Through the first six months of the year, Ethereum (ETH 1.29%) has largely kept pace with Bitcoin (BTC 1.70%). Both are now up about 45% year to date, and the big question on the minds of many investors is which is going to outperform during the rest of 2024.
In early May, the easy no-brainer answer would have been Bitcoin. But Bitcoin has stumbled of late, and that has opened the door for Ethereum. There are now four compelling reasons Ethereum could soar higher, even if Bitcoin continues to trade sideways.
The new ETFs
Bitcoin, of course, has had spot exchange-traded funds (ETFs) since January. And the introduction of this new investment product has arguably been one of the most important crypto narratives of 2024. But there's a new twist to that narrative. At the end of May, the Securities and Exchange Commission (SEC) finally approved new spot ETFs for Ethereum.
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It is still uncertain how much of a boost these new ETFs are going to provide. The current thinking is that they will start trading sometime this summer and that they could lead to $3 billion flooding into the new ETFs. That's a bull case scenario, though. According to JPMorgan Chase (JPM 1.55%), the bear case scenario is closer to $1 billion. That's barely a blip on the radar compared to the $30 billion that has flowed into the new Bitcoin ETFs. Nevertheless, they are still likely to move the needle for Ethereum.
Ethereum as the market leader
Ethereum continues to be the clear market leader in every important blockchain sector. Take decentralized finance (DeFi), for example, where Ethereum still accounts for more than 60% of all total value locked (TVL) in the blockchain world. No other blockchain even comes close. So we can start to downplay any notion that a challenger such as Solana (SOL 2.80%), Cardano (ADA 0.13%), or Avalanche (AVAX 3.36%) has any clear-cut path to toppling Ethereum anytime soon.
The market seems to agree. Ethereum is significantly outperforming all of its peers. For example, Solana is up 35%, and Sui (SUI 2.20%) is up 9%. Other top competitors are reeling. Aptos (APT 1.02%) is down 28%, Cardano is down 32%, and Avalanche is down 33%.
Regulatory clarity
There's another big reason to cheer on Ethereum, and that is regulatory clarity. Just about anyone who has ever heard of Ethereum considers it to be a cryptocurrency. However, through the first six months of the year, there were rumbles and murmurs about a pending SEC investigation into Ethereum, due to uncertainty over whether it might actually be a security.
But those rumors now appear to be quashed, with the SEC saying that it is closing down any investigation into Ethereum. That's important because it could turn on the money spigots for risk-averse institutional investors. Crypto is risky enough without the added risk of an SEC probe.
Long-term disruptive potential
And, finally, there's the long-term disruptive potential of Ethereum. For the past decade, Ethereum has been a true innovator, pioneering niches of the blockchain world that had never existed before. And, judging by all the tech upgrades that have been made to the Ethereum blockchain over the past two years, this trajectory should continue.
In fact, investment firm VanEck expects Ethereum to grow dramatically in several key areas, led by DeFi. It's here that the Ethereum blockchain can offer the greatest disruptive potential. It's simply faster, cheaper, and more transparent to manage financial assets on a blockchain. And that could lead to Ethereum gaining market share at the expense of traditional financial rivals.
In fact, VanEck has run the numbers and determined that Ethereum could soar to a value of $22,000 per token by 2030. That would give Ethereum an implied market cap north of $2 trillion. Given that the top companies in Silicon Valley are now worth anywhere from $1 trillion to $3 trillion, a market cap of $2 trillion for Ethereum is not as unreasonable as it might sound at first.
What to look for over the next six months
From my perspective, the biggest threat to Ethereum remains the rise of blockchain challengers such as Solana. The economic moat that once surrounded Ethereum seems to be getting smaller and smaller with each passing year.
That said, Ethereum is shaping up to be one of the best crypto investments you can make in the second half of 2024. If the new ETFs perform as expected, then it could be off to the races for the world's second-most-valuable cryptocurrency.
