Is Ethereum Still a Millionaire-Maker Crypto?

Since its launch in July 2015, the price of Ethereum (CRYPTO: ETH) has skyrocketed from just $0.31 to $3,000 today. That’s almost a 10,000x return on your investment! If you had invested just a few hundred dollars in Ethereum ten years ago, you would probably be a millionaire today.

So does Ethereum still have the power to make you a millionaire? While it’s hard to argue with Ethereum’s historical past, things get a little more complicated when you consider its future prospects.

competitive environment

When Ethereum was launched in 2015, it stood alone as the only smart contract blockchain platform. And so he had an incredible first mover advantage. It could be argued that Ethereum’s first legitimate rival only emerged in 2020, with blockchain startup Solana (CRYPTO: SOL) emerging.

To put this in perspective, imagine your favorite Silicon Valley tech company has a staggering five-year advantage over the competition. After this period, it will likely be seen to have an insurmountable lead when it comes to market share, intellectual property and customer loyalty. Frankly, he looked unstoppable.

So I think Ethereum’s ability to replicate its historical performance is limited at best. There is a lot of competition now and Ethereum is no longer the only major Layer-1 blockchain. Check it out for yourself; Three of the top 15 cryptocurrencies by market cap are direct competitors of Ethereum. This type of competition did not exist in 2015.

Incremental and disruptive innovation

Moreover, I’m a little put off by Ethereum’s endless blockchain upgrades. Yes, the 2022 blockchain upgrade known as The Merge was impressive. People compare this technical feat to changing an airplane’s engine during flight. The merger resulted in the complete transformation of Ethereum. In the process, Ethereum has become faster, cheaper to use, and more efficient at processing transactions.

Image source: Getty Images.

But Ethereum initially promised us 1 million transactions per second, and we didn’t come close to that. Even more concerning is that Ethereum now relies on a complex mix of Layer 2 blockchains for scalability and functionality. The core Ethereum blockchain (i.e. Layer 1) is not fast or efficient enough to handle current transaction volumes. So we have several more upgrade cycles, each filled with new tweaks and upgrades.

Of course, there’s nothing wrong with incremental innovation. But there is a big difference between incremental innovation and truly disruptive innovation. This is what worries me about Ethereum; We may have witnessed the end of disruptive innovation with The Merge. This will open the door for fast and agile competitors to challenge Ethereum.

The story continues

SEC and regulatory risk

Finally, there’s the pesky little matter of the Securities and Exchange Commission (SEC). Since the merger, the SEC has not fully ruled on whether Ethereum is a commodity or a security. When Ethereum evolved into a proof-of-stake blockchain as part of The Merge, it changed the way people interact with the blockchain, with potential regulatory implications.

For example, the process of crypto staking may be interpreted by some as “investing money in a joint venture with the reasonable expectation of profit from the efforts of others.” According to the SEC, this would make Ethereum a security.

This may seem incredibly risky from a legal perspective, but it is important for investors. There are currently some Bitcoin maximalists who are happy with Ethereum’s potential regulatory dilemma, and there is a very real risk that the SEC will view Ethereum as a security. In such a case, all bets are void. I don’t think this will pose an existential risk for Ethereum, but it will definitely scare many investors.

1000x crypto legend

If you have $1,000 to invest in crypto today, you will need a 1,000x return on your investment to become a millionaire. So, let’s revisit the original question about Ethereum being a millionaire-producing crypto this way: Could Ethereum appreciate 1,000 times from its current price of $3,000?

This points to a stratospherically high $3 million price tag for a single Ethereum coin in the near future. Considering Ethereum’s circulating supply of 120 million coins, this means its total market cap is $360 trillion! By comparison, the S&P 500’s total market cap is around $50 trillion these days.

At the end of the day, investing based solely on past performance is like driving a car looking only in the rearview mirror. So stop focusing so much on Ethereum’s past performance and focus more on how it will create value in the future.

Should you invest $1,000 in Ethereum right now?

Before buying shares in Ethereum, consider:

The Motley Fool Stock Advisor analyst team identified what they believe are the 10 best stocks for investors to buy right now… and Ethereum wasn’t one of them. The 10 stocks that made the cut could deliver monster returns in the coming years.

Consider that Nvidia made this list on April 15, 2005… if you had invested $1,000 on the date we recommended, you would have had $550,688!*

Stock Advisor provides investors with an easy-to-follow success plan, including guidance on portfolio construction, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of the S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of May 6, 2024

Dominic Basulto has positions in Ethereum and Solana. The Motley Fool has positions in and recommends Ethereum and Solana. The Motley Fool has a disclosure policy.

Is Ethereum Still a Millionaire-Producing Crypto? originally published by The Motley Fool