If history is any guide, Ethereum could be on track to post stellar gains during the current Bitcoin halving cycle.
The Bitcoin (BTC 2.72%) halving that took place on April 19 was one of the most eagerly anticipated events of the year for crypto investors. Three previous halving events in 2012, 2016, and 2020 have led to spectacular gains for Bitcoin, and the expectation was that this year's halving would kick off yet another bull market cycle.
What many investors may not realize, however, is that other cryptocurrencies can also post spectacular gains once the Bitcoin halving cycle starts. One crypto on my radar right now is Ethereum (ETH 1.90%), which could be on track for rapid price appreciation over the next 12 months. Let's take a closer look at why.
Bitcoin's impact on the Ethereum ecosystem
Keep in mind that Ethereum is both a cryptocurrency as well as a blockchain ecosystem. This is important, because any new bullish sentiment around Bitcoin tends to benefit the components of these blockchain ecosystems, simply due to the greater interest that investors have in everything crypto-related. This can include everything from non-fungible tokens (NFTs) to decentralized finance (DeFi) exchanges, all of which are built on top of the Ethereum blockchain.
Image source: Getty Images.
In many ways, then, the Bitcoin halving is a rising tide that lifts all blockchain boats. This is exactly what happened during the previous Bitcoin halving cycle that kicked off in May 2020. Growing excitement around the Bitcoin halving led to investors looking for other cryptocurrencies that could benefit, and that naturally led them to Ethereum, which has the largest and most diversified blockchain ecosystem of any cryptocurrency.
As a result of all the new money flooding into the Ethereum ecosystem from crypto investors, the value of Ethereum began to soar. Over a 12-month period starting from the date of the Bitcoin halving in May 2020, Ethereum soared by more than 1,732%.
Ether / United States Dollar chart by TradingView
Of course, there's no guarantee that this same phenomenon will occur yet again for Ethereum in 2024. After all, past performance is no guarantee of future performance. But there are simply so many use cases for Ethereum that I'm increasingly confident that investors will find new sources of value within its sprawling blockchain ecosystem.
Launch of the new spot Ethereum ETFs
The second reason why Ethereum could soar in the post-halving cycle has to do with the imminent launch of the new spot Ethereum ETFs. The Securities and Exchange Commission officially gave the go-ahead for these new Ethereum ETFs at the end of May. By coincidence, this happened to line up with the date of the Bitcoin halving in mid-April. So it's now only a matter of time before investor money starts to flow into these ETFs, helping to push up the price of Ethereum.
Admittedly, there's not as much investor demand for the spot Ethereum ETFs as for the spot Bitcoin ETFs. But as much as $3 billion might flow into these ETFs by the end of 2024. At the very least, this new influx of money would help to soak up any new selling pressure in the crypto market.
How high can Ethereum go?
The combination of these two factors could send Ethereum higher over the next 12 months. A growing number of analysts and investors now think that Ethereum could regain its all-time high of $4,891 sometime by the end of 2025. And, from there, Ethereum could soar as high as $22,000 by the year 2030, according to investment firm VanEck.
Obviously, a lot needs to go right for Ethereum to skyrocket in value. So keep your eyes on the shifting sentiment around the Bitcoin halving, and how that influences investor perceptions of the value that can be unlocked within blockchain ecosystems. If history is any guide, Ethereum might end up being the no-brainer buy of this Bitcoin halving cycle, just like it was in 2020.
Dominic Basulto has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
