Ethereum (CCC:ETH-USD) is now seen as a better long-term alternative to Bitcoin (CCC:BTC-USD) by a growing number of institutional investors.
For example, the CEO of deVere Group, the world’s largest international financial consultancy, says that Ethereum is set to outperform Bitcoin in the long run. He expects this to happen sometime in the next five years.
In a sense, this has already been happening. Year-to-date, as of Sept. 12, Ethereum was up 356% to $3,327.82. It ended last year at $730.37 and recently reached $3,327.82. This was even after dropping from a peak of $3,952 on Sept. 4 and a previous peak of $4,168 on May 10.
By contrast, Bitcoin is up just 54% from $29,374 at the end of last year to $45,244 on Sept. 12. It is also down steeply from a peak of $51,753 on May 4 and a prior peak of $63,314 on April 14.
From the end of Q1 on March 31, when ETH closed at $1,977.28, the crypto is now up 37.9% for investors who have held on to Ethereum during all of Q2 and Q3 through to Aug. 4.
But now it appears that Ethereum could have a new leg up.
Recent Report Spotlights ETH
This week, according to Cryptoslate online magazine, Standard Chartered, a major UK bank, issued a research report titled “Ethereum Investor Guide.”
The bank said that Ethereum could perform better than Bitcoin over the next few years. They like Ethereum since it is “akin to a financial market.” They said this is because it allows “non-linear financial transactions such as lending, insurance, and exchanges can operate.”
The 17-page report is a very good read for investors interested in taking a position in Ethereum. The report puts a structural value on Ethereum at between $26,000 to $35,000 per ETH token. This is because they believe it has a “broader value case” than Bitcoin.
The report talks about decentralized finance (Defi) and Ethereum’s central role in this new frontier in cryptocurrency and blockchain technology. For example, the report argues that Ethereum “underpins the vast majority of decentralized applications (Dapps).”
They also said it has some risks. Other ecosystems could rival Ethereum. In addition, there are separate but huge risks with “yield farming.” This is where investors stake their tokens in order to gain higher amounts of the token paid out as interest, akin to a bank’s certificate of deposit.
However, this is by far one of the best treatises on Ethereum that I have read so far, especially since it seems to deal with all of the latest issues. This includes the value of Ethereum’s move from a proof of work authentication system to a proof of stake. It also includes regulatory, competitive, demand and Bitcoin comparison issues.
What to Do With Ethereum
A number of investors have already moved on from Ethereum, primarily because of its high transaction fees. A recent article in CoinTelegraph, another popular online crypto magazine, had an article: “Is Solana an Ethereum Killer?” Solana has significantly lower transaction costs and much faster transaction speeds than ETH. The Standard Chartered report did not really discuss this competitive aspect.
Nevertheless, this report will be an eye-opener to many institutional investors. I expect other research firms or divisions of investment banks to come out with similar in-depth papers on Ethereum.
Assuming ETH reaches the bottom of the range at $26,000 in five years, that means that Ethereum will be 7.813 times its presents price. That implies an average annual return of 50.856% each year for the next five years.
That is a very high ROI for most investors. Although it is very speculative, it means that investors should put a portion of their overall portfolio in Ethereum.
On the date of publication, Mark R. Hake held a long position in Bitcoin and Ethereum but not any other security mentioned in the article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.