Ethereum Is Now Better Than Ever, but Does That Make It a Buy?

Ethereum's (CRYPTO: ETH) latest technology upgrade called Pectra went live on May 7, potentially making the chain the fastest and cheapest that it has ever been. With the coin's price rising by almost 70% during the past 30 days (likely buoyed by a handful of macroeconomic factors), it seems that investors are receiving the upgrade with some enthusiasm as developers are reporting they appreciate the new features.

Does that mean you should be considering a purchase? Below I'll examine what Pectra changed, why it's important, and how it fits into the long-term thesis for buying this coin.

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These new additions open lots of doors

Here's a quick non-exhaustive rundown of the most important new features for end users:

• Biometric authentication support
• Gas (user) fees can be sponsored by one of the parties in a transaction
• Spending limits can be assigned to wallets
• Transactions can be processed in batches
• Wallets can now behave as smart contracts

There are also a handful of back-end improvements that aim to make the chain run faster and with lower fees, as well as a few security improvements. For the most part, application developers haven't had enough time to fully integrate the new user-facing features into existing apps. New apps that lean on those features more heavily to offer unique value to their users will take even longer to launch, assuming they do.

Nonetheless, these upgrades grant Ethereum a handful of capabilities that other chains simply don't have and have the potential to make it more user-friendly, secure, and capable. All of the above contributes to the bull thesis for buying the coin and holding it for a long period.

However, it's important to recognize that Pectra's impact on Ethereum's price will take some time to play out in full. This first launch is only phase one out of two; phase two is slated for later this year or in early 2026.

Although the market is digesting how phase one is performing, it willl need to repeat the process relatively soon. It's possible that a lukewarm set of phase one features might be significantly streamlined, made more useful, or made to perform much better by what's coming in the next phase. This arc of the chain's story is at the beginning right now, not the ending.

Image source: Getty Images.

Therefore, there's still plenty of time for the coin's price to rise from here -- and there's another major catalyst coming that could be even stronger. And that's before considering the other tailwinds that are coming into play, like adoption among institutional investors who are seeking to use it to track and trade their real-world assets using its blockchain.

If there's a combination of things that are capable of knocking Ethereum out of its multiyear doldrums, this is probably it.

The risks are still significant

Time to throw just a little bit of cold water on the investment thesis for buying Ethereum right now.

As of the afternoon of May 12, it cost roughly $9.13 to perform a token swap on Ethereum, a dramatic increase of just a week or so earlier when gas fees were less than $1 for the same transaction. Transactions take about 30 seconds to complete, on average -- no change from before Pectra went live. This data indicates that, as substantive as the changes to scaling that were added with Pectra may be, they're still wholly insufficient to tackle the chain's longest-running and most annoying problems.

That makes Ethereum a risky purchase right now. Without strong evidence in hand that Pectra is making the chain cheaper to use, as it was marketed to do, it's hard to declare that the future of the chain is bright. Rivals like Solana continue to be faster and less expensive.

At the same time, it's undeniable that Ethereum's feature set is larger than ever. It's also the chain with the most capital for investment into new projects in its ecosystem.

Both of those things increase the crypto's chances of growing over the next five years. The balance of risk and reward of an investment is rapidly shifting in the coin's favor by virtue of the increasing sophistication of its technology, even if costs remain higher than desired.

If you're very risk tolerant, it's worth punting with a small investment in Ethereum today. For those who are less comfortable with the prospect of sustaining losses, hold off for now. There will be more information about how Pectra is working during the coming months, which might shore up the coin's odds of success as an investment.

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Alex Carchidi has positions in Ethereum and Solana. The Motley Fool has positions in and recommends Ethereum and Solana. The Motley Fool has a disclosure policy.