For the first six months of 2023, Ethereum (ETH 5.95%) was one of the standout performers in the crypto market. Ethereum is now up 55% year to date, and was recently trading at $1,865.
However, of late, Ethereum has had difficulty pushing past the $2,000 price level, much as Bitcoin had trouble breaking through the $30,000 mark. Clearly, crypto investors are mixed on what's going to happen next in the financial markets, and there could be some turbulence ahead. So should you buy Ethereum while it's still trading below $2,500? Here's what you need to know.
Ethereum as market leader
One major factor in Ethereum's favor is that it remains the acknowledged market leader in just about every niche of the blockchain and crypto world, from non-fungible tokens (NFTs) to decentralized finance (DeFi), the metaverse, and Web3. In part, this is due to Ethereum's first-mover advantage. Ethereum was first to market with innovations such as smart contracts, and has not let up since then, despite the arrival of many new competitors.
Image source: Getty Images.
Take, for example, the NFT market. Ethereum created the NFT boom with groundbreaking collections such as the Bored Ape Yacht Club and the CryptoPunks, and these remain among the most valuable NFT collections in the world. All of the top 25 NFT collections are on the Ethereum blockchain. And while Bitcoin has had some recent success with the introduction of Ordinals, Ethereum still remains the top blockchain in terms of NFT sales volume. As a long-term investor, that's exactly what I'm looking for: a best-in-class crypto with a clear competitive advantage and a huge market share edge.
Track record of tech upgrades
Another key factor in Ethereum's favor is its strong track record of new technological upgrades. With each new upgrade, Ethereum remains one step ahead of the competition. Last year, for example, Ethereum captured the imagination of investors with The Merge, its long-anticipated transformation from a proof-of-work blockchain to a proof-of-stake blockchain. This was a technological tour de force, with some comparing its difficulty level to that of changing the engine of an airplane mid-flight.
And Ethereum shows no signs of letting up on these technological upgrades for its underlying blockchain infrastructure. In April, Ethereum completed the Shapella upgrade, which made Ethereum much more attractive for crypto staking. The next major upgrade, tentatively known as Dencun (a mashup of "Cancun" and "Deneb"), is coming in the fourth quarter of 2023. This upgrade will further improve Ethereum's storage capacity, scalability, and efficiency. The goal is now 100,000 transactions per second for the Ethereum blockchain, which is far more than what any of its primary competitors can offer.
At the end of 2022, Ethereum co-founder Vitalik Buterin unveiled a comprehensive series of updates and upgrades designed to transform Ethereum into "Ethereum 2.0." While many of these upgrades are incredibly wonky from a technological perspective, all of them are designed to make Ethereum more attractive for both users and developers. This detailed roadmap for future development gives me tremendous confidence that Ethereum is playing the long game here, and is not just reacting instinctively to temporary moves in the crypto market.
Important caveats
Of course, investing in Ethereum is hardly a slam dunk. First of all, Ethereum has plenty of competitors, all of them vying to become an "Ethereum killer." And that means tremendous competition in areas such as NFTs, DeFi, the metaverse, and Web3. Over time, it is likely that Ethereum's market share in each of these segments will decline.
Moreover, while Ethereum's tech upgrades are impressive, they are also extremely complex, time-consuming, and, at times, frustrating. The Merge, for example, was filled with a series of delays, to the point where some investors questioned whether it was going to happen at all.
And, of course, crypto remains a volatile and speculative investment filled with regulatory uncertainty. Any new crypto crackdown by the Securities and Exchange Commission (SEC), for example, could put an immediate halt on Ethereum's growth ambitions.
That being said, I remain bullish on Ethereum's future prospects. Ethereum has a best-in-class blockchain, a clear competitive advantage, and plenty of diversification, thanks to its prowess across a wide range of blockchain niches. Moreover, Ethereum has planned a series of new tech upgrades that will only make it better over time. All of which leads me to believe that, yes, you should buy Ethereum while it's still below $2,500. Even at that elevated price, Ethereum would still be nearly 50% below its all-time-high, suggesting that there's plenty of upside potential ahead.
