Is Ethereum Still a Smart Investment? Analyzing Its Performance and Competition

Summary:

Ethereum is up 50% for the year but still underperforms against Bitcoin, which is up 131%.
The launch of spot Ethereum ETFs has not met expectations, with only $3.5 billion in assets compared to Bitcoin's $53.5 billion.
Since the launch of Ethereum ETFs, its value has actually declined 1%.
New competitor blockchains are taking market share due to being faster, cheaper, and easier to use.
Ethereum's transaction capacity is only 15 per second, while Solana processes 65,000.

If you're an Ethereum (CRYPTO: ETH) investor, there's some good news: the world's second-largest cryptocurrency is up an impressive 50% for the year. Recently, Ethereum broke through the $4,000 price level and is within striking distance of its all-time high of $4,891 from November 2021.

However, there's a flip side. Ethereum continues to underperform against other cryptocurrencies. For instance, Bitcoin (CRYPTO: BTC) is up 131% for the year, with many other top cryptocurrencies also posting triple-digit returns. This raises the critical question: Should you buy Ethereum as we head into 2025?

The catalyst that was expected to boost Ethereum this year was the launch of new exchange-traded funds (ETFs). Following the successful launch of spot Bitcoin ETFs in January, investors had high hopes for spot Ethereum ETFs in July. Unfortunately, while spot Bitcoin ETFs are still receiving rave reviews, the feedback for spot Ethereum ETFs has been mixed. The largest, the iShares Ethereum Trust (NASDAQ: ETHA), currently has just $3.5 billion in assets under management, compared to over $53.5 billion for the iShares Bitcoin Trust (NASDAQ: IBIT).

Despite the 50% increase in Ethereum's value this year, its performance has been lackluster since the launch of the spot Ethereum ETFs, actually declining 1% since July 23. This is particularly disappointing as this period included a post-election rally that saw Ethereum briefly soar past $4,000.

Adding to the concerns, new competitor blockchains are steadily taking market share from Ethereum in areas like decentralized finance (DeFi) and blockchain gaming. These new blockchains are generally faster, cheaper, and easier to use than Ethereum. For example, while Ethereum can process only 15 transactions per second, Solana (CRYPTO: SOL) can handle 65,000 transactions per second, and Sui can even manage 297,000 transactions per second.

Investors are noticing these developments. While Ethereum is up 50% this year, Cardano is up 60%, Solana is up 88%, and Sui has skyrocketed by an astonishing 505%. Additionally, many of the Layer-2 scaling solutions on Ethereum's blockchain, such as Arbitrum, Optimism, and Polygon, are down 50% or more for the year.