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1 Top Cryptocurrencies to Buy Before They Soar 5,000%, Says Cathie Wood
Earlier this year, Ark Invest’s Cathie Wood stunned cryptocurrency investors by predicting that BitcoinThe price of (CRYPTO:BTC) would reach $1.5 million by 2027. Wood believes recent approvals of Bitcoin’s first spot exchange-traded funds (ETFs), more institutional buying and the halving impending Bitcoin (which will make the task twice as difficult) to mine the cryptocurrency) will all result in a bull stampede to the world’s largest cryptocurrency.
But Wood made an even more optimistic prediction for Ethereum (CRYPTO: ETH), which is currently trading at around $3,200. In Ark Invest’s “Big Ideas” presentation early last year, Wood said Etherium’s market cap could exceed $20 trillion – which would require a market price of over $166,000 per token – by 2032. Could the price of Etherium actually rise more than 5,000% to reach this target?
Image source: Getty Images.
How is Ethereum different from Bitcoin?
Ethereum is the largest cryptocurrency in 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 applications (dApps), and non-fungible tokens (NFTs) on the Ethereum network. This flexibility makes Ethereum an essential pillar of the Web3 movement, which aims to disrupt centralized application platforms like Applethe App Store and AlphabetGoogle Play with decentralized applications and payment methods.
Second, mining Ethereum requires much less energy than Bitcoin. The Ethereum network previously used the same energy-intensive proof-of-work (PoW) mining method as Bitcoin, but in September 2022 it switched to the more energy-efficient proof-of-stake (PoS) method. This transition, called The Merge, reduced the network’s total mining energy consumption by 99.95%. Ethereum bulls believe the upgrade will facilitate the expansion of the Ethereum network and support more Web3 projects.
What are the main enablers of Ethereum?
Ethereum is now the second largest cryptocurrency in the world after Bitcoin. It is also one of eight cryptocurrencies, including Bitcoin and six stablecoins of PayPal (NASDAQ:PYPL) and Gemini (CRYPTO: GUSD) – on the New York State Department of Financial Services’ “green list” of pre-approved cryptocurrencies. This relative stability suggests that the U.S. Securities and Exchange Commission (SEC) may eventually approve Ethereum spot ETFs.
However, the SEC recently reiterated its view that Bitcoin was the only cryptocurrency that could be classified as a commodity rather than a security because it still uses the PoW method, which is comparable to the physical mining of precious metals. The SEC said that the PoS method, while more environmentally friendly, makes cryptos that use it more similar to derivative contracts – so that Ethereum is more like a security than a commodity.
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The SEC also recently requested more information from the Ethereum Foundation and remains committed to reclassifying Ethereum and other Ethereum tokens as securities. This stance implies that the SEC will likely not approve any spot ETFs for Ethereum – since commodities are more typically valued by their spot prices – for the foreseeable future.
But despite this, Ethereum’s periodic burning of its tokens could stabilize its price in the short term. Upcoming upgrades to the Ethereum network could also make it even easier to facilitate financial transactions and develop more decentralized tokens and applications. More companies could also start accepting ether, the coin that powers the Ethereum blockchain, as a payment option, and institutional investors could accumulate more cryptocurrencies, even if they are not as easily accessible as Bitcoin through spot ETFs.
Should we believe Wood’s bullish prediction?
Investors should take Wood’s price target of $166,000 with a grain of salt. First, the famous growth investor made many bad choices. His company’s flagship product Arche Innovation ETF (NYSEMKT: ARKK) is actually down 4% over the past five years as the S&P 500 is up 76%. Ark also offers its own Ethereum futures ETF and is trying to get an Ethereum spot ETF approved, so Wood’s opinion is arguably more subjective than objective.
That said, Wood strongly believes that Ethereum’s expanding developer base and its potential to “displace many traditional financial services” and “take share from existing financial intermediaries” will push its price towards its sky-high target of 166 000 $. Personally, I think Ethereum could be well below this high price in 2032, but it could certainly stabilize and rise over the next few years if the Ethereum Foundation upgrades its network and keeps pace with Bitcoin.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Leo Sun has positions at Apple. The Motley Fool holds positions and recommends Alphabet, Apple, Bitcoin, Ethereum and PayPal. The Motley Fool recommends the following options: Short June 2024 calls at $67.50 on PayPal. The Mad Motley has a disclosure policy.
1 Top Cryptocurrencies to Buy Before They Soar 5,000%, Says Cathie Wood was originally published by The Motley Fool