Ethereum Dropped More Than 30% in February. Is It Worth Buying the Dip?

This wasn't supposed to happen: Ethereum (CRYPTO: ETH), the world's second-largest cryptocurrency, is now down significantly for the year after an absolutely disastrous February when it lost 32% of its value. Wasn't 2025 supposed to be a banner year for all cryptocurrencies, and especially a heavyweight like Ethereum?

Given this unexpected turn of events, it's understandable that so many investors are thinking twice about the traditional "buy the dip" strategy that has worked so well in the past. Is it worth buying the dip on Ethereum one more time, or is it finally time to move on to another cryptocurrency?

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Support from the Trump administration

The biggest factor in Ethereum's favor right now is support from the Trump administration. Over the past two months, the Trump administration has sent repeated signals that it intends to support Ethereum over the next four years. In January, for example, the Trump-affiliated crypto company World Liberty Financial bought $47 million worth of Ethereum as a show of support.

But the big news came on March 2, when President Donald Trump publicly declared via Truth Social that he intends to make Ethereum a major component of the new crypto strategic reserve for the U.S. government. A Bitcoin reserve has been talked about for months, but it was never clear until now whether Ethereum would become part of it.

Moreover, Ethereum appears to be the centerpiece of the Trump administration's plans for decentralized finance (DeFi). The basic idea here is to use the security, stability, and throughput capacity of the Ethereum blockchain to help build out the overall DeFi sector.

This is exactly what happened during the crypto bull market rally of 2020-2021, when Ethereum became the DeFi leader. If history repeats itself, it would cement Ethereum's status as one of the cryptocurrencies you need to own in your portfolio.

Ethereum's tech roadmap

Another factor in Ethereum's favor is its very detailed tech roadmap. You can think of this roadmap as a strategic blueprint for the future. Every year, Ethereum releases an updated tech roadmap, and it's very helpful for investors. It helps them to understand where Ethereum's going and what steps need to happen next. You simply don't get this level of visibility with other cryptocurrencies.

Image source: Getty Images.

The good news, if you're thinking about investing in Ethereum, is that it continues to focus on scalability, capacity, and overall throughput speed. The Ethereum community has done a lot of careful thinking about the future of the overall Ethereum ecosystem, giving investors important details on initiatives related to interoperability with other blockchains. A new mandatory tech upgrade is rolling out to all Ethereum computing and validation nodes in March, and that should make Ethereum even faster, more efficient, and more scalable.

All of that, of course, is important if Ethereum is going to play a key role in future DeFi initiatives. Overall speed and throughput capacity are paramount for DeFi, so the faster and more efficient Ethereum becomes, the more dominant it should be.

What could possibly go wrong?

So far, everything sounds great, right? Ethereum is clearly in the good graces of the Trump administration, and it continues to improve in terms of overall blockchain performance.

However, it's not quite that simple.

For one, there's currently a tremendous amount of debate over whether Ethereum has the optimal strategy for future growth. Things have gotten so contentious, in fact, that there has been a shakeup at the Ethereum Foundation, which helps to manage the growth and development of Ethereum. And top developers at Ethereum have been squabbling over the best approach to the blockchain's technical development.

What's more, the competition seems to have caught up with Ethereum. Other Layer 1 blockchains -- such as Solana and Cardano -- represent a huge competitive threat. In general, they are faster and more efficient than Ethereum, and that makes them more attractive to both users and developers. In the area of DeFi, Solana has emerged as a formidable rival.

Both Solana and Cardano have also caught the eye of the Trump administration. As Trump announced on March 2, it's not just Ethereum that may be added to the crypto strategic reserve -- Solana and Cardano are also in the discussion. That could make it difficult for Ethereum to put distance between itself and the competition.

Should you buy Ethereum?

At a current price of $2,370, Ethereum is a whopping 51% below its all-time high of $4,892 set back in November 2021. Theoretically, if Trump is able to ignite a rally in the crypto market, Ethereum could reclaim its all-time high. So you might make 50% on your investment this year. That's not too shabby.

But things are less certain over the long haul. You need to have rock-solid conviction that Ethereum will continue to be the top Layer 1 blockchain in the world. If you do, then it is definitely worth buying the dip on such an undervalued digital asset. However, if you don't, now might be the time to start looking for better investment targets elsewhere.

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Dominic Basulto 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.