As of January 16, Ethereum (Cryptocurrency: ETH) The cryptocurrency is up 37% in one year. However, the process has been a wild ride, with token prices ranging from $2,220 to $4,070. All told, the second-largest company in cryptocurrency barely outperformed S&P 500 Index Stock market index over the same period.
This morning, Ethereum was worth approximately $3,333 per coin. I like the alliteration and repeating patterns, but the cryptocurrency won't stay at this attractive price for long. (In fact, the price has changed since I wrote this - it's hard to keep up with these volatile digital assets.)
But if you want to be an Ethereum owner, none of this matters. What matters is whether the smart contract platform is poised to move higher, or whether it peaked 10 months ago.
The value of Ethereum has exceeded $3,500 several times before. The price reached this level at least seven times in 2024, briefly topping $4,000 in May and December. These peaks aren’t even record-setting — Ethereum’s all-time high was a brief hit of $4,892 in November 2021.
A brief review of the cryptocurrency price chart shows that it tracks a four-year cycle Bitcoin (Cryptocurrency: BTC) Halving event. After each Bitcoin halving, Ethereum prices tend to surge for about a year, then surge for another year or so before falling back during crypto winter. If the market is to reiterate this pattern, then from a timing perspective, Ethereum and other cryptocurrencies are in the early stages of a new bull run.
However, there are many problems with this chart browsing analysis.
Like stocks, Ethereum's past performance is no guarantee of its future performance.
Each Bitcoin halving cycle is different from the previous halving cycle, and this one is no exception. Several price-rising events impacted Ethereum last year, potentially denting its short-term upside potential in 2025.
Ethereum’s chart history is quite short. This is only the third cryptocurrency market cycle since the launch of Ethereum in 2014. Perhaps investors shouldn't draw conclusions based on this limited pool of data.
This brings me back to my first point - past chart curves don't really tell you what's going to happen next. Technical analysis is neither an art nor a science, but more like gambling. I would not recommend making an investment decision on such tenuous premises.
Let's forget about price charts for a moment. What exactly happened to the Ethereum project? What does this mean for owners, users and investors in the long term?
Bitcoin and Ethereum are both essentially encrypted transaction ledgers that are managed on a public computer network. But their purposes are fundamentally different.
Bitcoin provides a digital coin that can be used for payments, and its value should rise over time due to growing demand and strictly limited supply.
Ethereum is the functional currency of a large global computer. Smart contracts embedded in its transactions execute automatically, performing various digital functions based on real-world data. This feature is at the heart of decentralized finance (DeFi) systems, which move financial processes from banks to your smartphone.
Therefore, the coin's value does not depend on a strict supply limit. It’s all about smart contracts finding many use cases, millions of daily users, and tons of actual Ethereum transactions. Every transaction happens something in someone's blockchain wallet or decentralized game or whatever, and those transactions incur gas fees. Some of the tokens used to cover these fees are “burned” – permanently removed from circulation. The rest is distributed to ether holders, which gives them the opportunity to verify transactions on the blockchain and ensure their security. Importantly, you can pay extra gas fees to execute smart contracts faster, which will cause prices to rise significantly when Ethereum-based applications become mainstream.
Additionally, Ethereum has been upgrading its software. Upcoming improvements include tighter security, changes leading to cheaper transaction fees, and laying the technical foundation for future game-changing upgrades. These improvements are needed to avoid challenges from younger, faster smart contract platforms. It would be a shame to build a global marketplace for decentralized applications only to see Solana (Cryptocurrency: SOL) and Cardano (Cryptocurrency: ADA) Reap all the long-term benefits of your job.
What’s missing from this overview is the timeline for decentralized finance applications to take off. With or without Bitcoin's help in determining price trends, Ethereum's true value won't become clear until we see the first killer applications of the DeFi and Web3 movements.
Determining an appropriate value for a digital transaction tracking network is difficult, especially in a rapidly changing market with multiple reliable alternatives.
In other words, I believe that DeFi and Web3 will completely change personal finance around the world. Disrupting the vast banking industry will be a difficult task, but it may also be inevitable. By 2025, the financial systems you use every day have been around for decades or even centuries, and better tools are now available.
Despite the presence of numerous challengers, Ethereum remains the leader in the smart contract space. There are many signs that the user community is healthy. More than half of all cryptocurrency value locked in application development projects belongs to the Ethereum market. There are approximately 300 million active addresses on Ethereum, compared with 130 million four years ago.
Over time, the network effects of a rapidly expanding user base should boost Ethereum’s value. According to Metcalfe's law, the value of any network is proportional to the square of the number of participants. This value formula was originally applied to telecommunications networks in the 1980s, but has also been applied to the Internet, social networks, airport networks, and financial services.
At this point, I expect the real-world value of Ethereum to skyrocket as more and more people embrace Ethereum as a fast and cheap solution to age-old financial problems. I can’t guarantee that $3,333 is the best buy price ever; nonetheless, I see a bright future for this cryptocurrency community in the long term, and this coin should create value over time .
Ethereum may or may not surge in 2025, but it doesn't matter. I recommend holding this cryptocurrency for the long term.
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Anders Bylund holds positions in Bitcoin, Cardano, Ethereum, and Solana. The Motley Fool holds and recommends Bitcoin, Cardano, Ethereum, and Solana. The Motley Fool has a disclosure policy.
Should you buy Ethereum when it’s below $3,500? Originally posted by The Motley Fool