bitcoin (btc -0.36%) The spotlight has been stolen from cryptocurrencies. Its price has soared 125% over the past year due in large part to the enthusiasm surrounding spot Bitcoin exchange-traded funds (ETFs). However, Ethereum (ETH -2.34%) it gained about 80% over the same period, and at least one Wall Street analyst sees bigger gains on the horizon.
Geoff Kendrick, head of digital asset research at Standard Chartered Bank, believes smart contract technology and Ethereum spot ETFs (if approved) could send the cryptocurrency to $14,000 by 2025. That implies roughly a 310% upside above its current price of $3,400, an attractive figure. given the short term.
Is Ethereum worth buying?
How smart contract technology could increase demand for Ethereum
He Ethereum blockchain is programmable, meaning developers can create self-executing programs called smart contracts on the platform. This technology is the basis of tokenization and others decentralized finance (DeFi) and the numerous utilities of smart contracts could increase the demand for Ethereum in the coming years.
Specifically, tokenization is the process by which ownership rights to physical and digital assets are represented as tokens on a blockchain, which in turn serves as a digital ledger. Benefits include greater audit transparency because details are automatically and immutably recorded on the blockchain when token transactions are made. Tokenization could also improve asset liquidity by allowing fractional ownership of assets such as real estate, artwork, and other collectibles.
More broadly, DeFi platforms could expand access to financial services and reduce underlying costs by allowing users to borrow, invest and earn interest on money without intermediaries like banks. This would be particularly valuable in unbanked regions of the world.
Ethereum is the blockchain best positioned to benefit when smart contract technology sees greater adoption. I say this because users clearly have a preference for Ethereum. According to DeFi Llama, it represents 56% of funds held in DeFi applications, meaning it has more market share than all other blockchains combined. Consequently, demand for the cryptocurrency could skyrocket if DeFi goes mainstream, simply because users must pay transaction fees to interact with products on the blockchain.
How Spot ETFs Could Increase Ethereum Demand
Ethereum spot ETFs are investment products that (if approved) would provide direct exposure to Ethereum while eliminating the hassle of cryptocurrency exchanges and blockchain wallets. Such funds would greatly reduce friction for individual and institutional investors, which could boost demand for the cryptocurrency and drive up its price.
In fact, recently approved detect Bitcoin ETF illustrate how much demand such investment products could unlock. Specifically, Bitcoin spot ETFs issued by Black Rock and Fidelity saw larger cash inflows during their first month on the market than any other ETF launched in the past 30 years, according to Bloomberg Intelligence.
With this in mind, seven issuers have filed applications for Ethereum spot ETFs, including BlackRock and Fidelity. He National Stock Market Commission (SEC) must make a decision by May 23, but investors should not take approval for granted. In fact, Bloomberg's James Seyffart expects the SEC to reject the requests this time. His assessment is based on the fact that regulators have not engaged with potential issuers to the same extent as they did with Bitcoin ETF applicants prior to their approval.
Investors should think twice before buying Ethereum
Smart contract technology is intriguing and the potential benefits of tokenization and other DeFi use cases are undeniable. However, widespread adoption of Ethereum-based smart contracts is likely a long way off, even in the best of times.
Additionally, I doubt Ethereum ETFs will get regulatory approval in May. Fortune recently reported that the SEC is investigating the Ethereum Foundation, which oversees cryptocurrencies, as part of its effort to classify many cryptocurrencies as securities. The outcome could shake the market in unpredictable ways, and the SEC would be unlikely to approve Ethereum spot ETFs while the investigation is ongoing.
For those reasons, I would avoid Ethereum right now. That does not mean that the cryptocurrency will lose value. In fact, Geoff Kendrick may be right on target with his $14,000 target. However, I see a more attractive investment. opportunities in bitcoin and the stock Exchange.
Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool holds and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
