Previewing what may be in store for Ethereum (ETH 3.61%) in 2022, Fool.com contributor Chris MacDonald and The Motley Fool's Eric Bleeker discuss the outlook for this megacap cryptocurrency. This discussion was seen on the Dec. 15 episode of "The Crypto Show" on Backstage Pass.
Eric Bleeker: Second in our line of 2022 previews I alluded to earlier, we would be discussing Ethereum more. Its current price is around $3,800. That's a market cap of $450 billion in the bull case.
Once again, Cathie Wood's saying it's even more undervalued than Bitcoin (BTC 2.22%), implying it's even more undervalued than -- what was Bitcoin, a 10x? [laughs] -- that price model. The bull case: New worlds to be built on top, which is this year, we saw an emergence in a big way of DeFi [decentralized finance] and NFTs [non-fungible tokens]. What could be the future breakthroughs being built on top of Ethereum?
For my money, that would likely be some metaverse and true gaming applications, as I discussed on last week's show.
On the bear case, persistently high gas prices, which is basically transaction fees, open the door for competition. And it's still in the process of massive transitions in its underlying technology, which is what Chris just alluded to in the mining answers, that Ethereum continues to work toward moving from proof-of-work to proof-of-stake, which is not a trivial undertaking.
Chris, I just teed it all up. What are you watching for in 2022 with Ethereum?
Chris MacDonald: Teed it up really well. You actually stole my thunder there with the metaverse. [laughs]
Ethereum, like I mentioned before, it's the layer 1 building block for a lot of these really popular DeFi projects, and whether that's NFTs or the metaverse. There's a large range of opportunities available to investors -- and users, really -- in the crypto world because of Ethereum.
When investors think about Ethereum, you've got to go all the way back to the beginning of its inception with smart contracts and being probably the first and the largest network to incorporate smart contracts.
That's really paved the way for decentralized finance and these real-world use cases to be made possible in the crypto world. You don't really see this with Bitcoin. Maybe as a store of value, you can make the argument that Bitcoin is the better bet. As a store of utility, perhaps Ethereum remains the top dog for a reason.
I think the update that's coming up, which would in theory move it to a proof-of-stake platform, and reduce its fees, speed up the platform, the network -- there are some risks with that, too. So like you mentioned, you've put it under the bear case. There's some bull and bear aspects to it.
But one of the things that people will be looking at is how this hard fork actually goes. Because there have been some issues with previous hard forks in the past. There's still some concern around how everything will ultimately work out next year.
