Ethereum: Buying the Dip? | The Pied Fool

The recent price crash at Ethereum (ETH 0.06%) understandably has many crypto investors on edge these days. In just five minutes, the price of Ethereum dropped by 15%. At one point, Ethereum fell nearly 30% before eventually recovering. As a result, Ethereum is down 15% over the past 30 days, firmly in bearish territory.

So should you buy the dip? Time and time again, this has been a successful strategy for Ethereum investors, and this could be the case again. Here’s why.

New Ethereum spot ETFs

Less than two weeks before the Black Monday cryptocurrency crash, new spot Ethereum ETFs have begun trading. By all accounts, the first week of trading was a success, as the new spot ETFs managed to pull in about 40% of what the new Bitcoin spot ETFs managed to pull in in their first week of trading.

The big question now, of course, is what happens next with these spot Ethereum ETFs. Will investors be so traumatized by the recent market crash that they will avoid anything related to Ethereum for a while? Or will they see the recent crash as a buying opportunity?

Image source: Getty Images.

For now, it looks like they’re choosing the latter option. In other words, they keep pouring money into the new ETFs. Just on Black Monday, new spot Ethereum ETFs had a positive net inflow of $49 million. This could be a signal that a lot of savvy investors are planning to buy the discount.

And if they do, it could be huge for Ethereum. According to K33 Research, between $3.1 billion and $4.8 billion could flow into Ethereum in the last five months of the year. This type of consistent buying will help provide a floor for Ethereum’s price and help absorb any selling pressure from the market.

Ethereum’s continued market dominance

There is another factor in Ethereum’s favor and that is its continued dominance in almost every major niche of the blockchain world. Ethereum may have plenty of blockchain rivals trying to take it down, but for now, the only rival that has come close is Solana (SOL -1.93%). Whether in non-fungible tokens (where Ethereum has a reported 70% market share) or decentralized finance (where Ethereum has a 60% market share), the world’s second largest cryptocurrency appears to be the clear market leader.

These strong numbers coming out of Ethereum are, in part, what led investment firm VanEck earlier this summer to propose a price target of $22,000 for 2030. VanEck cited three major factors — new ETFs (which hasn’t started trading yet), powerful blockchain data and continued “scaling progress”.

The latter refers to all the blockchain upgrades that have emerged from Ethereum over the past two years. If you look at the updated roadmap that Ethereum co-founder Vitalik Buterin released earlier this year, it’s easy to see that these blockchain upgrades could be coming for another 24 months, if not longer.

The goal of all these upgrades is to achieve a transaction processing speed of 1 million transactions per second. By comparison, the top credit card processing networks claim to be able to achieve a speed of 65,000 transactions per second.

How High Will Ethereum Go?

A price target of $22,000 might seem unrealistic given that Ethereum is currently trading at just $2,637 and has recently flirted with a price of $2,100. So we’re talking about a nearly tenfold increase in valuation over five years. At that inflated price, Ethereum would have an implied market valuation north of $2 trillion. If it were a tech company, it would be valued on par with the giants of Silicon Valley.

And that’s really the key to understanding Ethereum. If you see it primarily as a cryptocurrency, then it might not be worth $22,000. But if you look at it as a new kind of tech company, capable of taking on the giants of Silicon Valley and Wall Street with blockchain technology and a decentralized army of global developers, then it could be worth a lot more.

At the very least, Ethereum should be able to make a good run at its all-time high of $4,891, which it reached during the previous crypto bull market rally. And that’s why I’m bullish on Ethereum for the long term. It appears to be extremely undervalued at the moment and it may not take much for the value to double.