In the expansive world of cryptocurrency, there’s Bitcoin (CCC:BTC), a lot of pretenders and a big morass in the middle. Perhaps the most credible member of this universe not named bitcoin is Ethereum (CCC:ETH).
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Also known as “ether,” this is the second-largest cryptocurrency by market capitalization. As of late Jan. 24, Ethereum’s market cap is $160.54 billion. That’s dwarfed by Bitcoin at $623.54 billion.
Still, ETH is more than six times larger by market value than the third-largest crypto — Tether (CCC:USDT). It’d be easy to get wrapped up in Ethereum’s status as the second-largest digital asset and attribute its stunning rise — it’s more than doubled in less than two months — to bitcoin’s halo effect.
That misses the market because Ethereum is evolving in its own right and investors are taking note, indicating that there’s demand among crypto market participants for a legitimate alternative or complement to Bitcoin.
Additionally, there’s room for more ETH upside. On the heels of a 18% climb over the past week, Ethereum traded just over $1,400 on January 24. The recent topping of $1,400 is the first time in two years the cryptocurrency traded above that level and some market observers believe recent action suggests more upside is on the way.
Multiple Catalysts for Ethereum
Many crypto traders, newbies in particular, are drawn to Bitcoin owing to its heft and its command of digital currency news flow, but there are indications that Ethereum could be the way to go over the near-term.
“Indeed, Ethereum’s outperformance looks set to endure in the near term, as the BTC/ETH ratio breaks to its lowest levels since August of 2018. That being said, both cryptocurrencies seem poised to move higher in the coming weeks, as bullish technical setups take shape on multiple timeframes,” writes Daniel Moss for DailyFX.
Beyond technicals, Ethereum has a catalyst-rich fundamental story and some of those factors could bring more professional investors into the market for this digital asset. For example, Ethereum futures start trading on CME on February 8. Bitcoin futures are just over three years removed from debuting on the exchange and data confirm that brought more pros into crypto market:
“There has been significant growth in their adoption from a broad array of participants, including institutional investors,” according to the exchange operator. “In 2020-to-date, 8,560 CME Bitcoin futures contracts (equivalent to about 42,800 bitcoin) have traded on average each day. At the same time, institutional interest continues to build with the number of large open interest holders reaching a record of 110 in December.”
Next is the Ethereum 2.0 upgrade. This a four-phase action, Phase 0 of which commenced last month, designed to enhance the depth of Ether’s blockchain network.
In tech terms, this upgrade makes verifying Ether transactions more efficient and as those efficiencies so will the network’s capacity to handle more transactions. Over time, that could increase the allure of using Ether as a standard form of payment.
Ethereum Expectations
For novice crypto investors, the best way to approach Ethereum is to eschew the line of thinking that this is the next Bitcoin. Bitcoin topped $40,000 earlier this month and those that missed out on that move are looking for assets with similar potential.
Ethereum may never sport five-digit prices a la Bitcoin, but that doesn’t mean the number two crypto isn’t destined for big things.
Do some quick research and it’s easy to find $2,000 price forecasts. From current pricing around $1,400, that target implies significant upside. Assuming Ether shows the ability to exceed those expectations and if the CME futures stoke institutional interest, this could easily be the “next big thing” in digital currencies even if it never sees $10,000.
On the date of publication, Todd Shriber did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Todd Shriber has been an InvestorPlace contributor since 2014.