Ethereum continues to be a tech disruptor. But will it really be worth over $2 trillion by 2030?
Through the first six months of the year, Ethereum (ETH -0.02%) is up 50%. That's right in line with the performance of Bitcoin (BTC -0.28%), which is also up 50%. At its current price of $3,500, Ethereum is within striking distance of its all-time high of $4,891.
But the best may be yet to come. Investment firm VanEck recently predicted that Ethereum could hit a price of $22,000 by 2030. That might sound overly aggressive, but VanEck has some solid data to back up its prediction. So will it be right or not?
Ethereum's disruptive ability
For the better part of the past decade, we've seen Ethereum disrupt the tech sector. Ethereum was the first smart contract blockchain platform. It pioneered entire sectors of the crypto world -- such as non-fungible tokens (NFTs) and decentralized finance (DeFi) -- that had never existed before. VanEck is counting on Ethereum's ability to remain a tech disruptor over the next five years to warrant such a hefty valuation.
Most importantly, VanEck sees Ethereum making further inroads into the finance, banking, and payments sectors. And VanEck also sees Ethereum building value in sectors ranging from blockchain gaming to artificial intelligence (AI). The key to disruption will be Ethereum's ability to provide solutions that are cheaper, faster, and better than those currently available from market leaders.
The $15 trillion opportunity
That's where things get interesting, because VanEck digs into the numbers to estimate the total potential market opportunity (which it refers to as total addressable market, or TAM). That number could be as high as $15 trillion. The lion's share of this value ($10.9 trillion) will come from finance, banking, and payments. And there is a growing market opportunity ($1.4 trillion) that could result from artificial intelligence.
The logic here is simple but powerful: Ethereum will continue to roll out disruptive solutions that make it possible to win market share from entrenched incumbents. And the big push will be in DeFi, where a rich, vibrant ecosystem already exists. Just think of how upstart decentralized cryptocurrency exchanges are winning market share from centralized cryptocurrency exchanges such as Coinbase Global (COIN 0.10%).
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When you consider key future trends such as asset tokenization (which involves moving real-world financial assets onto the blockchain), it's possible to understand just how big the DeFi opportunity might be. Cathie Wood of Ark Invest, for example, has suggested that smart contract networks such as Ethereum could be generating fees of $450 billion by 2030.
The new ETFs
And, finally, there's the matter of the new spot Ethereum ETFs. These recently won approval from regulators and are expected to start trading soon. Once they do, they could lead to a huge influx of new money into Ethereum. VanEck now predicts that the impact of these new ETFs could be greater than that of the spot Bitcoin ETFs.
That's highly debatable, though. As one of the firms that will be launching a spot Ethereum ETF, VanEck may be overestimating the potential impact of these ETFs. In comparison, JPMorgan Chase (JPM -1.10%) predicts these new ETFs might only attract $3 billion in new investor money. That's about one-tenth of what the new spot Bitcoin ETFs have attracted.
A $2 trillion asset?
VanEck provides three different scenarios for the future value of Ethereum. In the base case scenario, VanEck predicts a price of $22,000. In the bull case scenario, VanEck predicts a price of $154,000. And, in a bear case scenario, VanEck predicts that the price of Ethereum could collapse to just $360. Yikes!
That's a wide range of outcomes to work with, and that's what makes investing in Ethereum potentially so risky. Yes, Ethereum could soar to a price of $22,000, giving it a massive $2 trillion market cap. But it could also lose nearly 90% of its value and be banished to the dustbin of history.
Keep in mind that Ethereum is not the only blockchain going after that $15 trillion market opportunity. There are plenty of other blockchain competitors, each one promising solutions that are cheaper, faster, and better. So if you're thinking about investing in Ethereum, make sure you do your due diligence and have a good grasp of the assumptions being used to predict a price of $22,000.
JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Dominic Basulto has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin, Coinbase Global, Ethereum, and JPMorgan Chase. The Motley Fool has a disclosure policy.
