Ethereum
Is Ethereum a creator of millions?
Ethereum still has upside potential. But is it enough to make you a millionaire?
We can’t deny it Ethereum (ETH 0.48%) has been one of the best crypto investments of the last decade. At the current price of $3,500, Ethereum is more than 10,000 times higher than its original price of just $0.31. As a result, an investment of just $100 in 2015 would likely have been enough to make you a crypto-millionaire today.
But we are now entering Ethereum’s second decade, and it is no longer certain that you can become a crypto-millionaire by investing at current prices. If you are considering investing in it for this purpose, here are three important questions to ask yourself.
1. Does Ethereum still have 1000x upside potential?
Let’s assume for a moment that you currently have $1,000 to invest in Ethereum. For that initial investment to reach $1 million, its value would have to be multiplied by 1,000. Ten years ago, that was certainly possible. But what about today?
Remember: in 2015, Ethereum had a very significant first-mover advantage. It was literally the first smart contract blockchain platform, and this has opened up all sorts of new opportunities that even Bitcoin (BTC 0.41%) could not match.
Ethereum has therefore created, defined and controlled entire sectors of the blockchain world. From decentralized finance (DeFi) to blockchain gaming and non-fungible tokens (NFT), it wasn’t just the first to hit the market. It was also better to market.
Unfortunately, Ethereum no longer has the first-mover advantage. There are many new challengers and many blockchains that can offer exactly what they can offer, if not more. It makes sense, then, that the explosive growth that characterized Ethereum’s early years is no longer possible. This is bad news if you’re expecting a 1,000x increase.
2. How long can Ethereum remain the market leader?
There are now three direct challengers to Ethereum: Solana (GROUND 1.28%), avalanche (AVAX -1.04%), and Cardano (ADA 0.76%) – which rank among the top 15 cryptocurrencies in terms of market capitalization.
The emergence of these new challengers means that Ethereum’s dominant market share in different niches is slowly eroding. So even if it is able to create entirely new blockchain niches (as it has over the past decade), the market share it captures will likely continue to decline over time.
Image source: Getty Images.
What’s even more concerning is that some of these blockchain rivals are seen by investors as potential “Ethereum killers.” This poses a clear existential threat.
When it comes to choosing a blockchain, users and developers have choices. And if Ethereum’s new rivals continue to claim much higher speeds, improved throughput capacity, and lower fees, which blockchains do you think users will choose?
3. What effect will the new ETFs have?
Finally, there is the question of how much the new Ethereum spot exchange-traded funds (ETFs) will deliver. Almost everyone agrees that there was a lot more demand and hype for the new spot Bitcoin ETFs.
Spot Bitcoin ETFs have raised over $30 billion in customer funds. However, JPMorgan Chase thinks new Ethereum spot ETFs will only raise $3 billion.
As a result, Ethereum spot ETFs will likely have much less impact than many people think. If you’re expecting the price of crypto to soar as soon as these new ETFs start trading, you might be disappointed.
Set realistic expectations
It may be difficult to recognize, but Ethereum may only have 10x upside potential in the foreseeable future. And even that might be too optimistic. Given its current market capitalization of just over $400 billion, a 10-fold increase in its value would imply a new market capitalization of $4 trillion. It’s much more than Nvidiawhich now has a high market value of $3 trillion.
A $4 trillion valuation could have been possible back when Ethereum had a economic gap to ward off potential challengers. But the barbarians are now at the gate, and some of them are crossing the drawbridge.
For this reason, I am not convinced that Ethereum is still a millionaire maker. Unfortunately, if you really want to become a millionaire, you may need to find “the next Ethereum” – an unknown crypto with 1,000x potential that you can buy for pennies. And that, as we all know, is much harder to do than it seems.
JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Dominique Basulto has positions in Bitcoin, Cardano, Ethereum and Solana. The Motley Fool holds positions and recommends Avalanche, Bitcoin, Cardano, Ethereum, JPMorgan Chase, Nvidia and Solana. The Motley Fool has a disclosure policy.