As I'm writing this on Monday evening, one Ethereum (ETH +4.05%) coin is worth $2,482. The leading smart contracts coin is dipping below the $2,500 mark for the first time since last November, and you'd be down by nearly 15% if you bought Ethereum a year ago.
Incredibly, you also lost money if you held on to the Ethereum you bought in April 2021. By contrast, Bitcoin (BTC +2.98%) gained 70% over the same nearly five-year period while the S&P 500 (^GSPC +0.83%) stock market index rose 43%.
Is Ethereum's heyday already behind it, or is it a no-brainer buy at this historically low price? Let's consider three crucial questions. A firm "no" to any of these queries would be terrible news for Ethereum in the long run.
CRYPTO: ETH
Key Data Points
Is crypto going away?
Ethereum's days could be numbered if cryptocurrencies and blockchain networks are going out of style.
But growth investing mastermind Cathie Wood expects Bitcoin to reach a million-dollar price in the next five years. Institutional investment firms are rolling out crypto-based exchange-traded funds (ETFs) and assigning a small portion of their wealth-building strategies to crypto assets. The current White House administration wants to build a crypto-based stockpile, similar to the gold reserves of Fort Knox. Long story short, investors of all stripes are taking cryptocurrencies more seriously these days.
Yes, most of them focus on Bitcoin's inflation-proof value conservation. But there are Ethereum ETFs too, led by financial colossus Blackrock's iShares Ethereum Trust (ETHA +2.95%). And that brings me to the next game-changing question.
Is there a place for Ethereum-style smart contracts in crypto's future?
So cryptocurrencies may have a robust future, but what if it turns out to be all about Bitcoin in the end? Does Ethereum have a serious role to play in the next era of the crypto market's development?
Well, Bitcoin is a very simple digital asset. It holds transaction records, and was designed to dodge inflationary forces forever. Park your money in that digital asset and watch it grow over time. That's the whole idea.
Ethereum is very different. It was designed with other goals in mind, focused on the utility of smart contracts. These are computer programs that are executed when certain preset conditions are met. With the help of data-feeding oracle coins like Chainlink (LINK +4.56%) and a rising number of Ethereum-compatible financial apps, Ethereum can do all kinds of bank-like tricks. This is the heart of the decentralized finance (DeFi) industry. Without Ethereum's smart contracts, you'll be stuck with traditional banking forever -- complete with high fees, slow transactions, and limited hours of operation.
But Ethereum isn't the only name in the game...
Can Ethereum hang on to its "preferred provider" status?
There's a plethora of so-called "Ethereum killers" out there. Solana (SOL +4.90%) and Cardano (ADA +2.61%) can close transactions and run smart contract processes much faster than Ethereum. Others come with far lower transaction fees. And the sheer number of alternatives suggests that Ethereum might be old news already.
But Ethereum's developer activity is holding steady over time while Solana's project volume plunged last spring and Cardano's is trending downward. In other words, Ethereum is still the smart contracts platform to beat, and the technical advantages of leading challengers aren't turning the tables.
Furthermore, the challengers have some catching up to do. Ethereum started building a developer community years before the rest, and neither Solana nor Cardano are fully compatible with the leading platform. Therefore, developers must learn a new language and radically different programming concepts to switch over from Ethereum projects. Steep learning curves can hold back technically superior alternatives.
There are also fully Ethereum-compatible systems such as Avalanche (AVAX +5.07%) and Polygon (POL +0.14%). But Polygon is actually a token on the Ethereum blockchain and Avalanche's developer community is tiny. They are not real threats to Ethereum's market dominance.
Is Ethereum a buy today, then?
Ethereum could fail in many ways, but I don't see any of these hazards materializing right now. Things can change over time, but don't forget that Ethereum is evolving, too. The organization keeps rolling out important technical improvements every year, aiming for faster transactions and lower fees without sacrificing data security and usability.
The upgrades are running ahead of schedule, even. So-called second-layer networks such as Arbitrum and Optimism (OP +3.44%) sped up the main Ethereum network so much that the long-awaited introduction of sharding (splitting up the blockchain network into several systems running in parallel) was canceled.
So I expect Ethereum to remain as a leading provider of smart contract services in the long run. A few alternatives only make the industry healthier, inspiring technical progress to stay ahead of hungry upstarts. And a strong developer community should eventually drive Ethereum's price chart to new heights.
I can't promise that Ethereum will soar in 2025, or even in the next few years, given the unexpected slowdown in recent years. Still, $2,500 looks like a great starting price for patient investors.
In fact, I doubled my modest Ethereum holdings a couple of weeks ago at the slightly less inspiring price of $2,730 per coin. Now I'm seriously considering taking another bite of the tasty Ethereum pie, at a more attractive price. You could follow my example unless you think I'm wrong about Ethereum's place in the long-term crypto market.
