Currently trading at just under $2,000, Ethereum (ETH 2.15%) has a market capitalization of $227 billion, making it the world's second-largest cryptocurrency. Ethereum now accounts for about 20% of the entire value of the $1.2 trillion crypto market.
So what would it take for Ethereum to more than quadruple in value to become a trillion-dollar cryptocurrency? For one, it would require Ethereum to continue to find innovative use cases for its blockchain technology. Second, it would most likely require Ethereum to surpass Bitcoin (BTC 0.13%) as the world's most popular cryptocurrency. Let's take a closer look at both of these factors.
Post-Merge roadmap
The good news is that Ethereum's co-founder, Vitalik Buterin, has plenty of upgrades, changes, and tweaks planned for the cryptocurrency. At the end of November 2022, he released an updated roadmap for Ethereum, and it's impressive. According to Buterin, Ethereum's transformation is still only 55% complete, even after last year's landmark upgrade known as The Merge. There are five big upgrade stages ahead, known as the Surge, Scourge, Verge, Purge, and Splurge.
The big question, of course, is what types of innovative use cases will emerge from each of these upgrades. In April, we saw the completion of one such upgrade, known as Shapella, which made crypto staking on the platform much more attractive to investors. The next big upgrade, now scheduled for the end of 2023, could lead to Ethereum being able to support 100,000 transactions per second in the near-term future. That type of raw processing speed would make Ethereum much more attractive to both users and developers.
Image source: Getty Images.
Ethereum has a strong track record of innovation, and each new improvement to the blockchain typically leads to a completely unexpected new use case scenario. Thus, if there are five upgrades ahead, that's five new opportunities for new breakthrough innovations. Ethereum's post-Merge roadmap might be incredibly wonky, filled with terms like "proto-danksharding," but I think it could be the key to unlocking this crypto's full valuation potential.
Can Ethereum flip Bitcoin?
In crypto circles, one hypothetical scenario is known as "the flippening." This is the moment when Ethereum finally surpasses Bitcoin as the world's most valuable cryptocurrency. Throughout its history, Ethereum has always played second fiddle to Bitcoin in terms of market capitalization. At some point, though, Ethereum could eventually "flip" Bitcoin.
Most likely, Ethereum will need to surpass Bitcoin for it to become a trillion-dollar cryptocurrency. Until it happens, the math simply doesn't work. Investors can't assume that the entire crypto market is going to increase in value at the same rate as Ethereum. The math only works if Ethereum gains market share from other cryptos such as Bitcoin.
There are several factors in Ethereum's favor here. A big one is Ethereum's smart contract platform, which gives it much greater utility than Bitcoin. With Ethereum, the number of use cases includes non-fungible tokens (NFTs), decentralized finance (DeFi), gaming, the metaverse, and Web3. And just about every new technological innovation -- such as artificial intelligence -- is better suited to running on Ethereum than Bitcoin. Thus, in the near-term future, it is likely that Ethereum will grow faster than Bitcoin.
CRYPTO: ETH
Key Data Points
Moreover, thanks to The Merge, Ethereum is now a modern proof-of-stake blockchain, while Bitcoin is still an old proof-of-work blockchain. That means Ethereum no longer requires crypto mining, and that makes the blockchain 99.9% more energy efficient. Given the debate on the environment and climate change, this is a big deal. For example, in September 2022, the White House released a detailed study on the harmful environmental effects of Bitcoin mining. As people become more aware of the environmental effects of different cryptos, it might lead to more investors moving their money out of Bitcoin and into Ethereum.
The path to $1 trillion
While Ethereum definitely has a path to a $1 trillion market cap, the road will not be easy. Consider, for example, that only a handful of stocks currently have trillion-dollar market valuations. Getting to this valuation for Ethereum would represent a real milestone, and one that will likely require overcoming a number of regulatory obstacles along the way.
Nevertheless, I'm bullish on Ethereum's medium- to long-term prospects. Within the next few years, it is entirely within the realm of possibility that Ethereum will become a trillion-dollar cryptocurrency as long as it continues to execute on its roadmap for growth.
