Should You Buy Ethereum While It's Under $3,500?

As of Jan. 16, the Ethereum (CRYPTO: ETH) cryptocurrency had gained 37% in a year. It was a wild ride along the way, however, with coin prices ranging from $2,220 to $4,070. All told, the second-largest name in crypto barely managed to outperform a stellar showing by the S&P 500 stock market index over the same period.

Ethereum is worth about $3,333 per coin this morning. I love alliteration and repeating patterns, but the cryptocurrency won't stay at this appealing price for long. (Actually, it's already moved since I wrote down that price -- it's hard to keep up with these volatile digital assets.)

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But none of that matters if you're thinking about becoming an Ethereum owner. What does is whether the smart contracts platform is poised to move higher, or whether it peaked 10 months ago.

A quick and easy forecast

Ethereum has been worth more than $3,500 several times before. It reached that level on at least seven occasions in 2024, and briefly topped $4,000 in May and December. Those spikes didn't even set records -- Ethereum's all-time high was a brief visit to $4,892 in November 2021.

A simplistic review of the cryptocurrency's price chart suggests that it tracks the four-year cycle of Bitcoin (CRYPTO: BTC) halving events. Ethereum prices tend to soar about a year after each Bitcoin halving, skyrocket for another year or so, and then fall back amid a crypto winter. If the market is going to reiterate that pattern, then, timing-wise, Ethereum and other cryptos are in the early innings of a fresh bull market.

There are many issues with this chart-glancing analysis, though.

• As with stocks, Ethereum's past results are no guarantee of its future performance.
• Every Bitcoin halving cycle has been different from those that preceded it, and this one is no exception. Several price-boosting events impacted Ethereum last year, perhaps undermining its potential for short-term gains in 2025.
• Ethereum has a fairly short charting history to look at. This is only the third crypto market cycle since Ethereum was introduced in 2014. Maybe investors shouldn't draw conclusions based on this limited data pool.
• That brings me back to the first point -- chart squiggles from the past can't really tell you what's next. Technical analysis is neither an art nor a science, but more of a gamble. I don't recommend making investment decisions on such a flimsy premise.

A more robust analysis

Let's forget about the price chart for a minute. What's actually going on in the Ethereum project, and what could it mean for owners, users, and investors in the long run?

Both Bitcoin and Ethereum are essentially encrypted transaction ledgers, managed on publicly available computer networks. But they serve fundamentally different purposes.

Bitcoin offers a digital coin that can be used for payments, and its value should rise over time due to rising demand and a strictly limited supply.

Ethereum is the functional coin of a massive, global computer. Smart contracts embedded in its transactions are executed automatically, performing a wide range of digital functions based on real-world data. This functionality is the core of decentralized finance (DeFi) systems, which move financial processes out of banks and into your smartphone.

As such, the coin's value doesn't rely on tight supply limitations. It's all about the smart contracts finding many use cases, millions of daily users, and a massive volume of actual Ethereum transactions. Each transaction makes something happen in somebody's blockchain wallet, or in a decentralized game, and so on -- and the transactions incur gas fees. Some of the tokens used to pay those fees are "burned" -- permanently removed from circulation. The rest go to holders who stake their Ethereum coins, which gives them the opportunity to validate transactions on the blockchain and keep it secure. Importantly, you can pay extra gas fees to execute your smart contracts faster, which should result in significant price increases when Ethereum-based apps go mainstream.

Moreover, Ethereum is always upgrading its software. Upcoming improvements include tighter security, changes that should lead to cheaper transaction fees, and technical foundations for game-changing upgrades later on. These boosts will be required in order to stave off challenges from younger and faster smart contract platforms. It would be a shame to build a worldwide market for decentralized apps, only to see Solana (CRYPTO: SOL) and Cardano (CRYPTO: ADA) reap all the long-term benefits of your work.

What's missing from this overview is a timetable for decentralized finance apps to take off. With or without assistance from Bitcoin's tenor-dictating price trends, Ethereum's real value won't become clear until we see the first killer apps of the DeFi and Web3 movements.

Why Ethereum looks ready to run

It's hard to pin a proper value on a digital transaction-tracking network, especially in a rapidly changing market that includes several credible alternatives.

That said, I'm convinced that DeFi and Web3 will revolutionize personal finance around the globe. Disrupting the enormous banking industry will be a heavy lift, but it also may be inevitable. The financial systems you use every day in 2025 have been around for decades or even centuries, and there are better tools available these days.

And despite a plethora of challengers, Ethereum remains the leader of the smart contracts pack. Many signs point to a healthy user community. More than half of all crypto value locked into app development projects belongs to the Ethereum market. There are roughly 300 million active Ethereum addresses, up from 130 million four years ago.

The network effect of that rapidly expanding user group should boost Ethereum's value over time. According to Metcalfe's Law, the value of any network grows in proportion to the square of the number of people involved. This value formula was originally applied to telecommunications networks in the 1980s, but has also been applied to the internet, social networks, airport networks, and financial services.

On that note, I expect Ethereum's real-world value to soar as more people embrace its fast and inexpensive solutions to age-old financial problems. I can't promise that $3,333 is the best buy-in price ever; still, I see a bright future for this crypto community in the long run, and the coin should build value over the years.

Ethereum may or may not skyrocket in 2025, but it doesn't really matter. I suggest holding this cryptocurrency for the long haul.

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Anders Bylund has positions in Bitcoin, Cardano, Ethereum, and Solana. The Motley Fool has positions in and recommends Bitcoin, Cardano, Ethereum, and Solana. The Motley Fool has a disclosure policy.