Ethereum
Prediction: Ethereum will reach $5,000 by the end of 2025
If Ethereum is to reach a new all-time high of $5,000 in 2025, here’s what needs to happen.
It’s been a strange year for Ethereum (ETH 0.21%). The world’s second-largest cryptocurrency exploded early, going from $2,200 in January to $4,000 in mid-March. We would have said Ethereum was easily going to hit the $5,000 mark by the end of the year.
But that’s not what happened. Ethereum lost value after reaching its high point of $4,000 and is now at the $3,000 level. The good news, however, is that there are two key catalysts that could help Ethereum reach the $5,000 level by the end of 2025.
The arrival of altcoin season
First and foremost, there is the arrival of “altcoin season”. This refers to the period of the crypto bull market cycle where cryptocurrencies are less known. altcoins explodes in value. This usually occurs during the early stages of a Bitcoin halving cycle, when investors begin to diversify their holdings in search of higher returns.
Consider what happened in the previous altcoin season, which aligned well with the start of the previous season. Bitcoin Halving Cycle in May 2020. On the date of the halving, Ethereum was trading below $200. A year later, it was trading at $3,800. It eventually reached an all-time high of $4,891 in November 2021.
While there is no guarantee that this same pattern will repeat itself in 2024, it is clear that investors are starting to look for other places to invest their money beyond Bitcoin. So far, meme coins and AI crypto tokens have gotten all the attention, but the time may soon arrive for larger-cap cryptocurrencies such as Ethereum.
Approval of Ethereum spot ETFs
The other important factor would be the SEC’s approval of new Ethereum spot exchange-traded funds (ETFs) similar to the new spot Bitcoin ETFs. Granted, these Ethereum spot ETFs probably wouldn’t see the same types of inflows as the new Bitcoin spot ETFs, but the influx of new money would still be significant. And this new influx of money would likely help drive the price of Ethereum higher over the next 18 months.
Image source: Getty Images.
As with Bitcoin ETFs, a number of influential Wall Street players are racing to make them happen. These include Ark Invest and black rock, both of which now have extremely successful spot Bitcoin ETFs. Approval of these new Ethereum spot ETFs was supposed to come in May, but it now appears that the Securities and Exchange Commission (SEC) will push back approval of these ETFs until late summer.
The impact of these new Ethereum spot ETFs could be huge. Arguably, the main reason why Ethereum price surged from $2,200 to $4,000 earlier this year was the anticipation of the new Ethereum spot ETFs arriving soon. Wall Street got a head start and was already beginning to assess their impact. So it is not out of the realm of possibility that Ethereum could rise from its current price of $3,000 to $4,000 once these new investment products are approved.
Beware of the SEC
The only problem, of course, is that there is something about Ethereum that the SEC doesn’t like. Since Ethereum moved from a proof-of-work blockchain to a proof of stake blockchain In September 2022, as part of The Merge, the SEC sought reasons to classify Ethereum as a security.
Recently, concerns about possible SEC oversight have returned, which has had a chilling effect on the price of Ethereum. This is why I don’t think Ethereum will hit the $5,000 mark this year: investors need to have absolute clarity on regulatory risk before Ethereum’s price can skyrocket.
The good news here is that the regulatory climate appears to be shifting in Washington, DC, in favor of pro-crypto legislation. And some lawmakers have spoken out publicly about potential SEC overreach and the need to change the crypto regulatory framework after the 2024 election.
How high can Ethereum go?
The future price trajectory of Ethereum will depend, to a large extent, on the price trajectory of Bitcoin. If you assume that Bitcoin can reach a price of $150,000 by the end of 2025, as many crypto investors now do, then Ethereum has the potential to climb in value to $7,500.
Using just a few back-of-the-envelope calculations, it’s easy to see why this is possible. A price of $150,000 for Bitcoin implies a market cap of $3 trillion. If you then multiply this number by 0.3 (which is the ratio of the current market cap of Ethereum to the current market cap of Bitcoin), you arrive at a market cap of $900 billion for Ethereum by the end of 2025. Considering Ethereum’s circulating coin supply of 120 million, this implies a price of $7,500.
So while $5,000 may seem like an illusory price prediction at first glance, it really isn’t. In fact, it’s a bit conservative. As long as the SEC doesn’t get involved, Ethereum has a real chance of reaching $5,000 by the end of 2025.