Ether (ETH 2.04%), the native token of the Ethereum blockchain, is the world's second most valuable cryptocurrency, with a market cap of $308 billion. If you had invested $100 in Ether when it publicly launched 10 years ago, your stake would be worth more than $453,000 today.

Some bullish investors believe Ether still has plenty of upside potential. VanEck's Matthew Sigel and Patrick Bush expect it to rally from about $2,500 today to $22,000 by 2030. Ark Invest's Cathie Wood believes its price could soar even higher to $166,000 by 2032.

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We should take those estimates with a grain of salt, since VanEck and Ark Invest are both invested in Ether through their own ETFs. I wouldn't set a firm price target on Ether, but I think it's still worth buying over the next five years for five simple reasons.

1. Its strong developer ecosystem

In 2022, Ethereum transitioned from a proof-of-work (PoW) mechanism to a more energy-efficient proof-of-stake (PoS) mechanism in a sweeping upgrade called "The Merge." Ether could no longer be mined like Bitcoin after that transition. Instead, it needs to be "staked" to earn interest-like rewards.

But as a PoS blockchain, Ethereum gained the ability to support smart contracts, which are used to develop decentralized apps (dApps), non-fungible tokens (NFTs), tokenized assets, and other crypto assets. That transformation, driven by a growing developer ecosystem that turned Ethereum into the world's largest developer platform for decentralized apps, is now the primary driver of Ether's value, instead of the scarcity of its tokens.

2. Its upcoming network upgrades

Ethereum's Layer 1 blockchain is slower than other PoS blockchains like Solana and Cardano. To keep up with those speedier competitors, Ethereum hosts Layer 2 solutions which bundle together its transactions and processes them off-chain at higher speeds before returning them to its L1 blockchain.

Over the next few years, Ethereum will go through three more upgrades: The Verge, The Purge, and The Splurge. The Verge will improve Ethereum's scalability without compromising its decentralization. The Purge will clear out its historical data and technical debt to reduce its network congestion and gas fees. The Splurge will provide additional optimizations and minor improvements to ensure its blockchain is running as efficiently as possible.

The Ethereum Foundation hasn't set the exact dates for these upgrades yet, but they could draw more developers to its platform, widen its moat against Solana and Cardano, and stabilize Ether's price as it's more widely used in transactions across its blockchain.

3. Increased network activity will reduce its circulating supply

Unlike Bitcoin, which is always deflationary, Ether can be both inflationary and deflationary because it burns (removes from circulation) a portion of each transaction fee. If its network activity increases, it becomes deflationary as it burns more tokens. But if its network activity decreases, it becomes inflationary as more tokens are issued than burned.

So if more developers launch dApps, tokens, and other crypto assets on its blockchain, its network activity will rise and reduce its circulating supply. While Ether's value doesn't typically depend on its scarcity, the tighter supply should limit its downside potential during a market downturn.

4. Institutional investors will accumulate more Ether

The first spot-price ETFs for Ether were approved by the Securities and Exchange Commission (SEC) last July, but they didn't include any of the underlying token's staking features (which add a 3%-4% annual yield). If the SEC approves new Ether ETFs with staking features, those higher-yielding funds could draw in more institutional investors.

Big investors like BlackRock, Deutsche Bank, Coinbase, and Kraken have already been accumulating more Ether and launching more Ethereum projects. If they ramp up those efforts over the next few years, Ether's price could soar even higher.

5. Declining interest rates will lift the crypto market

Finally, declining interest rates could attract investors back to the crypto market. As a "blue chip" cryptocurrency, Ether should attract a lot more attention than the smaller meme coins. Declining interest rates should also weaken the U.S. dollar.

That erosion could drive more investors toward Bitcoin and Ether as hedges against inflation and the dollar's devaluation. Those cryptocurrencies will likely remain more volatile than gold, silver, and other physical assets, but they might be a good place to park your cash for the long term if you're worried about the dollar's future.

Should you invest in Ether right now?

Ether slightly underperformed Bitcoin over the past five years, but it still rallied more than 950%. It might not replicate those massive gains over the next five years, but investors shouldn't ignore the catalysts that could drive its price a lot higher. I wouldn't go all-in on Ether yet, but I'd be willing to accumulate it as a speculative growth play.