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