It's been a strange year for Ethereum (ETH 1.20%). The world's second-largest crypto exploded out of the gate early, soaring from $2,200 in January to $4,000 by mid-March. It looked like Ethereum was easily going to reach the $5,000 mark by the end of the year.
But that's not what happened. Ethereum fell in value after hitting its high-water mark of $4,000, and now sits right at the $3,000 level. The good news, though, is that there are two key catalysts that could help Ethereum reach the $5,000 level by the end of 2025.
The arrival of altcoin season
First and most importantly, there's the arrival of "altcoin season." This refers to the period of the crypto bull market cycle when lesser-known altcoins explode in value. This typically happens during the early stages of a Bitcoin halving cycle, when investors start to diversify their holdings in search of higher returns.
Consider what happened during the previous altcoin season, which lined up nicely with the start of the previous Bitcoin halving cycle in May 2020. On the date of the halving, Ethereum was trading under $200. One year later, it was trading for $3,800. It eventually went on to hit an all-time high of $4,891 in November 2021.
While there's no guarantee that this same pattern will happen again in 2024, it's clear that investors are starting to look around for other places to invest their money beyond just Bitcoin. Thus far, meme coins and AI crypto tokens have gotten all the attention, but the time could be coming soon for larger-cap cryptocurrencies such as Ethereum.
The approval of spot Ethereum ETFs
The other big factor would be SEC approval of new spot Ethereum exchange-traded funds (ETFs) similar to the new spot Bitcoin ETFs. Admittedly, these spot Ethereum ETFs would likely not see the same types of inflows as the new spot Bitcoin ETFs, but the influx of new money would still be significant. And that new influx of money would presumably help to push the price of Ethereum higher over the next 18 months.
Image source: Getty Images.
As in the case of the Bitcoin ETFs, there are a number of influential Wall Street players fighting to make them a reality. These include the likes of Ark Invest and BlackRock, both of which now have extraordinarily successful spot Bitcoin ETFs. Approval for these new spot Ethereum ETFs was supposed to come in May, but it now looks like the Securities and Exchange Commission (SEC) will push off approval for these ETFs until the end of the summer.
The impact of these new spot Ethereum ETFs could be huge. Arguably, the primary reason why Ethereum soared in price from $2,200 to $4,000 earlier this year was the expectation that the new spot Ethereum ETFs were coming soon. Wall Street got a bit ahead of itself, and was already starting to price in their impact. So, it's not out of the range of possibility that Ethereum could soar from its current price of $3,000 to $4,000 once these new investment products are approved.
Beware the SEC
The only problem, of course, is that there's something about Ethereum that the SEC does not like. Ever since Ethereum transformed from a proof-of-work blockchain to a proof-of-stake blockchain in September 2022 as part of The Merge, the SEC has been looking for reasons to classify Ethereum as a security.
Recently, the concerns about potential SEC oversight have returned, and that has had a chilling effect on Ethereum's price. That's why I don't think Ethereum will reach the $5,000 mark this year -- investors need to have absolute clarity about regulatory risk before Ethereum can skyrocket in price.
The good news here is that the regulatory climate appears to be shifting in Washington, D.C., in favor of pro-crypto legislation. And some lawmakers have spoken out publicly about the potential overreach of the SEC and the need to change crypto's regulatory framework after the 2024 election.
How high can Ethereum go?
The future price trajectory of Ethereum will depend, to a considerable degree, on the price trajectory of Bitcoin. If you assume that Bitcoin can hit a price of $150,000 by the end of 2025, as many crypto investors now do, then Ethereum has the potential to soar in value to $7,500.
Using just a few back-of-the-envelope calculations, it's easy to see why this is possible. A $150,000 price tag for Bitcoin implies a $3 trillion market cap. If you then multiply that figure by 0.3 (which is the ratio of Ethereum's current market cap to Bitcoin's current market cap), you arrive at a market cap figure of $900 billion for Ethereum by the end of 2025. Given Ethereum's circulating coin supply of 120 million, that implies a price of $7,500.
So, while $5,000 might sound at first like a pie-in-the-sky price forecast, it's really not. In fact, it's a bit conservative. As long as the SEC doesn't get involved, Ethereum has a real chance to hit $5,000 by the end of 2025.
