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Written by Anthony Di Pizio for The Motley Fool
Ethereum is the world's largest platform for developing decentralized software applications, which are popular in industries like gaming and financial services.
Tom Lee, chairman of Bitmine Immersion Technologies, thinks Ethereum's native cryptocurrency, Ether, is poised for a major gain.
Lee predicts Ether will eventually reach $250,000 per coin, but his forecast is a little self-serving.
Cryptocurrencies are experiencing a broad rally right now, but most of the industry's major coins are still down significantly from their all-time highs. Ethereum's native cryptocurrency, Ether (CRYPTO: ETH), is trading for almost $2,700 (as of Sept. 25), which is still 46% below last year's peak of $4,846.
But Tom Lee, Wall Street analyst and chairman of Bitmine Immersion Technologies (NYSE: BMNR), thinks investors should consider buying Ether. While speaking at the Proof of Talk conference back in June, he highlighted a series of tailwinds that could spark a rally to $250,000 per coin, representing an eye-popping 9,159% gain from its current price. He didn't provide a timeframe for his forecast, but will it ever become a reality?
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Ethereum is a platform for developing decentralized software applications, which are increasingly popular in industries like gaming and financial services. Each app is governed by slivers of computer code called smart contracts that enforce its rules. Smart contracts live on the Ethereum blockchain and they typically can't be changed, so no person or entity can manipulate an app's core functions, ensuring it remains fully decentralized.
The Ethereum network is also fully decentralized. Thousands of nodes (computers) around the world store an updated copy of its blockchain, so the broader network won't be compromised even if some nodes experience an outage. As a result, Ethereum has maintained 100% uptime during the past decade. This wouldn't have been possible if the network was hosted in a single data center instead, because even the best infrastructure providers typically promise an uptime of just 99.9%.
Ether is the gas that keeps the network running. Whenever someone uses an Ethereum-based decentralized app, a smart contract is activated, and the person must pay a fee in Ether to cover computer processing costs. Therefore, demand for Ether increases organically as the network becomes more heavily used, which should lift the value of each coin.
In the past, Ethereum was mostly used to build cryptocurrency applications and create non-fungible tokens (NFTs), but Tom Lee thinks the platform is quickly maturing from those obscure use cases. He says it will gradually enter the mainstream economy where it will be used to build payment rails and even settlement infrastructure for transactions conducted by artificial intelligence (AI) agents, which can take actions with minimal human input.
Financial institutions like BlackRock, JPMorgan Chase, and UBS Group have already launched tokenized investment funds that trade on Ethereum-based blockchains instead of traditional stock exchanges. Billions of dollars have flowed into these funds so far, which are used to buy secure assets like U.S. Treasury bonds.
Robinhood Markets (NASDAQ: HOOD) built a Layer-2 blockchain on top of Ethereum called Robinhood Chain. The company is tokenizing real stocks to let clients trade popular securities like Nvidia and Tesla outside of regular market hours. To be clear, investors don't have legal ownership of the underlying stocks when they buy tokenized securities, but they still benefit from any potential upside in exactly the same way.
AI agents can also buy and sell tokenized securities on behalf of their human operators through Robinhood Chain, which could significantly boost transaction volumes in the long term. Speaking more broadly, these agents could eventually have their own money, and a trusted, secure, and decentralized network like Ethereum could be perfect for processing their transactions.
A little more than 122 million Ether coins are in circulation as I write this, so at the current price of $2,700 per coin, the ecosystem has a market capitalization of $328 billion. Simple math suggests that a price of $250,000 per coin would result in a market cap of $30.5 trillion, which is almost equal to the output of the entire U.S. economy. It would also make Ethereum more than five times as valuable as the world's largest company, Nvidia, which is currently valued at $5.4 trillion.
If Ethereum eventually finds itself at the center of the financial system, then Lee's $250,000 price target might be achievable. However, despite growing adoption by major financial institutions, the network still has just 2.3 million daily active wallet addresses across its primary blockchain and all Layer-2 blockchains, which is down significantly from its peak of almost 4 million last year.
On a positive note, Robinhood Chain is experiencing a surge in adoption which could lift overall usage numbers. But generally speaking, it seems most consumers aren't very keen to participate in the tokenized economy just yet. I'm not sure what will convince them, but this presents a real challenge for Lee's $250,000 target.
It's important to remember that Lee is the chairman of Bitmine Immersion Technologies, which currently owns 6 million Ether coins, or nearly 5% of all circulating supply. The company's position is worth more than $16 billion, but that would grow to an eye-popping $1.5 trillion if Ether hits $250,000 per coin, so Lee's forecast is definitely a little self-serving.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends BlackRock, Ethereum, JPMorgan Chase, Nvidia, and Tesla. The Motley Fool has a disclosure policy.