Earlier this year, Ark Invest's Cathie Wood (known as "Sister Wood") shocked investors with her statement that the cryptocurrency market was affected, predicting that the price ·of Bitcoin (CRYPTO: BTC) will reach $1.5 million in 2027. In April, Wood argued that the approval of the first exchange-traded funds (ETFs) based on Bitcoin's spot price, more institutional purchases, and the upcoming Bitcoin halving at the time, which doubles the difficulty of mining the cryptocurrency, would attract a large number of investors to the world's largest cryptocurrency market.
WOOD ALSO MADE SOME BULLISH PREDICTIONS FOR ETHEREUM (CRYPTO: ETH), ESTIMATING THAT ITS MARKET CAP COULD EXCEED $20 TRILLION BY 2032, MEANING MORE THAN $166,000 PER ETHEREUM COIN.
Recent updates and analyses have added a new perspective to Ethereum's potential. The Bitcoin halving has been completed, with the first ETFs based on the Bitcoin spot price listed since January this year, and the first Ethereum ETFs to follow this week. So what happens next? Is Ethereum still a good investment option?
How is Ethereum different from Bitcoin?
Ethereum differs from Bitcoin in three important ways.
First, miners on the Bitcoin blockchain can mine Bitcoin tokens. Mining no longer exists on the Ethereum network, but developers can create their own tokens, decentralized applications (dApps), and non-fungible tokens (NFTs) based on Ethereum tokens. This flexibility has made Ethereum a central pillar of the Web3 movement, aiming to disrupt centralized application platforms such as Apple's App Store and Alphabet's Google Play with decentralized applications and payment methods.
Second, Ethereum requires much less electricity than Bitcoin. The Ethereum network previously used the same proof-of-energy (PoW) mining method as Bitcoin, and this cryptocurrency is a popular alternative to high-end graphics cards, making it popular with cryptocurrency mining enthusiasts. By September 2022, Ethereum transitioned to a more energy-efficient proof-of-stake (PoS) method. This shift has resulted in a 99.95% reduction in the network's total mining energy consumption. Ethereum bulls believe that this upgrade will make it easier to scale the Ethereum network and support more Web3 projects in the long term.
Third, and perhaps most importantly, Ethereum is able to execute so-called smart contracts. These digital contracts write the agreement directly into the code. The Ethereum platform continuously checks that all of its active contracts have met the terms and, if so, executes some code. These codes can transfer ownership of physical or digital assets, move funds or cryptocurrencies between different accounts, and more. This capability allows for the automation and decentralization of various applications and processes.
What is Ethereum's main catalyst?
Ethereum is now the world's second-largest cryptocurrency after Bitcoin. It is also one of eight cryptocurrencies pre-approved by the New York State Department of Financial Services. This relative stability led the Securities and Exchange Commission (SEC) to theoretically approve spot Ethereum ETFs and list them on the Chicago Board Options Exchange on Tuesday, July 23.
The SEC recently reiterated its view that Bitcoin is the only cryptocurrency that can be classified as a commodity rather than a security because it uses the PoW method, which makes it similar to physical gold mining. This is consistent with Bitcoin's original design document, which likened an energy-consuming numerical computing system to mining physical gold.
The SEC said that while the PoS method is more environmentally friendly, cryptocurrencies using the method are more akin to derivative contracts, so Ethereum is more akin to securities than commodities in the eyes of regulators.
Nonetheless, Ethereum's regular burning of its tokens may stabilize its price in the short term. The upcoming upgrade of the Ethereum network may also make it easier to facilitate financial transactions and develop more decentralized tokens and applications. More companies may also start accepting Ethereum coins as payment options, and institutional investors can also accumulate more crypto through easily accessible spot ETFs.
Market updates
Standard Chartered Bank has made a bold prediction for Ethereum.
Four months ago, analysts at the bank claimed that if spot Ethereum ETFs are approved, Ethereum could reach $8,000 by the end of this year and $14,000 by 2025. At the end of May, Standard Chartered doubled its price target in anticipation that the approval of spot ETFs could bring a significant inflow of funds into Ethereum. The bank estimates that spot ETFs could bring in inflows of between 2.4 and 9.2 million ETH in the first year, equivalent to about $15 billion to $45 billion injected into the Ethereum ecosystem.
If Bitcoin reaches $200,000 next year, as predicted by Standard Chartered Bank, the bank expects that Ethereum could reach a price of about $14,000 over the same period.
Should you believe the bullish forecasts of Wood and Standard Chartered?
Investors should be cautious about Wood's $166,000 price target.
First of all, this well-known growth investor has made a lot of misjudgments. Her company, the Ark Innovation ETF (NYSEMKT:ARKK), is actually down 4% over the past five years, while the S&P 500 is up 84%. Ark also offers its own Ethereum futures ETF and is trying to get approval for a spot Ethereum ETF, so Wood's views may be subjective.
That being said, Wood firmly believes that the expansion of Ethereum's developer base and its potential to "replace many traditional financial services" and "take a share from existing financial intermediaries" will drive its price towards her high target until 2032. Ethereum may not be nowhere near that high in 8 years, but if the Ethereum Foundation continues to upgrade its network, it will certainly stabilize and move higher in the long term.
Whether you're a skeptic or an avid supporter, the future of Ethereum is a topic to keep an eye on. This not-so-small cryptocurrency is on its way to success, and Ethereum looks like an undisputed buy option in the current market downturn.
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