Ethereum has transformed dramatically since 2022, transitioning to proof-of-stake, launching spot ETFs, and gaining clearer regulatory positioning, yet its price has underperformed Bitcoin over this period despite what appears to be fundamental improvements.
This disconnect between improving fundamentals and relative price weakness creates the essential question for 2026 investors: Is Ethereum a good investment now that it’s more mature and institutionalized, or has the best asymmetric opportunity already passed?
The answer depends on whether you believe Ethereum’s evolution from a speculative technology to an established platform justifies its current valuations or whether the very maturity that makes it more investable also caps its upside potential.
This article examines Ethereum’s position after recent developments to help you evaluate whether it deserves allocation in your portfolio at current prices.
How ETF Approval Changed Ethereum’s Investment Case
The July 2024 approval of spot Ethereum ETFs represented a legitimacy milestone comparable to Bitcoin’s ETF approval, yet the market response has been surprisingly muted compared to expectations, revealing important dynamics about Ethereum’s current position.
Spot Ethereum ETFs theoretically opened the floodgates for institutional capital that previously couldn’t access Ethereum due to custody concerns, compliance requirements, or mandate restrictions.
It was designed to enable financial advisors to allocate client portfolios to Ethereum through familiar, regulated vehicles, without requiring explanations of private keys, wallets, or blockchain mechanics, thereby dramatically lowering the barrier to entry for traditional finance.
The reality has been more complicated than the bulls anticipated. While Ethereum ETFs have accumulated billions in assets, the flows pale in comparison to Bitcoin ETF demand, with major providers seeing modest inflows rather than the deluge that characterized Bitcoin ETF launches.
This suggests either that institutional demand for Ethereum specifically is lower than expected, that investors prefer Bitcoin’s simpler value proposition, or that timing matters and Ethereum ETFs launched after the initial crypto enthusiasm had cooled.
The underperformance creates two possible interpretations.
First, it suggests Ethereum’s complexity and higher regulatory risk deter institutional capital that gravitates to Bitcoin’s commodity-like simplicity; secondly, it suggests Ethereum ETFs are building infrastructure and accumulating assets during a period of relative calm before a future surge in demand.
Your view on this likely shapes whether you see current prices as an opportunity or a warning.
While Ethereum ETF approval implied the SEC views Ethereum favorably enough to allow retail access through regulated products, explicit classification as a commodity versus a security remains unresolved, creating ongoing uncertainty that Bitcoin no longer faces. The SEC has carefully avoided stating whether ETH itself is a security, instead approving ETFs under the Investment Company Act without clarifying the underlying asset’s status.
This matters because if the SEC later determines ETH is a security, which seems unlikely but not impossible, the regulatory framework changes dramatically with registration requirements, trading restrictions, and disclosure obligations that could impair Ethereum’s functionality and value.
More realistically, the ambiguity deters some institutional participants who demand absolute clarity before deploying significant capital, keeping a portion of potential demand on the sidelines.
The Proof-of-Stake Transition Creating Winners and Losers
Ethereum’s 2022 transition from proof-of-work to proof-of-stake fundamentally altered its economics and environmental profile, theoretically improving the investment case through reduced issuance and sustainable consensus, yet also introducing new dynamics that cut both ways.
The supply dynamics that should favor price
Post-merge Ethereum issuance dropped roughly 90%, reducing new ETH entering circulation from approximately 13,000 daily to under 2,000 daily while maintaining or reducing miner selling pressure since validators don’t face the same cost structures as miners.
Combined with EIP-1559 fee burning, Ethereum becomes deflationary during periods of high network activity where fees burned exceed new issuance, also creating supply dynamics that theoretically support price appreciation.
During peak usage periods, Ethereum burns more ETH than it issues, making it the first major cryptocurrency with a genuinely deflationary monetary policy where total supply decreases rather than increases.
If you believe Ethereum usage will grow or remain elevated, the supply dynamics create a natural upward pressure on price as the float shrinks while demand remains constant or grows.
The problem emerges during low activity periods when fee burning drops while issuance continues, creating modest inflation rather than deflation.
This means Ethereum’s supply dynamics are variable rather than fixed like Bitcoin, creating dependency on sustained high usage to maintain the narrative that bulls emphasize. If network activity stagnates or competition erodes Ethereum’s dominant position, the story weakens and potentially reverses.
Ethereum staking provides yields currently around 3-4% annually, transforming ETH from a purely speculative asset into a productive asset generating income from network operations, making Ethereum more attractive for risk-adjusted return analysis compared to Bitcoin, which generates zero yield.
For institutional investors accustomed to evaluating assets on total return, including income, Ethereum’s staking yield provides a quantifiable benefit that Bitcoin lacks, potentially justifying allocation even during periods of price consolidation or modest decline. A 3% staking yield plus 5% annual price appreciation delivers 8% total returns, competitive with equity markets, while providing different risk exposures.
However, staking introduces complexity and costs that reduce net yields, including lockup periods that create liquidity risk, slashing risk if validators misbehave, and tax implications that vary by jurisdiction but generally create reporting obligations. Many investors will access Ethereum through ETFs that don’t provide staking exposure, meaning they miss this yield entirely and own Ethereum purely for price appreciation, eliminating one of its primary advantages over Bitcoin.
The Competitive Landscape that Threatens Dominance
Ethereum maintains the largest smart contract platform ecosystem by most metrics, yet competition has intensified dramatically with alternative Layer 1 blockchains and Ethereum’s own Layer 2 solutions creating complex dynamics that could enhance or undermine ETH’s value proposition.
Ethereum’s scaling roadmap centers on Layer 2 solutions like Arbitrum, Optimism, Base, and others that process transactions off the main chain while inheriting Ethereum’s security, theoretically allowing Ethereum to scale to millions of transactions per second without compromising decentralization.
The complication with this method is that L2 success doesn’t necessarily translate to ETH value accrual in obvious ways. L2 transactions pay reduced fees to the Ethereum mainnet compared to executing directly on L1, meaning the fee burning that creates deflationary pressure captures less value as activity migrates to L2s. While L2 usage theoretically drives long-term ETH demand through security requirements and bridging activity, the mechanism is less direct than L1 usage, burning fees proportionally to activity.
Solana, Avalanche, Cosmos, and other alternative Layer 1 blockchains have proven more resilient than previous “Ethereum killers,” maintaining significant developer activity, user bases, and market caps despite Ethereum’s dominance. While none have overtaken Ethereum’s total value locked or developer count, they’ve collectively captured meaningful market share that would otherwise flow to Ethereum.
The multi-chain future where different blockchains serve different use cases rather than Ethereum capturing everything represents a credible scenario that caps Ethereum’s upside relative to maximum bull cases. If Solana captures gaming and high-frequency applications while Ethereum focuses on DeFi and high-value settlements, the total addressable market for ETH shrinks compared to winner-take-all scenarios.
Whether competition is an existential threat or a healthy ecosystem development depends on your timeframe and conviction in Ethereum’s moats. Bulls argue that Ethereum’s developer ecosystem, apps, and security model create defensible advantages that alternative L1s can’t overcome despite technical superiority in specific dimensions, and bears will argue that technology evolves quickly and today’s advantages become tomorrow’s legacy burden as newer chains learn from Ethereum’s limitations.
The Valuation Question that Nobody Can Answer Definitively
Ethereum’s valuation remains deeply uncertain because its value derives from being an infrastructure for applications that may or may not achieve mass adoption.
Unlike Bitcoin, where you can evaluate it relative to gold’s market cap or as a digital store of value, Ethereum is absolutely different.
Ethereum isn’t a company with earnings you can value through discounted cash flow, yet it generates fees that could theoretically be valued similarly to revenue-generating protocols. The fee revenue goes to validators rather than token holders directly, creating a disconnect between protocol revenue and token value that makes traditional valuation frameworks problematic without modification.
Some analysts value Ethereum based on total value locked in DeFi applications, arguing TVL represents trust in Ethereum’s platform that should correlate with ETH value; others focus on transaction fees burned as a proxy for network usage and value; still others use relative valuation comparing Ethereum to Bitcoin’s market cap or to potential comparable companies like payment processors or cloud platforms.
None of these approaches provides definitive answers because Ethereum doesn’t fit cleanly into existing valuation paradigms.
This valuation ambiguity creates opportunity and risk. If Ethereum is undervalued relative to its utility as internet infrastructure, current prices represent a significant opportunity; if it’s overvalued relative to actual usage and adoption that remains primarily crypto-native rather than mainstream, substantial downside exists.
The uncertainty means your conviction about Ethereum’s trajectory matters more than precise valuation calculations.
Ethereum has traded as low as $880 and as high as $4,800 in the past three years, with current prices around $2,600 representing neither obvious bargain nor clear overvaluation.
This wide range of plausible outcomes makes position sizing critical. If Ethereum represents 30% of your portfolio and it drops to $1,500, you’ve suffered significant wealth destruction; if it represents 5% and drops to $1,500, the damage is manageable, while upside to $5,000+ still meaningfully improves overall portfolio returns. The uncertainty argues for modest positioning that captures upside without creating catastrophic exposure to downside scenarios.
Making the Investment Decision in 2026
So is ethereum a good investment at current prices with current developments? The answer depends less on Ethereum’s qualities than on your specific situation and convictions about its future trajectory.
For whom Ethereum makes sense now
Ethereum deserves consideration if you believe smart contract platforms will capture significant economic value over the next decade, want exposure beyond Bitcoin’s store-of-value narrative, can handle extreme volatility and regulatory uncertainty, and view 3-5 year minimum time horizons as appropriate for crypto allocation. The ETF approval and proof-of-stake transition have de-risked Ethereum somewhat compared to 2020-2021 positioning, making it more suitable for mainstream portfolios at modest allocation levels.
The investor profile that fits Ethereum includes those already holding Bitcoin who want diversified crypto exposure, those who believe in DeFi’s potential beyond speculation, those with high risk tolerance and long time horizons, and those whose portfolios need exposure to technological platform investments rather than just digital gold. If you fit this profile, allocating 2-5% of your portfolio to Ethereum alongside Bitcoin positions makes rational sense.
See also: Is Bitcoin a Good Investment in 2026? Bull, Base & Bear Cases
Why waiting might be equally rational
Conversely, legitimate reasons exist to avoid or minimize Ethereum exposure at current prices. The regulatory uncertainty exceeds Bitcoin’s despite ETF approval, the technical complexity makes it harder to evaluate compared to Bitcoin’s simpler proposition, the competition creates execution risk that Bitcoin doesn’t face, and valuation ambiguity means you might be paying premium prices for uncertain outcomes.
If you’re skeptical about DeFi achieving mainstream adoption beyond crypto-native speculation, prefer assets with clearer regulatory treatment, want maximum simplicity in crypto holdings, or are concerned that Ethereum’s best gains are behind it while most risk remains ahead, staying in Bitcoin exclusively or avoiding crypto entirely both represent defensible positions rather than mistakes.
The allocation framework that accounts for uncertainty
For investors who decide Ethereum belongs in their portfolio, appropriate sizing likely falls between 20-40% of total crypto allocation, with Bitcoin comprising the majority at 60-80% to balance Ethereum’s higher risk profile with Bitcoin’s more established position. Within a total portfolio, this might translate to 2-4% Ethereum and 4-8% Bitcoin for moderate crypto allocators, maintaining diversification while acknowledging Bitcoin’s stronger position.
The mistake would be overweighting Ethereum relative to Bitcoin based on higher potential returns without accounting for higher execution risk and regulatory uncertainty, or underweighting Ethereum to zero based on skepticism while holding Bitcoin, potentially missing exposure to smart contract platform upside if that narrative succeeds, where digital gold might plateau.
Regular rebalancing between Bitcoin and Ethereum positions maintains target allocations and forces disciplined selling of whichever has outperformed to buy whichever has lagged, removing emotion and timing decisions from the equation while ensuring you participate in both narratives as they develop.
Evaluate Ethereum’s investment case:
- Bitcoin vs Ethereum: Which Is the Better Investment?
- Ethereum’s Real Value Proposition Beyond Hype
- How Much of Your Portfolio Should Be in Crypto?
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Disclaimer: This article is for informational purposes only and should not be considered financial advice. Cryptocurrency investments carry substantial risk, including potential loss of principal. Ethereum faces regulatory uncertainty and technological competition that could significantly impact value. Always conduct your own research and consult with qualified financial advisors before making investment decisions.
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