Is Ethereum a No-brainer Buy After Bitcoin Halving?

Ethereum’s big moment came with the launch of five spot ETFs.

Earlier this year, Cathie Wood of Ark Invest stunned cryptocurrency investors by predicting that Bitcoin ‘s (Bitcoin The price of 0.55%) would be reach $1.5 million by 2027. Last April, Wood thought that the recent approvals of the first exchange traded funds (ETFs) based on Bitcoin’s spot price, more institutional buying, and the impending halving of Bitcoin mining rewards (making mining the cryptocurrency twice as difficult) would cause a bull run into the world’s largest cryptocurrency.

Wood also made some optimistic predictions for Ethereum (ETH 0.49%), estimating that its market capitalization could exceed $20 trillion by 2032. This would mean a market price of over $166,000 per Ethereum coin.

Recent updates and analyses have added new insights into Ethereum’s potential. Bitcoin Halving is in the books, the initial spot Bitcoin ETFs have been on the market since January, and the first Ethereum ETFs followed this week. So what’s next and is Ethereum still a good investment?

How is Ethereum different from Bitcoin?

Ethereum differs from Bitcoin in three important ways.

• First, miners can mine Bitcoin tokens on the Bitcoin blockchain. Mining no longer exists on the Ethereum network, but developers can create their own tokens, decentralized applications (dApps), and non-fungible tokens (NFTs) based on Ethereum tokens. This flexibility makes Ethereum a key pillar of the Web3 movementwhich aims to disrupt centralized application platforms like Apple App Store and Alphabet Google Play with decentralized apps and payment methods.
• Second, Ethereum requires much less electrical energy than Bitcoin. The Ethereum network previously used the same energy-intensive proof-of-work (PoW) mining method as Bitcoin and the cryptocurrency was a popular alternative for crypto mining enthusiasts with high-end graphics cardsIn September 2022, Ethereum moved to the most energy efficient proof-of-stake (PoS) method. This transition reduced the network’s total mining energy consumption by 99.95%. Ethereum supporters believe that this upgrade will make it easier to expand the Ethereum network and support more Web3 projects in the long term.
• Third, and arguably most importantly, Ethereum can run what is called smart contractsThese digital contracts contain agreements written directly into the code. The Ethereum platform constantly checks whether any of its active contracts have met their conditions and, if so, executes a code. This code can transfer ownership of physical or digital assets, move money or cryptocurrencies between different accounts, etc. This capability enables the automation and decentralization of various applications and processes.

What are the main catalysts for Ethereum?

Ethereum is now the world’s second-largest cryptocurrency after Bitcoin. It is also one of eight cryptocurrencies on the New York State Department of Financial Services’ “green list” of pre-approved cryptocurrencies. This relative stability has led the U.S. Securities and Exchange Commission (SEC) to theoretically approve Ethereum spot ETFs, followed by an actual launch on the Cboe exchange on Tuesday, July 23.

The SEC recently reiterated its view that Bitcoin is the only cryptocurrency that can be classified as a commodity rather than a security since it uses the PoW method, arguably making it comparable to the physical mining of precious metals. Original Bitcoin Design Documentwhich compares the energy-intensive computing system to mining physical gold. The SEC said that the PoS method, while more environmentally friendly, makes the cryptos that use it more similar to derivatives contracts — so in the regulator’s eyes, Ethereum is closer to a security than a commodity.

Even so, the periodic burning of Ethereum tokens could stabilize its price in the short term. Upcoming upgrades to the Ethereum network could also further facilitate financial transactions and develop more decentralized tokens and applications. More businesses could also start accepting Ethereum coin as a means of payment, and institutional investors could accumulate more cryptocurrencies through easily accessible spot ETFs.

Market Update

British multinational bank Standard Chartered made bold predictions for Ethereum.

Four months ago, the bank’s analysts were saying that Ethereum could hit $8,000 by the end of this year and $14,000 by 2025, subject to the approval of spot Ethereum ETFs. Towards the end of May, Standard Chartered doubled its price targets due to the potential for significant inflows into Ethereum following the approval of the ETFs. The bank estimated that spot ETFs could generate inflows of 2.4 to 9.2 million Ether in the first 12 months. This equates to an injection of approximately $15 to $45 billion into the Ethereum ecosystem.

If Bitcoin hits $200,000 next year, as Standard Chartered predicts, the bank expects the price of Ethereum to reach around $14,000 over the same period.

Should we believe the optimistic predictions of Wood and Standard Chartered?

Investors should take Wood’s $166,000 price target with a grain of salt. First, the famed growth investor has made plenty of bad choices. Her company’s flagship Ark Innovation Exchange Traded Fund (ARKK 0.21%) is actually down 4% over the past five years, while the S&P 500 is up 84%. Ark is also offering its own Ethereum futures ETF and is trying to get an Ethereum spot ETF approved, so Wood’s opinion may be subjective.

That said, Wood strongly believes that Ethereum’s expanding developer base and its potential to “replace many traditional financial services” and “take share from existing financial intermediaries” will push its price toward its very high target by 2032. I personally believe that Ethereum could be a long way from that high price in 8 years, but it could certainly stabilize and increase in the long term if the Ethereum Foundation continues to upgrade its network.

Whether you’re a skeptic or a believer, Ethereum’s future is one to watch closely. This not-so-small cryptocurrency is going places, and Ethereum seems to an obvious purchase in the current context of market stagnation.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Anders Bylund has positions in Alphabet, Bitcoin, and Ethereum. The Motley Fool has positions in and recommends Alphabet, Apple, Bitcoin, and Ethereum. The Motley Fool recommends Standard Chartered Plc. The Motley Fool has a disclosure policy.

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