In 2022, Ethereum (ETH) experienced a significant drop of 68%, but it made a strong comeback in 2023 with a 91% increase. This resurgence was driven by renewed optimism in the crypto industry.
Despite this recovery, Ethereum is still 49% below its all-time high. However, this dip could be a rare opportunity for investors.
The question is, should investors buy Ethereum while it’s still trading below $2,500? To make an informed decision, let’s examine both the bull and bear cases for Ethereum.
On the bullish side, Ethereum was the first cryptocurrency to incorporate smart contract functionality, giving it a greater potential for various use cases. This includes decentralized applications in gaming, social, governance, and art. The most promising use case, however, is decentralized finance (DeFi). Currently, Ethereum has 71% of the total value locked in the entire crypto industry, indicating its dominance in this sector.
Moreover, Ethereum’s network recently transitioned to a proof-of-stake consensus mechanism, known as “The Merge.” This upgrade has significantly reduced its energy consumption and increased its capacity to process more transactions at lower costs. This makes Ethereum an attractive platform for developers, further driving its growth potential.
Another reason to consider investing in Ethereum is the possibility of spot exchange-traded funds (ETFs) being approved by the SEC. With the recent approval of Bitcoin spot ETFs, there is optimism that Ethereum could also receive approval. This would bring in institutional capital, potentially supporting a higher price for Ethereum in the long run.
On the bearish side, the control of Ethereum by a small group of individuals, led by co-founder Vitalik Buterin, is a cause for concern. This centralization goes against the core principle of cryptocurrencies, which is to give power to the community. There is also a comprehensive roadmap for future upgrades to the network, known as “The Surge, Verge, Purge, and Splurge,” which adds technical risks to the platform.
Additionally, regulatory concerns cannot be ignored. SEC chair Gary Gensler has indicated that he views Bitcoin as a commodity, but all other cryptocurrencies are likely securities. This could mean a stricter regulatory framework for Ethereum, potentially discouraging investment and talent in the platform.
Ultimately, whether or not to invest in Ethereum depends on one’s risk tolerance and portfolio goals. Both the bull and bear cases have valid arguments, and investors should carefully consider the facts before making a decision. If willing to take the risk and withstand volatility, a small investment in Ethereum below $2,500 could be worth considering, with a long-term mindset of at least five to 10 years.
Disclosure: Neil Patel holds positions in Bitcoin. The Motley Fool also has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.