Earlier this year, Ark Invest's Cathie Wood stunned cryptocurrency investors by predicting that Bitcoin's (CRYPTO: BTC) price would reach $1.5 million by 2027. Wood believes the recent approvals of Bitcoin's first spot exchange-traded funds (ETFs), more institutional purchases, and the impending halving of Bitcoin (which will make it twice as hard to mine the cryptocurrency) will all drive a stampede of bulls to the world's largest cryptocurrency.

But Wood made an even more bullish prediction for Ethereum (CRYPTO: ETH), which currently trades at about $3,200. In Ark Invest's "Big Ideas" presentation early last year, Wood said Ethereum's market cap could exceed $20 trillion -- which would require a market price of more than $166,000 per token -- by 2032. Could Etherium's price actually soar by over 5,000% to hit that target?

How is Ethereum different from Bitcoin?

Ethereum is the largest cryptocurrency on the open-source Ethereum Network, which differs from Bitcoin (CRYPTO: BTC) in two key ways. First, miners can only mine for Bitcoin tokens on the Bitcoin blockchain, but developers can create their own tokens, decentralized apps (dApps), and non-fungible tokens (NFTs) on the Ethereum Network. That flexibility makes Ethereum a core pillar of the Web3 movement, which aims to disrupt centralized app platforms like Apple's App Store and Alphabet's Google Play with decentralized applications and payment methods.

Second, Ethereum requires much less power to mine than Bitcoin. The Ethereum Network previously used the same energy-intensive proof of work (PoW) mining method as Bitcoin, but it in September 2022, it transitioned to the more energy-efficient proof of stake (PoS) method. That transition, dubbed The Merge, reduced the network's total mining energy consumption by 99.95%. Ethereum bulls believe that upgrade will make it easier to expand the Ethereum Network and support more Web3 projects.

What are Ethereum's main catalysts?

Ethereum is now the world's second-largest cryptocurrency after Bitcoin. It's also one of eight cryptocurrencies -- which include Bitcoin and six stablecoins from PayPal (NASDAQ: PYPL) and Gemini (CRYPTO: GUSD) -- on the New York State Department of Financial Services' "green list" of pre-approved cryptocurrencies. That relative stability suggests the U.S. Securities and Exchange Commission (SEC) might eventually approve spot Ethereum ETFs.

However, the SEC recently reiterated its view that Bitcoin was the only cryptocurrency that could be classified as a commodity instead of a security since it still uses the PoW method, which is comparable to physically mining precious metals. The SEC said the PoS method, while more environmentally friendly, makes the cryptos that use it more similar to derivatives contracts -- so Ethereum is more similar to a security than it is to a commodity.

The SEC also recently requested more information from the Ethereum Foundation, and it remains committed to reclassifying Ethereum and other Ethereum tokens as securities. That position implies the SEC probably won't approve any spot ETFs for Ethereum -- since commodities are more commonly valued by their spot prices -- in the foreseeable future.

But despite that, Ethereum's periodic burning of its tokens could stabilize its price in the near term. The upcoming upgrades for the Ethereum Network could also make it even easier to facilitate financial transactions and develop more decentralized tokens and apps. More companies could also begin accepting ether, the coin that powers the Ethereum blockchain, as a payment option, and institutional investors could accumulate more of the crypto -- even if it's not as easily accessible as Bitcoin through spot ETFs.

Should you believe Wood's bullish prediction?

Investors should take Wood's $166,000 price target with a grain of salt. First, the famed growth investor has made plenty of wrong calls. Her firm's flagship Ark Innovation ETF (NYSEMKT: ARKK) has actually declined by 4% over the past five years as the S&P 500 rallied 76%. Ark also offers its own Ethereum futures ETF and is trying to get a spot Ethereum ETF approved, so Wood's opinion is arguably more subjective than objective.

That said, Wood adamantly believes the expansion of Ethereum's developer base and its potential to "displace many traditional financial services" and "take share from existing financial intermediaries" will drive its price toward her sky-high target of $166,000. I personally think Ethereum could come up far short of that lofty price in 2032 -- but it could certainly stabilize and head higher over the next few years if the Ethereum Foundation upgrades its network and keeps up with Bitcoin.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Leo Sun has positions in Apple. The Motley Fool has positions in and recommends Alphabet, Apple, Bitcoin, Ethereum, and PayPal. The Motley Fool recommends the following options: short June 2024 $67.50 calls on PayPal. The Motley Fool has a disclosure policy.

1 Top Cryptocurrency to Buy Before It Soars 5,000%, According to Cathie Wood was originally published by The Motley Fool