Bitcoin (BTC -2.36%) has seriously overshadowed Ethereum (ETH -3.67%) this year. The leading crypto rallied to a new all-time high in January, while Ethereum struggled to come close to its 2021 glory days. This week, Bitcoin set a new price record, and Ethereum is still almost 50% below its record high set in late 2021.
However, the tide may be shifting. Ethereum has gained about 50% during the past month. Moreover, several factors might push its price higher before year-end. If you're wondering whether now is a good time to buy Ethereum, here are some considerations that may figure in its price.
Why Ethereum could be poised for a rally
Ethereum has a lot going for it. It's more accessible than almost every other crypto, since the Securities and Exchange Commission has only approved spot exchange-traded funds (ETFs) for Bitcoin and Ethereum. It's the second-biggest crypto by market cap, and -- as the original smart contract crypto -- it's home to thousands of projects and billions of dollars' worth of assets. Smart contracts are tiny pieces of code that live on the blockchain and make it programmable.
The difficulty is that it's been plagued by scalability issues for some time. From slow transactions to relatively high gas (user) fees, Ethereum has become the crypto people love to hate. Even so, it has the most development activity of any network and a proven history of successful technical upgrades. And its price is starting to rally.
The following tailwinds could push it even higher in the coming months:
- Its recent Pectra upgrade was a success. The upgrade, which improves staking and usability, is another step on Ethereum's journey to increased scalability. Ongoing developments are part of what keeps the Ethereum engine secure and running.
- The GENIUS Act could be good for Ethereum. The bipartisan legislation that sets a framework for stablecoins took another step forward this week and will soon be put to the Senate. The Ethereum ecosystem is home to many stablecoins, as well as a large chunk of the decentralized finance projects. As such, clearer regulation could promote growth for the blockchain.
- Investors are holding Ethereum. Blockchain analytics firm Santiment reported this week that the amount of Ethereum on crypto exchanges is at an all-time low. Just 4.9% of the Ethereum supply is held on centralized exchanges. Limited supply on exchanges is often seen as a sign of investor confidence. The fact that people are storing their assets elsewhere can mean they aren't planning to sell.
Image source: Getty Images.
Critics are missing Ethereum's strong ecosystem
Standard Chartered recently slashed its price forecast for Ethereum. It now expects the beleaguered crypto to reach $4,000 by the end of the year. That's still about a 60% higher than today's price. It cited scalability issues and questioned the project's fundamentals.
Those are legitimate concerns, but there's one point that Ethereum critics miss: Ethereum is still being used. People trust it and build on it. DefiLlama says that more than half the money -- $60 billion in total locked value -- that's on crypto platforms is on Ethereum.
For all the talk about so-called Ethereum killers, none of them have yet displaced it. Sure, faster, newer cryptocurrencies like Solana (SOL -0.53%), Tron (TRX -1.25%), Avalanche (AVAX -4.67%), and more have taken some market share. Investors can't ignore Ethereum's issues or the competition it faces. However, Ethereum's reliability and the fact that developers know how to use it mean it is still very much in the game.
Ethereum's still got potential
One of the challenges with long-term crypto investing is that it is a very speculative asset class. In an industry where investors are often chasing the next big thing, old favorites can get left behind.
It's true that Ethereum hasn't seen the same price action as Bitcoin this year. Still, the work has continued, and its ecosystem is a force to be reckoned with. As the crypto industry matures, solid projects with proven track records and real-world utility may capture investor attention again. That may include workhorse Ethereum.
