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Is Ethereum a good investment? The question makes sense because Bitcoin ETF is approved and Ethereum ETF is unlikely to get approval in the near future.
Last updated Jan 23, 2024 at 07:19 PM
Posted Jan 21, 2024 at 07:00 PM
Crypto is becoming mainstream and Bitcoin approval is a testament to this. We all hoped that Bitcoin would get approved later if not in January – and it did. Bitcoin is now available on traditional exchanges as ETF and new investors are getting into it. Everything seems perfect and calculated. However, what we didn’t see coming was the “sell the news” effect on Bitcoin price. The price of Bitcoin dropped soon after the approval and couldn’t match the anticipated hype and expectations of the Bitcoin maximalists. This has allowed Ethereum to shine and attract investors with significant moves. Does that make Ethereum a good investment? Time to find.
I thought Bitcoin approval was a 2023 story but upon digging I found out that Winklevoss twin, the founder of the Gemini exchange in 2013, filed the first Bitcoin ETF application. In response to their application, the SEC rejected the application in 2017. From 2016 to 2019, various applications were filed by various entities and were rejected. The reasons for rejections were such as lack of transparency, liquidity, custody, and surveillance.
In 2020 SEC issued a public outline for the areas to address before applying to avoid rejection or delay. The SEC approved the first Bitcoin futures ETF, ProShares Bitcoin Strategy ETF (BITO), which began trading on the NYSE Arca on October 19, 2022. Fast track to 2024, BTC Spot ETF was approved for all the applicants on January 10, 2024. Now BTC Spot ETF is the second largest ETF commodity.
The price of Bitcoin is finally below $40,000 psychological support level and headed to the next local support in December 23, at $38,000. Bitcoin is down 9% in the last 30 days and lost over 6% this month.
Almost everyone was bullish about Bitcoin ETF approval so the price started bullish momentum after November 27. Since then, the price of Bitcoin has 27% and reached a high of $49,000 – a momentary candle that retraced back to $46,500. The price of Bitcoin has dropped more than 18% after Bitcoin Spot ETF approval.
Bitcoin Dominance reached a high of 55% due to the ETF hype which then dropped back to 50%. This means that half of the crypto marketcap is in altcoins while half of the money is in Bitcoin. The plummeting price of Bitcoin gave altcoins, particularly Ethereum, a chance to shine and falling BTC dominance is a clear indication of this.
Ethereum is the top-ranking crypto among altcoins and has probably the best track record as being the second-largest crypto after Bitcoin. Here are some potential upsides and downsides whether you should invest in Ethereum or not.
Potential Upsides:
Potential Downside:
Bitcoin’s ETF approval has long-term implications for cryptocurrency as it increases the adoption and acts as a milestone in making crypto mainstream. However, Bitcoin price action was unexpected due to the ‘sell the news’ phenomenon. However, this gave Ethereum a head start can investors started pouring money into the best Bitcoin alternative: Ethereum.
The price of Ethereum is 45% up since the ETF buzz and as compared to Bitcoin, it stands strong against the bearish wave. Easier access to Bitcoin through ETFs encouraged institutional investors to explore other promising cryptocurrencies like Ethereum.
Bitcoin was hyped up before ETF which turned the entire market bullish. However, the swift bearish moves of Bitcoin after ETF were approved gave Ethereum a chance to shine and allowed day traders to go long.
Most analysts expect Ethereum's price to trend upward in 2024, with a gradual recovery from the current bear market. According to Changelly, the price of Ethereum is expected to reach $3,805.82 in 2024. In 2025, the price of Ethereum is expected to reach a maximum of $ 6,520.44 with an average price of $5,583.67.
According to Bloomberg, seven or more entities have applied for Ethereum Spot ETF approval after Bitcoin ETF was approved by the SEC. The most prominent among the applicants include Blackrock and GrayScale Ethereum Trust. Blackrock filed its ETH ETF application in November last year. There’s a 70% chance that Ethereum ETF will get the SEC’s approval in its next review. According to many online sources, the deadline for the verdict on Spot Ethereum ETF is May 2024 (approximately 120 days).
Though Ethereum ETF applications have less potential for approval than BTC’s that got recently approved, Ethereum bulls are optimistic about the outcome. Ill Capo of Crypto says Ethereum needs to dip before a final surge.
If Ethereum Spot ETF is approved it will Ethereum exposure to traditional investors. That would create demand for Ethereum and might help the price appreciation. According to JP Morgan, Ethereum Spot ETFs would offer investors an opportunity to gain exposure to the cryptocurrency without worrying about its security or liquidity.
Moreover, the ETH ETF will pave the way for other potential projects like Solana and BNB to apply for ETF to gain extra exposure to a new class of investors.
It depends on personal preferences and risk tolerance whether to invest in Ethereum or not. Is Ethereum a good investment? Yes, it is. Ethereum has a good track record, high liquidity, and a bullish trajectory that at times beats that of Ethereum. However, since the ETH ETF approval is still pending, there is regulatory uncertainty about its future.