Ethereum (ETH 2.61%), the second most valuable cryptocurrency by market cap, now trades at a price of about $1,360. Getting to the $5,000 level would imply a gain of more than 375%.

That might sound overly optimistic, especially given the current market environment for cryptocurrency, but it's certainly not out of the realm of possibility. After all, less than 12 months ago, Ethereum touched an all-time-high of $4,892.

For Ethereum to retrace the path back to $5,000, a few key things will need to happen over the next 12 to 24 months. Here's a closer look at three key factors to consider.

Deliver a post-Merge roadmap

In 2022, every analyst covering Ethereum focused on The Merge. This was supposed to be the magical moment when Ethereum suddenly experienced a major upgrade in everything from transaction-processing speeds to throughput capacity to transaction fees.

But did this really happen? While a transition to a proof-of-stake blockchain from a proof-of-work blockchain was an important technological feat, we have yet to see the kinds of amazing breakthroughs -- like 100,000 transactions per second -- that were originally promised.

Ethereum gold and silver coins.

Image source: Getty Images.

That's why Ethereum needs to lay out a post-Merge roadmap to recalibrate expectations. At an Ethereum developers conference this summer, Ethereum co-founder Vitalik Buterin sketched out a very rough roadmap that he called the "Surge, Verge, Purge, and Splurge." But few specific details were actually provided.

In the same way that publicly traded companies provide "guidance" to Wall Street about what's coming next, Ethereum also needs to offer "guidance" to investors. Once this is provided, it will be much easier to value Ethereum. 

Retain a market-leading position

Part of the reason Ethereum soared to the $4,892 mark back in November 2021 was because investors almost universally perceived Ethereum to be the market leader in nearly every sector of the blockchain and crypto world. Ethereum was No. 1 in non-fungible tokens (NFTs), decentralized finance (DeFi), and new metaverse and gaming experiences. It also boasted the world's biggest blockchain ecosystem and largest army of blockchain developers.

One year later, however, the competitive landscape is much more crowded, and the media continually touts the arrival of some new "Ethereum killer." It's not so clear that Ethereum is destined to remain the market leader in every single blockchain category.

In the NFT market, for example, Solana has been aggressively coming after Ethereum. Other blockchains, too, have been upgrading to boost their own transaction speeds and throughput capacities. For Ethereum to reach $5,000, it needs to re-establish itself as the clear market leader. Quite simply, Ethereum isn't worth a premium valuation if it can't outperform its rivals.

Find a new catalyst for growth

Finally, Ethereum needs to find a new catalyst for growth. Until recently, this catalyst was The Merge. If you asked anyone why they thought Ethereum was going to soar in value, the answer was typically just two words: The Merge. However, for Ethereum to soar in value post-Merge, it needs to find a new catalyst that will captivate investors. This has to be more than just a new metaverse project or a popular new blockchain gaming experience. It needs to be something really big.

One big catalyst might be the influx of institutional investor money into crypto. We've already seen this phenomenon with Bitcoin (BTC 0.34%), which has become the favorite crypto of large asset managers like BlackRock. The next big crypto to capture these institutional investment dollars might be Ethereum.

For example, in early October, investment-giant Fidelity announced the rollout of a new Ethereum Index Fund for accredited retail investors. And speculation persists that Fidelity will roll out crypto trading for all retail investors. Back in April, the brokerage unveiled its first retirement offerings that feature crypto. As more dollars flow into Ethereum investment products, it could help to push the price of Ethereum higher.

How realistic is Ethereum going to $5,000?

Ethereum may not need a huge influx of institutional money to hit $5,000. Crypto executive Arthur Hayes, for example, suggested in August that Ethereum only needed two catalysts to hit that mark by the end of Q1 2023: a successful Merge and a "Fed pivot" on interest rates, meaning a reversal of the rate increases the central bank is using to battle inflation.

While Ethereum skyrocketing from $1,328 to $5,000 within the next six months sounds a bit optimistic, it's certainly reasonable to suggest that, over a slightly longer time horizon, Ethereum could reach this goal. I'm bullish on Ethereum eventually hitting $5,000.