Ethereum is the second largest cryptocurrency in the world. But is it a buy?

If you are Ethereum (Ethereum 3.09%) Investor, the good news is that the world’s second largest cryptocurrency is up a staggering 50% for the year. Ethereum recently broke through the $4,000 price level, and even with the recent pullback, it is within striking distance of reclaiming its all-time high of $4,891 from November 2021.

However, the bad news is that Ethereum is still performing poorly against other cryptocurrencies. Bitcoin (Bitcoin -1.29%)for example, is up 131% for the year. Many other cryptocurrencies are also posting triple-digit returns. All of this leads to the obvious question: Should you buy Ethereum as we head into 2025?

Mixed reviews for spot ETFs

The only catalyst that was supposed to push Ethereum higher this year was the launch of new exchange-traded funds (ETFs). After the amazing launch of Spot Bitcoin ETFs In January, investors had high hopes for… Spot Ethereum ETFs In July.

Unfortunately, while spot Bitcoin ETFs still have great reviews, reviews have been mixed for spot Ethereum ETFs. On the launch date, some investors were expecting $1 billion per month to flow into these ETFs. Five months later, the largest Ethereum ETF,… iShares Ethereum Trust (Itha -3.37%)it still has only $3.5 billion in assets under management. For comparison, the iShares Bitcoin Trust (Ebit -3.56%) It has more than $53.5 billion in assets under management.

Ethereum/USD chart By TradingView

Furthermore, although Ethereum’s price has risen 50% this year, its performance has been lackluster since Ethereum ETFs debuted. Since July 23, when the new investment products were launched, the price of Ethereum has fallen by 1%. This is especially disappointing considering that this time period includes a post-election rally that saw the price of Ethereum briefly rise above the $4,000 mark.

New competitors on the horizon for Ethereum

The poor performance of new ETFs is not the only cause for concern. Steadily but surely, new competing blockchains are taking market share from Ethereum, in areas ranging from decentralized finance (DeFi) to blockchain gaming.

One reason for this is that new competing blockchains are simply faster, cheaper, and easier to use than Ethereum. This disparity is much wider than many people assume. For example, Ethereum can only process 15 transactions per second. Solana (Sol 5.76%) It can process 65,000 transactions per second. and but It can process 297,000 transactions per second.

And for good reason, investors are starting to take notice. The price of Ethereum is up 50% this year, however Cardano Up to 60%. Solana rose by 88%. Sui’s percentage increased by a staggering 505%. Furthermore, almost all layer 2 scaling solutions that sit on top of the underlying Ethereum blockchain (in order to help it process transactions faster) also perform poorly. Three of the best Layer 2 measurement solutions – Arbitration, optimismand ribbed – Decreased by 50% or more for the year.

Putting it all together, I think Ethereum’s first-mover advantage is about to disappear in the blockchain world. Yes, when Ethereum was launched back in 2015, it stood alone as the only blockchain platform for smart contracts. This is what made it unique, and what fueled its stratospheric returns. But as 2025 approaches, Ethereum has been at the top for a decade, and competitors have had time to catch up.

What is the best alternative to Ethereum?

Of course, there are some reasons to be optimistic about Ethereum. Led by one of the brightest minds in the entire cryptocurrency industry, Vitalik Buterin. It has a world-class developer network that helped launch The Merge (a blockchain transformation project) in 2022. It has a proven track record of rewarding investors with amazing returns. It remains a major player in almost every blockchain niche.

However, I’m still not convinced that this makes it a buy before 2025. If you’re looking for much more upside potential, you might consider investing in one of Ethereum’s rising competitors, like Solana. If this sounds risky or speculative, there’s always Bitcoin, which continues to deliver triple-digit returns in… A predictable four-year cycle.