Despite ranking as the globe's second-largest digital currency, the question persists: Is Ethereum a worthwhile investment?
If you're a fan of Ethereum (ETH), the positive news is that the world's second-largest cryptocurrency has soared an impressive 50% this year. Ethereum surpassed the $4,000 price threshold recently, despite a recent pullback, and is nearly at par with its all-time high of $4,891, set in November 2021.
The downside, however, is that Ethereum has been struggling to keep pace with other cryptocurrencies. For instance, Bitcoin (BTC) is up an impressive 131% this year. Various other prominent digital currencies are also posting triple-digit gains. Therefore, the question arises: Should you be investing in Ethereum as we approach 2025?
Mixed feedback for Ethereum spot ETFs
The anticipated booster for Ethereum this year was supposed to be the launch of new exchange-traded funds (ETFs). Following the successful debut of spot Bitcoin ETFs in January, investors had high expectations for the spot Ethereum ETFs in July.
Unfortunately, while the spot Bitcoin ETFs continue to receive positive feedback, the feedback for the spot Ethereum ETFs has been divided. On its launch date, some investors expected up to $1 billion in inflows per month to these ETFs. Five months later, the largest spot Ethereum ETF, the iShares Ethereum Trust (ETHA), manages only $3.5 billion in assets under management. In comparison, the iShares Bitcoin Trust (IBIT) boasts over $53.5 billion in assets under management.
Moreover, while Ethereum has climbed 50% this year, its performance has been mediocre since the debut of the spot Ethereum ETFs. Since July 23, when the new investment products were launched, Ethereum has experienced a decline of 1%. This is particularly disappointing considering that this period includes a post-election rally that saw Ethereum briefly surpass the $4,000 mark.
Competitors on the rise for Ethereum
The poor performance of the new ETFs is not the only cause for concern. Progressively, new competitor blockchains are eroding Ethereum's market share in various sectors, including decentralized finance (DeFi) and blockchain gaming.
These new competitor blockchains are simply quicker, less expensive, and easier to use than Ethereum. This disparity is much greater than many assume. For example, Ethereum can process only 15 transactions per second. Solana (SOL), on the other hand, can handle 65,000 transactions per second, while Sui can manage 297,000 transactions per second.
As a result, investors are beginning to take notice. Ethereum is up 50% this year, but Cardano is up 60%. Solana is up 88%. And Sui is up a remarkable 505%. Moreover, most of the Layer-2 scaling solutions that bolster Ethereum's core blockchain, in an effort to improve its transaction speed, are also underperforming. Three of the top Layer-2 scaling solutions—Arbitrum, Optimism, and Polygon—have declined by 50% or more this year.
In conclusion, I believe Ethereum's first-mover advantage is rapidly diminishing in the blockchain world. While, when Ethereum launched in 2015, it held a unique position as the sole smart contract blockchain platform, it's been a decade now, and rivals have had time to catch up.
The best Ethereum alternative
Despite having one of the brightest minds in the entire crypto industry leading it (Vitalik Buterin), a robust developer network, and a history of delivering extraordinary returns to investors, I remain skeptical about Ethereum as a purchase option heading into 2025. If you're seeking greater upside potential, you may want to consider investing in one of Ethereum's up-and-coming rivals, such as Solana. If that sounds too risky or speculative, then there's always Bitcoin, which consistently delivers triple-digit returns in a predictable four-year cycle.
The mixed feedback for Ethereum spot ETFs might impact investing decisions, as the largest Ethereum ETF currently manages only $3.5 billion in assets, significantly less than its Bitcoin counterpart. Despite Ethereum's 50% gain this year, its performance has been mediocre since the launch of the spot Ethereum ETFs, with a decline of 1% since July 23.
As competitors continue to rise in the blockchain world, Ethereum's first-mover advantage is diminishing. New blockchains like Solana and Sui are not only faster and less expensive but also process a higher number of transactions per second, posing a significant threat to Ethereum's dominance in sectors like Decentralized Finance (DeFi) and blockchain gaming.
This shift in the market could encourage investors to consider other alternatives, such as Solana, which has seen an impressive 88% growth this year. While Ethereum has a robust developer network and is led by one of the brightest minds in the industry (Vitalik Buterin), its slow transaction speed could hinder its growth in the future. Investors seeking greater upside potential might want to explore these alternatives.
