google-play

Scan to Download iOS&Android APP


ETH/USD forecast: The ether price may shake off Fed policy blues after The Merge

12:35, 29 August 2022

Share this article

What You Need to Know

The week ahead update on major market events in your inbox every week. Subscribe
Image of a golden eth coin laying on stack of american usd banknotes
What is The Merge all about and will it help boost the ETH/USD price before 2022 comes to an end? Photo: Inspiration GP / Shutterstock

Ethereum says version 2.0 of its network is scheduled for release on 19 September.

Dubbed “the biggest event on the cryptocurrency markets”, Ethereum’s transition from the Proof of Work (PoW) to the Proof of Stake (PoS) consensus mechanism has been delayed many times in the past. But now a date for ‘The Merge’ has been set.

A positive shift in investor sentiment in 2021, and the rising popularity of decentralised apps (dApps), non-fungible tokens (NFTs) and decentralised finance (DeFi) helped ether (ETH), Ethereum’s native cryptocurrency, surge more than 400% in 2021, from as low as $730 at the start of the year to over $3,600 at the end of December 2021.

The highly anticipated Merge is expected to help ETH reach its sustainability goals, and improve scalability and security. But what will it do to the price, which has suffered a big fall this crypto winter?

Read ahead for an ETH/USD forecast. 

Ethereum: a brief introduction

The Merge, also known as Ethereum 2.0, has been on the radar of many crypto investors since it was first announced by Ethereum’s CEO Vitalik Buterin in October 2018 at the Devcon conference in Prague.

But before we look deeper into that, let’s look at what Ethereum is.

Ethereum is a community-run technology that powers the ether cryptocurrency and thousands of decentralised applications. Essentially, it’s a programmable blockchain that allows people to build dApps on its network thanks to its ability to run smart contracts

But, why is there so much talk about The Merge?

At the moment, Ethereum is using a PoW consensus mechanism to execute transactions, just like Bitcoin (BTC). However PoW has a number of flaws such as it being expensive, uses up a lot of energy, which makes the platform not eco-friendly, lacks disk space and suffers from clogged networks. 

In contrast, PoS aims to make Ethereum more secure, less energy-intensive and better for implementing new scaling solutions. 

Originally known as ‘Serenity’ and ‘Eth2’, the upgrade has been in active development since 2014. According to Buterin, the change involves “a bunch of different features that [Ethereum has] been talking about for several years, researching for several years, actively building for several years, that are finally going to come together into this one coherent whole.”

Farbod Sadeghian, founder of artèQand Qlindo, told Capital.com:

“We have all waited a long time for the Merge and I believe it is a great thing. As a result of the Ethereum Merge, the blockchain will become 99.5% more energy efficient after shedding its power-hungry proof-of-work consensus mechanism. The Merge is also believed to reduce processing times, lower transaction fees, and help the blockchain scale in the future. This will be a big shout out for the whole crypto community as we are working hard to be more environmentally friendly. For me this is the most important aspect of it. Therefore, it is fair to say that the Ethereum Merge is perhaps the most significant upgrade in the history of cryptocurrencies.”

Many “Ethereum killer” blockchains already use the PoS consensus mechanism, including Polkadot (DOT), Cardano (ADA) and Solana (SOL).

“This is a very bullish development for Ethereum in the long term, with the majority of analysts in agreement that this is the route that will best ensure ETH is well placed to deliver on its immense potential,” said Invezz data analyst Dan Ashmore. 

What is your sentiment on ETH/USD?

1324.38
Bullish
or
Bearish
Vote to see Traders sentiment!

ETH/USD price history

Since its launch in 2015, ETH has seen great success in the crypto market as it surged to become the second biggest digital asset by market capitalisation, behind only BTC. 

As of the time of writing (29 August), the coin had a market capitalisation in excess of $177bn. ETH does not have a maximum supply (an unlimited number of coins can be mined). Over 122 million ETHs are currently in circulation. 

Over the years, the ether price has experienced a number of slumps and peaks. Its first peak came in 2017 when ETH surged by around 7,400% from $18.62 on 4 March 2017 to its then all-time high of $1,396.42 on 13 January 2018. The peak did not last long as the asset’s price fell back to under $100 by the end of 2018. 

ETH/USD price chart

After nearly two years of trading flat, ether picked up its pace in the middle of 2020 as the DeFi market began to rapidly expand. 

By 11 May 2021, the coin reached its second most significant price hike, surging to $4,168.7 – up 827% in just six months from the previous low of $450. After falling to $1,787.51 on 20 July 2021, it rose by around 170% to its current all-time high of $4,812.09 on 8 November 2021. 

2022 has been a harsh year not only for ETH but also other cryptocurrencies. Economies have suffered the effects of Russia’s invasion of Ukraine, rising energy costs and the crash of the former TerraUSD (UST) stablecoin

After 10 consecutive weeks of falling between 4 April 2022 and 18 June 2022, ETH had lost over 70% of its value, heading down from $3,500 to $990. 

XRP/USD

0.44 Price
-0.380% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 21:00 (UTC)
Spread 0.00600

DOGE/USD

0.06 Price
-1.570% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 21:00 (UTC)
Spread 0.0007966

ETH/USD

1,324.38 Price
-2.340% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 21:00 (UTC)
Spread 5.00

BTC/USD

19,390.25 Price
-1.230% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 21:00 (UTC)
Spread 60.00

The cryptocurrency is currently valued at $1,447.69 – nearly 70% down from its November all-time high. 

ETH/USD: What has been shaping the pair’s future?

One of the biggest market drivers in 2022 is US Federal Reserve (Fed) monetary policy.

The Fed has taken a strong stance on bringing inflation levels in the US down to the 2% target. However, the latest US CPI data shows that US inflation is currently (29 August) at 8.5%. Although down from the previous 40-year record of 9.1%, the Fed is keen to maintain the pace of monetary tightening. 

Fed chair Jerome Powell spoke about the US central bank’s plans on 26 August:

"Reducing inflation is likely to require a sustained period of below-trend growth. While higher interest rates, slower growth, and softer labour market conditions will bring down inflation, they will also bring some pain to households and businesses. These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.” 

“If your crypto investments see some extra volatility after the upcoming meeting, you can thank the Federal Reserve, as it could be the fifth consecutive increase of rate since the start of the year,” artèQand Qlindo’s Sadeghian noted. 

Lars Seier Christensen, Chairman of the Concordium Foundation and founder of Saxo Bank, added that crypto has been quite correlated with stock markets in recent months, which, as Invezz’s Ashmore noted, “hinge upon the Fed’s every word.” 

Ashmore added that “if the upcoming [Fed] meeting notes are more hawkish than investors expect, the market will sell-off. Likewise, we will have an uptick if the meeting is more dovish than anticipated.”

Mike McGlone, senior commodity strategist at Bloomberg Intelligence, agreed that If stock markets continue to decline, ETH will also “come under pressure, likely more so than bitcoin”.

CoinLoan’s digital assets analyst, Maxim Shilo added that ETH has “significantly” outperformed BTC in the last couple of months.

It is important to note that Ethereum’s transition to PoS is expected to reduce the ETH circulating supply, since it will be staked and not mined, which could boost its price. In addition, hype surrounding the upgrade has potential to lift the ETH price, Sadeghian added. 

However, Ashmore and McGlone noted that even though The Merge has the potential to affect ETH’s prices in the long-run, in the short-term the key driver for the token is macro.

“In the near term, it’s the unfavourable macro, the ebbing tide of all risk assets being pressured by the Fed tightening sledgehammer. Plenty can go wrong with the merge, but view the transition as quite bullish for ETH, long term,” McGlone said. 

“In the short term, even an event as significant as the Merge is unlikely to overcome macro, which is the main driver right now,” Ashmore added. 

A Bloomberg Intelligence report published in August backed this up, saying that ETH “may have bottomed over the past quarter” due to “more accommodating” macroeconomic conditions”. 

The report also noted:

“Whilst, mean reversion is likely short-term, the upcoming Merge, and the re-engineered supply/demand dynamics, tilt risk to further upside. We expect that by the end of 2022, Ethereum could have a staking yield of 6-9%, with a slightly deflationary issuance schedule.”

The current yield is around 4.1%. 

ETH/USD forecast: What to expect and when?

Despite the latest downward price action, algorithm-based forecasting service Wallet Investor gave a bullish ETH/USD prediction at the time of writing (29 August). The site noted that ETH is “an awesome long-term investment”, adding that it has a long-term earning potential amounting to 405.45%.

Based on its analysis of past price performance, Wallet Investor’s ethereum to US dollar forecast noted that in a year, the coin could be valued at $2,632.47. In five years, it’s expected to surpass $7,000. 

DigitalCoinPrice supported a positive ETH/USD forecast but saw a much slower pace of growth. Its ETH/USD forecast for 2022 expected the coin to reach $2,103.29 by the end of the year. 

The platform’s ETH/USD forecast for 2025 suggested it could surpass $3,000. By the end of 2027, ether could reach $4,100.87. Its long-term ETH/USD forecast for 2030 saw the coin valued at $7,575.17.

“I view Ethereum as stuck between about $1,000 and $2,000, and more likely to come out ahead, above in the longer term,” McGlone told Capital.com

While CoinLoan’s Shilo was majorly bullish with his ETH to USD prediction, he noted several threats that could see the coin’s price drop, including:

  • “The market has priced in the successful Merge, which has already been delayed so many times due to uncertainty of the whole process. If the Merge is unsuccessful, it will lead investors to potentially dump their holdings or open shorts to hedge their long-term holdings, which will then cause a major sell-off across the board.”

  • The introduction of staking could lead investors to sell their coins after the Merge. 

Note that predictions and analysts’ views about the future of ETH can be wrong. Forecasts and analysts’ expectations shouldn’t be used as a substitute for your own research. Always conduct your own due diligence. Never invest or trade money you cannot afford to lose. And keep in mind that past performance is no guarantee of future results. 

FAQs

Why has ETH/USD been dropping?

Tight monetary conditions, the fall of the former TerraUSD (UST) stablecoins and Russia’s invasion of Ukraine have affected the crypto markets, including the price of ETH/USD.

Will ETH/USD go up or down?

At the time of writing (29 August), algorithm-based site Wallet Investor’s ETH/USD forecast suggested that ETH could reach $2,632.47 by the end of 2023 and surpass $7,000 by the end of 2027. On the other hand, DigitalCoinPrice’s ETH/USD forecast saw the coin reaching $2,103.29 by the end of 2022 and topping $3,000 in 2025.

It should be noted that predictions can be wrong. Forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before investing. And never invest money you cannot afford to lose.

When is the best time to trade ETH/USD?

Cryptocurrency markets are open 24/7, which means you can trade ETH/USD at any time of day. Looking at price charts, and following the latest news and updates to conduct your own market analysis could help you figure out which time is best for you.

Is ETH/USD a buy, sell or hold?

Your trading strategy for ETH/USD depends on your personal circumstances, risk tolerance and portfolio composition. You should do your own research to develop an informed view of the market.

Look at the latest market trends, news, technical and fundamental analysis, and expert opinion before making any investment decision. Keep in mind that past performance is no guarantee of future returns. And never invest money that you cannot afford to lose.

Further reading:

What You Need to Know

The week ahead update on major market events in your inbox every week. Subscribe
The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided on this website is for information purposes only and should not be understood as an investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page. If you rely on the information on this page then you do so entirely on your own risk.

Read next

Still looking for a broker you can trust?


Join the 450.000+ traders worldwide that chose to trade with Capital.com

1. Create & verify your account

2. Make your first deposit

3. You’re all set. Start trading