Should You Buy Ethereum in 2025?

In 2025, Ethereum (ETH 4.47%) will celebrate its 10th anniversary. When Ethereum first launched in July 2015, it traded for less than $3. Ten years later, it's now trading for $3,200. Over the past decade, Ethereum has even outperformed Bitcoin (BTC 2.40%).

However, there's growing evidence to suggest that you might think twice about investing in Ethereum in 2025. Here are several key factors to consider.

Rise of new blockchain challengers

The biggest point of concern, quite frankly, is the continued appearance of new blockchain challengers, all of which are capable of knocking Ethereum off its top perch. If you take a look at the top 12 cryptocurrencies by market cap, five of them -- Solana (SOL 6.39%), Cardano (ADA 0.83%), Tron (TRX 5.20%), Avalanche (AVAX 5.22%), and Sui (SUI 2.00%) -- are direct rivals to Ethereum.

All these are smart contract Layer-1 blockchains, and that means they can do everything that Ethereum can do. In many cases, these blockchains are faster, more efficient, and cheaper to use. While Ethereum still has a dominant market share in many blockchain niches, there are definitely signs of slippage.

Image source: Getty Images.

For example, when it comes to decentralized finance (DeFi), blockchain rivals with superior transaction processing speeds are starting to take market share away from Ethereum. Solana recently surpassed Ethereum in terms of 24-hour trading volume on decentralized cryptocurrency exchanges, and all signs point to more trading volume being siphoned away from Ethereum. Moreover, Base -- the new blockchain from Coinbase Global (COIN 7.66%) -- is emerging as a platform to launch innovative new DeFi projects.

This is a story we've seen time and time again in the tech industry: An entrenched market leader begins to cede market share to smaller rivals in low-value or unprofitable niches. Over time, this market share erosion grows in intensity, as the rival upstarts develop better and better technology. At some point, the rival upstarts then begin to take over the profitable niches as well. Finally, the market leader is dethroned. Within Silicon Valley, this process is known as disruptive innovation.

Ethereum continues to underperform its rivals

And that's why I'm so concerned about Ethereum's recent performance. In 2024, Ethereum was up a robust 41%. That's more than the Nasdaq Composite (^IXIC 2.45%) or the S&P 500 (^GSPC 1.83%), which were up 30% and 24%, respectively. But it's nowhere near the performance of Bitcoin, which was up 125% last year.

Ethereum / US Dollar chart by TradingView

And it gets far more concerning when you compare Ethereum's performance directly to rivals such as Solana, which has been touted as an "Ethereum killer" for several years now. In 2024, Solana was up a stellar 71%. That comes on top of Solana's 900% surge in 2023.

If you're thinking about investing in Ethereum, this should be a red flag. Why has Solana been able to outperform Ethereum by such a significant margin for two years now?

Ethereum's ETF nothingburger

And there's one more factor to take into consideration: the relatively uninspiring performance of the new spot Ethereum ETFs. When they started trading at the end of July, analysts expected the price of Ethereum to soar. This is what happened with the spot Bitcoin ETFs in January, as new investor inflows sent the price of Bitcoin soaring.

But consider the performance of Ethereum from July to November. Until the post-election "Trump rally" in the crypto market at the end of the year, Ethereum had difficulty gaining any real momentum with investors.

In 2025, Ethereum is already down 5% after just two weeks. Granted, other top cryptocurrencies are down as well. But that's not an auspicious start to the new year, is it? Already, concerns are mounting over outflows from the spot Ethereum ETFs in 2025.