Amid the current crypto market rally led by Bitcoin, there's one crypto that seems to be getting completely overlooked: Ethereum (ETH 1.22%). That's somewhat surprising, given that Ethereum is the world's second-largest cryptocurrency, with an enormous $290 billion market cap.
However, the hype around a spot Bitcoin exchange-traded fund (ETF) has focused investor attention squarely on Bitcoin. At the same time, a number of direct Ethereum rivals skyrocketed to triple-digit percentage gains last year, and have become the new darlings of crypto investors looking for maximum upside. But there are several reasons Ethereum might be undervalued at its current price of about $2,400.
Ethereum vs. the wannabe Ethereums
At the end of 2022, Ethereum was the talk of the crypto industry. It had just pulled off The Merge, which fundamentally transformed its blockchain to make it faster, cheaper, easier to use, and much more energy efficient. The hype around Ethereum grew to the point where some investors even thought that Ethereum might eventually surpass Bitcoin in terms of market cap.
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But then came 2023. All of a sudden, rival blockchains like Solana started gaining traction with investors. At one point, Solana was up more than 1,000% for the year. Avalanche, another Ethereum rival, was up nearly 200% for the year. By way of comparison, Ethereum was up 90%, and seemed to be losing the attention of investors.
So the big question is whether Ethereum is still best-in-class. If you think that the so-called Ethereum killers are just a bunch of Ethereum wannabes with no long-term staying power, then Ethereum could be highly undervalued at its current price. But if you think that Ethereum's long reign as the top Layer-1 blockchain network in the world is coming to an end, then it's a completely different story.
A spot Ethereum ETF incoming?
Right now, the imminent arrival of the first spot Bitcoin exchange-traded fund (ETF) for the U.S. market is getting all the headlines. But, according to a growing number of crypto investors, a spot Ethereum ETF could be coming soon. And that means that Ethereum could soon get the same type of boost Bitcoin is getting right now.
Certainly, the underlying logic makes sense. Wall Street is looking for more reliable ways to invest in crypto, and has apparently determined that the ETF investment product is the best way to achieve this. Once it can show that a spot Bitcoin ETF is successful, then it's time to crank up this formula for every other major cryptocurrency.
Given Ethereum's market heft -- it now accounts for about 17% of the market value of the entire crypto market, second only to Bitcoin -- it would only make sense that Ethereum would be next in line for a spot ETF. And, indeed, there is already an application in the works for just such a product. In September, Cathie Wood's Ark Invest filed for a spot Ethereum ETF. If the Securities and Exchange Commission (SEC) decides to approve this (admittedly, a big "if"), it could result in billions of dollars flowing into Ethereum, pushing up its price.
A sexy new upgrade
Finally, there's the matter of Ethereum's next big upgrade. Ethereum recently published its strategic roadmap for 2024, and one item on the roadmap that caught the attention of investors was something called EIP-4844 ("Ethereum Improvement Proposal 4844"). Basically, this is a proposed technical change that would enable the processing of transactions on the Ethereum blockchain to become much faster and more efficient.
I know, I know. You're probably rolling your eyes right now. What a bunch of blockchain babble, right? But consider that EIP-4844 got J.P. Morgan really excited. In a research note to clients, JPMorgan specifically referred to EIP-4844 as a key reason it thinks Ethereum could outperform Bitcoin in 2024. That's because this major technical change would make it theoretically possible for the Ethereum blockchain to handle 100,000 transactions per second, up from about a dozen or so now. With that type of speed, Ethereum would basically be unstoppable.
How much higher can Ethereum go?
First and foremost, Ethereum needs to convince investors that it is still the preeminent Layer-1 blockchain network. So keep an eye on how Ethereum deals with the growing threat from the likes of Solana. As long as investors buy into the idea that Solana is a faster and more cost-efficient version of Ethereum, it's hard to see Ethereum skyrocketing in price.
CRYPTO: ETH
Key Data Points
With that in mind, it's certainly possible to find a number of bullish Ethereum price predictions for 2024. Some crypto traders think that Ethereum could double, triple, or even quadruple in value. I may not be as bullish on Ethereum, but I'm certainly open to the idea that Ethereum could surprise a lot of people in 2024.
