Ethereum (ETH 20.29%) is down almost 40% this year, and many investors are now starting to question its long-term outlook. At a current price of almost $2,100, Ethereum is nowhere close to its all-time high of $4,891 from 2021 and continues to lose ground to blockchain rivals.
So, it might seem ludicrous even to consider investing in Ethereum right now. But there is one compelling reason you might want to consider buying Ethereum on the dip.
Ethereum’s strategic roadmap
Ethereum is unique among the major cryptocurrencies in that it actually has a coherent roadmap for future development. This goes beyond just a mission statement or some broad expression of goals and proposed milestones.
Image source: Getty Images.
Every year, Vitalik Buterin, the co-founder of Ethereum, lays out the exact technological upgrades and improvements that are coming up, as well as some context for how they will make Ethereum better, faster, and stronger. This leads to some exciting technological breakthroughs, such as the much-ballyhooed Merge that took place in 2022.
On May 7, Ethereum unveiled yet another technological upgrade called “Pectra” (an amalgam of “Prague” and “Electra”). As with past tech upgrades, Pectra will offer improvements in terms of scalability, speed, and overall performance of the Ethereum blockchain.
The problem with Ethereum’s tech upgrades
The problem is that these annual tech upgrades are often so wonky and so complex that they are largely indecipherable to the layperson. This makes it very difficult for the average investor to value Ethereum and to come up with any kind of exciting investment thesis for it.
For example, take the new Pectra upgrade. As the Ethereum Foundation points out, one key improvement is that “L2 scaling data storage blobs increased by 2x.”
Sounds simple enough, but it requires you to know that Ethereum has a two-layer blockchain architecture (the L1 and the L2), that storage blobs (“binary large objects”) are a sophisticated way of storing data and a key piece of Ethereum’s overall strategic roadmap, and that the L2 layer is very important now for how quickly transactions are processed on the Ethereum blockchain.
That’s a lot to wrap your head around. And just imagine trying to convince a neighbor, friend, or family member to invest because “Ethereum has blobs.”
Making Ethereum as simple as Bitcoin
That’s why I’m so excited about what seems to be a major shift in Buterin’s thinking about the future of Ethereum. Just days before the Pectra launch, he came out with a new vision to make Ethereum “as simple as Bitcoin (BTC 3.50%)” within five years.
“One of the best things about Bitcoin is how simple it is. This simplicity has lots of benefits. Let’s bring these benefits to Ethereum,” Buterin posted on social media. This is a potential sea change. Right now, Ethereum is too complex for most people to figure out, so anything that could make it simpler to use and understand would be welcome.
Simplicity is the key to unlocking Ethereum’s full potential. For example, as Buterin points out, simplifying the architecture of the blockchain makes it much easier and cheaper to maintain, reduces development and testing time, improves overall scalability, and dramatically reduces the chances of “catastrophic bugs” hiding within the software.
This is vitally important because Ethereum seems to be losing ground right now to a number of smaller, nimbler blockchain competitors. All of them are taking market share from Ethereum, making it impossible for Ethereum’s price to move higher.
What’s next for Ethereum?
At one time, Ethereum led the way with new developments and technological breakthroughs. It was the clear market leader and the top innovator. And that’s exactly what made it so valuable and why it became the second-largest cryptocurrency in the world, with a huge $250 billion market cap.
By simplifying, Ethereum has a chance to reinvent itself and regain its former mojo. That’s it. That’s my new investment thesis for Ethereum.
Think about buying a new sports car. Do you care more about the sophisticated engine technology under the hood or that it can go from 0 to 60 in less than three seconds?
Instead of talking about all the super-cool technology under the hood, Ethereum just needs to say something like, “We’re going to process 1 million transactions per second soon, and that will make us the clear industry leader.”
So, don’t give up on Ethereum quite yet. It has been a top crypto for nearly a decade now and is led by a true industry visionary. It could be very undervalued right now, making it a prime candidate to buy on the dip.