Prices of Ethereum (CCC:ETH-USD) have continued to recover after last month’s crash. After the short-lived panic, which sent it from $4,000, down to briefly under $2,000, it made a partial recovery and as of this writing trades for around $2,600.
Said recovery looks like it’s going to continue. Investors still show less enthusiasm for Bitcoin (CCC:BTC-USD) and more enthusiasm for altcoins such as this one, which saw major breakouts starting in January.
But don’t take this to mean it’s going to be a fast trip back to $4,000 and beyond. Gains from here could end up much more gradual. Why? Mostly due to the emergence of other altcoins that may give this one a run for its money. I’m talking about names like Cardano (CCC:ADA-USD), Polkadot (CCC:DOT-USD) and Polygon (CCC:MATIC-USD).
All three have advantages to Ether when it comes to DeFi (decentralized finance) applications. This doesn’t mean this coin is going to get the Bitcoin treatment – languishing as newer rivals soar in value. Impatient may be better off sticking with the up-and-coming names if they’re looking for “to the moon” plays.
But for more cautious investors looking for opportunities in crypto, Ethereum remains a solid opportunity.
Why Ethereum Could Lose Ground
Among crypto aficionados, the “year of DeFi” may have already happened in 2020. But 2021 was the year the investing public took notice. And with Ethereum leading the charge with decentralized finance’s second wave, it’s no surprise the price of its native coin has seen a tremendous run-up in value.
Even after you account for last month’s declines. At today’s prices, ETH is still up well over three-fold from its trading levels at the start of the year. Yet even as the aforementioned trend shows little sign of slowing down, that doesn’t mean this cryptocurrency is about to make a full rebound back to over $4,000.
Why? Chalk it up to the three altcoins mentioned above (along with scores of other coins and tokens) that could gain more ground as decentralized finance continues to evolve. Even with its current dominance of the space, the Ethereum blockchain has many flaws. These include scalability issues, transaction speed and high transaction fees.
This has paved the way for rivals to become more widely used in DeFi/blockchain transactions. One area it still has an edge is with its smart contract capabilities. But that may not last for long. Cardano is making progress in this area. As a Motley Fool commentator recently pointed out, so is Polkadot.
Does this mean ETH is doomed to end up like Bitcoin, which is starting to look like a dinosaur way ahead of its time? I wouldn’t go that far, but the days of wild price movements may be coming to an end.
Expect Less of a Roller Coaster from Here
As rival coins and tokens gain ground in DeFi, what does that mean for Ether price action going forward? Speculators shouldn’t expect the kind of fast profits some made from it earlier this year.
In other words, don’t buy this at $2,600 with the expectation that it soars back to $4,000 in a matter of weeks. And don’t buy it now with the thought that it’s going to complete “the flippening” well ahead of schedule, if at all. Instead, assume it’ll generate solid, but not exactly life-changing, gains from here.
So, if there’s less potential for rapid trading profits, is it worth bothering with ETH anymore? If you’re looking to “roll the dice,” in the hopes of building a crypto fortune in the blink of an eye, that may be the case. But if you’re a more cautious investor looking for exposure to crypto, this may be one of your better options.
Less volatile than the up-and-coming names mentioned above, but still exposed to the overall DeFi trends, Ethereum’s price still stands to continue on its recovery. Years down the road, it may end up worth many times what it’s worth today.
The Bottom Line
Cardano, Polygon, Polkadot and the grab-bag of other coins and tokens may zoom to prices many times what they each trade for today. But they could crater in value, if fear and uncertainty takes hold once again.
Ethereum may offer less potential to gain big from here. But likely more stable than its rivals, consider it a solid choice for investors with less of a “get rich” mindset, and more realistic expectations when it comes to investing in this space.
On the date of publication, Thomas Niel held long positions in Bitcoin and Ethereum. He did not have (either directly or indirectly) any positions in any other securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.