Ethereum (ETH -2.51%), the world's second-largest cryptocurrency, has awakened from a long slumber. It has doubled in price in just the past three months. Over the past 30 days, it is up a dizzying 56%.
So it's perhaps no surprise that billionaire investors are now looking for ways to get exposure to Ethereum. Case in point: Billionaire tech mogul Peter Thiel just announced a 9% stake in Bitmine Immersion Technologies (BMNR -5.46%), a new Ethereum treasury company that is rapidly accumulating as much Ethereum as it possibly can. So should you also be looking for ways to invest in Ethereum?
The upside potential of Ethereum
For the first few months of the year, investors largely ignored Ethereum, and it ranked among the worst-performing major cryptocurrencies. But the last few months have seen a confluence of several key events: the passage of new crypto legislation in Congress, the buzzy initial public offering (IPO) of stablecoin issuer Circle Internet Group (CRCL 0.20%), and a new stock tokenization initiative from Robinhood Markets (HOOD 2.88%).
Each of these events, while they do not impact Ethereum directly, are very positive news for the future direction of the Ethereum blockchain. For example, the new stablecoin legislation assures a much greater role for stablecoins in the U.S. economy, and Ethereum just so happens to be the top blockchain for stablecoins. The new crypto markets legislation will likely lead to a blurring of the line between traditional finance and decentralized finance (DeFi), and Ethereum just so happens to be the top blockchain for DeFi.
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On top of all that, the Ethereum treasury company business model -- in which a company ditches its old business model and commits to raising money from investors to buy massive amounts of Ethereum instead -- has suddenly gone mainstream. Since the end of May, three publicly traded companies have embraced this model.
Just two months ago, Bitmine Immersion Technologies was a little-known Bitcoin mining company. Then it hired Wall Street strategist Tom Lee to be chairman, raised over $250 million from investors, and is now being talked about as "the MicroStrategy (MSTR -1.26%) of Ethereum." Its stock price has gone absolutely bananas, and is up 900% since the Ethereum treasury company model went into action.
Based on all this, there's now talk of Ethereum hitting $5,000 by the end of the summer, and $15,000 by the end of the year. Some have even suggested that Ethereum might zoom past $30,000. So it's no wonder Thiel (via the Founders Fund) is investing in Ethereum right now. The upside potential is just too big to ignore.
Different ways to get exposure to Ethereum
It's important to point out that Thiel is not buying Ethereum directly. He is also not buying Ethereum indirectly via a spot Ethereum exchange-traded fund (ETF). Instead, he's using a publicly traded company (i.e., Bitmine Immersion Technologies) as a proxy stock.
This is the same approach we saw with MicroStrategy (now known as Strategy) before the new spot Bitcoin ETFs launched last year. People invested in Strategy to get exposure to Bitcoin. That was because Strategy had so much Bitcoin on its balance sheet that it was almost the same thing as investing in a spot Bitcoin ETF.
In this case, however, Ethereum ETFs already exist. As a result, there should not be a need for a proxy stock. So why is Thiel choosing Bitmine Immersion Technologies as his preferred way to get exposure to Ethereum?
Thiel is likely trying to capture the same type of market outperformance as Strategy, which is up a head-spinning 3,517% over the past five years. During that time period, Strategy has outperformed even Bitcoin. The growing consensus is that crypto treasury companies can markedly outperform the crypto that they are accumulating.
Is Ethereum worth the hype?
Just remember: There's a lot of hype and buzz right now surrounding Ethereum. The hope is that Ethereum will suddenly turn itself around and go all-in on stablecoins, DeFi, and tokenization. As a result, its crypto price will take off on a rocket ship, and Ethereum treasury companies will go along for the ride.
But blockchains are not companies. They are incredibly decentralized organizations, relying on vast developer networks spanning the globe to make things happen. So there's no guarantee that Ethereum will strike while the iron is hot. Its legendary co-founder, Vitalik Buterin, has said over and over again that he does not want Ethereum to become a "degenerate casino" motivated by greed and powered by Wall Street speculation.
So keep your expectations in check. While Ethereum is certainly within striking distance of a new all-time high of $5,000, it will take a lot to go right for Ethereum to soar significantly higher than that.
