Ethereum (ETH 0.89%) is a cryptocurrency that really doesn't get as much attention as it probably should. Over the past week, that's certainly true, with any sort of discussion around Ethereum dwarfed by the massive catalyst that hit the overall crypto sector -- the highly anticipated approval of spot Bitcoin (BTC 0.10%) ETFs by the Securities and Exchange Commission (SEC).
This key catalyst initially drove a significant amount of buying interest in Bitcoin but has since given way to outperformance for Ethereum. As it turns out, investors are clearly focused on the next crypto with a big catalyst on the horizon, which could certainly be the introduction of spot Ethereum ETFs. Given the rather positive stance regulators have taken with Ethereum, market anticipation around such an event has driven Ethereum upward this week to levels not seen since spring 2022.
Now, the question is whether this momentum can continue. For long-term investors, the question of where Ethereum may be in three years' time is one that is certainly worth trying to answer.
No one knows where any asset will ultimately end up over any given period of time, and I'm not going to suggest I have a crystal ball. However, I'll attempt to at least rationalize why I think Ethereum will more likely than not continue to move higher over the next three years and potentially surge past its previous highs.
CRYPTO: ETH
Key Data Points
Ethereum ETF hype should be taken seriously
It's not just crypto bros, talking heads, and pundits suggesting spot Ethereum ETFs could be on the horizon. There's been some rather compelling commentary from big-name investors around the potential approval of such investing vehicles, with Blackrock (NYSE:BLK) CEO Larry Fink opining on this topic.
Fink noted in a recent interview that he believes there's "value" in a spot Ethereum ETF being launched at some point. His view is that Ethereum is among the most viable assets within the crypto space, and while these aren't necessarily currencies by technical definition, they do carry value similar to other assets like gold. That's a rather widespread view among mainstream investors, and given the SEC's stance toward Bitcoin and Ethereum, if regulators take a similar view, it's certainly likely we could see spot Ethereum ETFs on the horizon.
It's worth pointing out that Blackrock is among the companies that have applied for a spot Ethereum ETF already. So, perhaps there's some level of "talking his book" that investors need to price in. But given the interest major institutional investors have in promoting digital assets as a viable investment-grade option, Ethereum certainly has a future catalyst investors need to watch closely.
Tokenization likely to remain a key catalyst for Ethereum investors
The tokenization of real-world assets, or the ability to trade rights to physical assets such as art, collectibles, or even real estate, is a trend that's continuing to gain steam. In 2023, it's been estimated that the total value of all real-world assets that have been tokenized and trade on the blockchain has doubled, from around $1 billion at the start of 2023 to $2 billion at year's end. Notably, much of the trading volume in this nascent space has taken place on Ethereum's network, given its scale and ubiquity among users in the decentralized finance sector.
Ethereum's pole position as the leading blockchain for anything tied to decentralized finance (including tokenized real-world assets) benefits investors. Ethereum's token price has proven to be correlated over long periods of time to its network activity. Considering Ethereum's impressive ecosystem growth over the years, some investors have called into question where the next growth catalyst will come from. In the past, gaming and non-fungible tokens (NFTs) alongside other financial services took center stage. But given the nascent nature of the tokenized real-world assets market, this could be the next growth catalyst that drives Ethereum's fundamentals, and its price, higher over time.
Does Ethereum have what it takes to make new highs over the next three years?
Long-term investors can find plenty of other catalysts to focus on when it comes to Ethereum. After all, this ecosystem is vast and supports a great deal of the utility created in the crypto space. The launch of an ETF, continued growth in tokenization, and future Ethereum-network upgrades all remain key catalysts to watch over the next three years. However, who knows, maybe a bigger and more prominent catalyst will materialize. After all, this innovative space continues to evolve in rapid fashion, and I wouldn't rule it out.
My view is that over the next three years, Ethereum will continue to see the sort of volatility it's seen in the past. But given its fundamental tailwinds, and the potential for the macro- and monetary-policy environments to improve, I think it's far more likely that Ethereum makes new highs rather than multiyear lows.
