If you are thinking of investing in Ethereum (Encryption: ETH)you’re probably a little confused right now. Despite all pro-cryptic sentiments over the Trump administration, Ethereum has fallen 27% per year (as of February 11th). And market sentiment is clearly against Ethereum, which faces serious competition from lighter rivals.
But taking a long-term approach, things don’t seem so tragic. Wall Street investment firm Vaneck, for example, believes that Ethereum could raise its price to $7,334 by 2030. Ethereum’s current price represents a profit of over 185%, based on $2,570. So, what does Ethereum need to post those benefits?
Ethereum is the original smart contract blockchain network, and that’s exactly why it’s done such a great decade of execution. In 2015, we had the advantage of FirstMovers and quickly created a robust blockchain ecosystem that spreads across the blockchain world.
To come up with future price targets, Vanek looked into the activities within this ecosystem in detail. We looked into where value is created and where cash flows are created. And it made some assumptions about Ethereum’s future market share.
Ethereum is not as dominant as it once was, but ranks as a clear leader in almost every niche in the blockchain world. For example, in the world of decentralized finance (DEFI), Ethereum still accounts for an astounding 53% of the total value that is either locked or committed to smart contract services. Solana, the closest competitor, has just 9% market share.
This helps explain why the Trump administration didn’t keep Ethereum support a secret. A few days before the inauguration, the Trump debt company invested $47 million in Ethereum. All signals suggest that the Trump White House is relying on Ethereum to drive some of the big plans for the debt industry.
Image source: Getty Images.
Adding the fact that the Spot Ethereum Exchange-Traded Funds (ETF) was approved by regulators last year, it’s easy to be bullish on the Ethereum outlook. Investors now have a quick, easy and highly regulated way to invest in Ethereum. It helps Ethereum enter the mainstream.
These spot Ethereum ETFs are clearly not affecting the same price as the new spot Bitcoin ETFs, but continue to attract new money from investors. Currently, these Spot Ethereum ETFs have over $8 billion in assets under management, including $120 million in Spot Ethereum ETFs managed by Vaneck.
The story continues
In many ways, Ethereum has become a victim of its own success. Yes, there is a very vibrant and diverse blockchain ecosystem. But with Ethereum’s exponential growth over the past decade, things have become a little out of hand. It’s difficult to manage all of that growth. In many cases, the network is just too busy, and network fees are still too high for many users.
Ethereum has called for support from its Layer 2 Scaling Partners. There are currently dozens of these Layer 2 partners, all working to speed things up and keep prices as low as possible. They have full support from Vitalik Buterin, co-founder of Ethereum. He recently vowed to maintain the core part of Ethereum’s long-term strategy.
But here’s the problem. Too much value is beginning to flow from Ethereum to these Layer 2 partners, which is a concern for investors. When Vanek originally came up with the Ethereum valuation model, he assumed that 90% of the value would remain in Ethereum and 10% of the value would flow to the Layer 2 partner. So Vaneck originally came up with a $22,000 price forecast for Ethereum.
However, there have been a lot of changes over the last few months, and Vaneck believes that 90% of the value is now flowing to Layer 2 partners and only 10% to Ethereum. Last year’s major high-tech upgrades have been accused of tilting the arena in favor of the Layer 2 blockchain. This brought Vaneck back its $22,000 price forecast to $7,334.
It’s both good and bad news. That’s bad news as it suggests that Ethereum may have lost control of its Layer 2 partner. This is good news as it suggests that Ethereum’s rise could be significantly higher than $7,334. As more money returns to Ethereum, the long-term price outlook should also improve.
Ethereum has a world-class developer network, a strong track record for investors, and a market-leading position in all key blockchain niches. If you’re confident that Ethereum can sort out the current situation with your partner, you should be bullish about that outlook over the long term.
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Dominique Baslutt holds the position of Ethereum. Motley Fools holds and recommends Ethereum position. Motley Fools have a disclosure policy.
According to investment company Vanek, one top cryptocurrency could be purchased before buying before it rose 185%.
