The recent collapse in the price of Ethereum (CRYPTO: ETH) understandably has many crypto investors on edge these days. In just five minutes, the price of Ethereum fell by 15%. At one point, Ethereum was down nearly 30% before finally recovering. As a result, Ethereum is down 15% over the past 30 days, firmly in dip territory.
So should you buy the dip? Time and time again, this has been a successful strategy for Ethereum investors, and this might be the case again. Here's why.
The new spot Ethereum ETFs
Less than two weeks before the Black Monday crypto crash, the new spot Ethereum ETFs started trading. By all accounts, the first week of trading was a success, as the new spot ETFs managed to attract about 40% of what the new spot Bitcoin ETFs managed to attract during their first week of trading.
The big question now, of course, is what happens to these spot Ethereum ETFs next. Will investors be so traumatized by the recent market crash that they avoid anything Ethereum-related for some time to come? Or will they view the recent crash as a buying opportunity?
Image source: Getty Images.
For now, it looks like they are choosing the latter option. In other words, they are continuing to funnel money into the new ETFs. On Black Monday itself, the new spot Ethereum ETFs had a net positive inflow of $49 million. That could be a signal that a lot of savvy investors are planning to buy the dip.
And if they do, it could be huge for Ethereum. According to K33 Research, anywhere from $3.1 billion to $4.8 billion could flow into Ethereum over the final five months of the year. That type of steady buying will help to provide a floor for Ethereum's price and help to soak up any selling pressure in the market.
Ethereum's continued market dominance
There's another factor in Ethereum's favor, and that is its continued dominance in nearly every major niche of the blockchain world. Ethereum may have plenty of blockchain rivals trying to unseat it, but for now, the only rival that has come close is Solana (CRYPTO: SOL). 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 at the start of the summer to put out a $22,000 price target for the year 2030. VanEck cited three major factors -- the new ETFs (which hadn't started trading yet), strong blockchain data, and continued "scaling progress."
The last refers to all the blockchain upgrades that have been coming out of Ethereum for the past two years. If you look at the updated roadmap that Ethereum co-founder Vitalik Buterin released at the start of the 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 hit a transaction processing speed of 1 million transactions per second. By way of comparison, top credit card processing networks claim to be able to hit 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 currently trades at just $2,637 and recently flirted with a price of $2,100. So we're talking about a nearly tenfold boost in valuation within 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 Silicon Valley behemoths.
And that's really the key to understanding Ethereum. If you view it primarily as a cryptocurrency, then it might not be worth $22,000. But if you view it as a new type of tech company, able to take on the giants of Silicon Valley and Wall Street with blockchain technology and a decentralized army of worldwide developers, then it might be worth much 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 over the long term. It appears to be tremendously undervalued right now, and it might not take much for it to double in value.
Should you invest $1,000 in Ethereum right now?
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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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
