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The first cryptocurrency to buy before it rises 5,000%, according to Cathie Wood
Earlier this year, Cathie Wood of Ark Invest stunned cryptocurrency investors by predicting that Bitcoin(CRYPTO:BTC) would reach $1.5 million by 2027. Wood believes recent approvals of the first Bitcoin spot exchange-traded funds (ETFs), more institutional buying, and the upcoming Bitcoin halving (which will make the whole twice as difficult) to mine cryptocurrency) will guide everyone to bull run to the largest cryptocurrency in the world.
But Wood made an even more bullish prediction Ethereum (CRYPTO: ETH), which is currently trading at around $3,200. In Ark Invest’s “Big Ideas” presentation early last year, Wood said Ethereum’s market capitalization could surpass $20 trillion – which would require a market price of more than $166,000 per token – by 2032. Could the price of Ethereum actually rise more than 5,000% until it hits that target?
Image source: Getty Images.
How is Ethereum different from Bitcoin?
Ethereum is the largest cryptocurrency on the open source Ethereum network, which differs from Bitcoin (CRYPTO: BTC) in two main ways. First, miners can only mine Bitcoin tokens on the Bitcoin blockchain, but developers can create their own tokens, decentralized apps (dApps), and non-fungible tokens (NFTs) on the Ethereum network. This flexibility makes Ethereum a fundamental pillar of the Web3 Movement, which aims to disrupt centralized app platforms like Appleof the App Store e Alphabetof Google Play with decentralized applications and payment methods.
Secondly, Ethereum requires much less energy to mine than Bitcoin. The Ethereum network previously used the same energy-intensive Proof of Work (PoW) mining method as Bitcoin, but switched to the more energy-efficient Proof of Stake (PoS) method in September 2022. This transition, called The Merge, reduced the grid’s total mining energy consumption by 99.95%. Ethereum bulls believe that the upgrade will make it easier to expand the Ethereum network and support more Web3 projects.
What are the main catalysts of Ethereum?
Ethereum is now the second largest cryptocurrency in the world after Bitcoin. It is also one of eight cryptocurrencies, which include Bitcoin and six stablecoins PayPal (NASDAQ: PYPL) e Twins (CRYPTO: GUSD) — on the New York State Department of Financial Services “green list” of pre-approved cryptocurrencies. This relative stability suggests that the US Securities and Exchange Commission (SEC) may eventually approve Ethereum spot ETFs.
However, the SEC recently reiterated its view that Bitcoin is the only cryptocurrency that could be classified as a commodity rather than a security since it still uses the PoW method, which is comparable to physical mining of precious metals. The SEC said that the PoS method, while more environmentally friendly, makes cryptocurrencies using it more similar to derivatives contracts, so Ethereum is more like a security than a commodity.
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The SEC also recently requested more information from the Ethereum Foundation, which remains committed to reclassifying Ethereum and other Ethereum tokens as securities. This position implies that the SEC will likely not approve any spot ETFs for Ethereum – as commodities are more commonly priced based on their spot prices – in the near future.
But despite this, Ethereum’s periodic consumption of its tokens could stabilize its price in the short term. Upcoming updates to the Ethereum network could also make it even easier to facilitate financial transactions and develop more decentralized tokens and apps. More companies may also start accepting ether, the coin that powers the Ethereum blockchain, as a payment option, and institutional investors may accumulate more of the cryptocurrency, even if it’s not as easily accessible as Bitcoin through spot ETFs .
Should you believe Wood’s bullish prediction?
Investors should take Wood’s $166,000 price target with a grain of salt. First, the famous growth investor made a lot of bad choices. The flagship of his company Innovation Ark ETF (NYSEMKT: ARKK) has actually declined 4% over the past five years, while the S&P 500 has rallied 76%. Ark also offers its own Ethereum futures ETF and is trying to get a spot Ethereum ETF approved, so Wood’s opinion is likely more subjective than objective.
That said, Wood firmly believes that Ethereum’s expanding developer base and its potential to “replace many traditional financial services” and “take share from existing financial intermediaries” will push its price towards its very high target of $166,000. I personally think Ethereum could get much lower than that high price in 2032, but it could certainly stabilize and rise higher in the next few years if the Ethereum Foundation upgrades its network and keeps up with Bitcoin.
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Suzanne Frey, an executive at Alphabet, is a member of the board of directors of The Motley Fool. Leo Sun has positions in Apple. The Motley Fool has positions and recommends Alphabet, Apple, Bitcoin, Ethereum and PayPal. The Motley Fool recommends the following options: Short June 2024 $67.50 PayPal Calls. The Motley Fool has a disclosure policy.
The first cryptocurrency to buy before it rises 5,000%, according to Cathie Wood was originally published by The Motley Fool