted to boost that holding again.
Ethereum looks like a great long-term investment right now. Even if it falls short of Cathie Wood's ultra-optimistic targets, it should still beat the stock market in the long run.
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Anders Bylund has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
