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Ethereum 2.0 price prediction: Can a post-Merge ETH recover from the latest market crash?

By Mensholong Lepcha and Peter Henn


Updated

Ethereum 2.0 logo, which depicts a blue pyramid in reflection, on dark background
ETH may now be based on proof-of-stake, but can that save it from losses? – Photo: Shizume / Shutterstock.com

Ethereum’s long-awaited transition to the proof-of-stake (PoS) consensus mechanism was touted as the biggest crypto event of 2022 – but in the three months or so since ‘The Merge’ took place it has proven something of a damp squib.

The price of ETH initially stagnated following 15 September’s change because, despite the hype around what some people called ‘Ethereum 2.0’, it was still the same old ether.

Then the collapse of the FTX (FTT) exchange crashed the market and ETH could not escape, although it has remained the second-largest crypto in terms of market cap.  

Industry experts expected Ethereum 2.0 to make ether (ETH) more attractive by reducing its circulating supply and making it “net-deflationary”. On the flipside, Ethereum 2.0 is not expected to immediately address the network’s high gas fees.

However, the new method of adding blocks to the blockchain did not prevent the coin from being hit by serious losses after Binance (BNB) announced it would buy rival crypto exchange FTX, then pulled out of the deal. This left FTX stranded, and the exchange announced that it had filed for bankruptcy on 11 November 2022. 

As a result of the ensuing market turmoil, the token dropped more than 30% from a high of $1,574.80 on 8 November to a low of $1,083.29 the following day. By the afternoon of 10 November, though, it had recovered by more than 20% to $1,341.79.

A week later, on 17 November, it closed the day at $1,200.81. There was some good news on 14 December when it reached a high of $1,346.17, representing its best price since the fall of FTX, but on 16 December it slumped to trade at around $1,215.

It hovered around this point for the next few weeks before a market upturn saw it worth about $1,325 as of the time of writing on 9 January 2023.

No one can be entirely sure what might happen in the post-Merge, post-FTX crypto landscape. One potential unintended consequence might come in the form of crypto regulation. A case filed by the US Securities and Exchange Commission (SEC) against crypto investment trader Ian Balina hinted that the SEC could well consider the coin to fall under its remit. 

The papers said: “ETH contributions were validated by nodes on the Ethereum blockchain, which are clustered more densely in the United States than in any other country. As a result, those transactions took place in the United States.”

ETH ‘could be a security’

The news came after reports SEC chairman Gary Gensler said the change to proof-of-stake made it more likely that ETH would be considered to be a security by the SEC.  

Meanwhile, papers filed against former FTX boss Sam Bankman-Fried by the United States Commodity Futures Trading Commission (CFTC) on 13 December 2022 said the Commission considered ETH to be a commodity alongside other cryptos. 

On the other hand, news that Google had launched a blockchain node-hosting service, with Ethereum the first blockchain to be compatible with the new platform, saw ETH break through the $1,500 mark on 25 October 2022 for the first time since the day of The Merge.

Coupled with news of crypto enthusiast Elon Musk’s takeover of Twitter, the token started a rally that culminated in a high of $1,652.38 on 29 October. By 2 November 2022, though, it had dropped back down to a low of $1,507.24.

After that there was another bounce as the platform’s founder, Vitalik Buterin, announced a new roadmap for the system. This would include a new stage, called The Scourge, which would deal with problems relating to the amount of crypto extracted whenever blocks are added to the blockchain.

As a result, the price went up to $1,661.33 on 4 November 2022 before settling back down to $1,604.48 on 7 November. The wider market collapse then, as we have already seen, caused it to drop to a low of $1,083.29 on 9 November before recovering to around $1,341.79 the next day and dropping to close 17 November at $1,200.81. 

On 24 November, a new hard fork called Shanghai was given the thumbs-up, and the proposed new version of the chain could feature the ability to withdraw staked crypto as well as plans to help the system work more quickly. There is, however, no firm date for Shanghai to take place, although a report from Decrypt suggested it could happen in March 2023. 

In this article, we take a look at so-called Ethereum 2.0 – in reality, the same thing as just plain, normal ether – to understand how the upgrade might affect ETH and the market as a whole, and examine some of the ether (ETH) price predictions that were being made as of 9 January 2023. 

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What is Ethereum 2.0?

Before 15 September 2022, Ethereum used the proof-of-work (PoW) consensus mechanism. The smart contract platform transitioned to a proof-of-stake (PoS) chain in an upgrade known as The Merge or Ethereum 2.0 at around 7.45am BST (UTC+1) on 15 September.  

To fully understand Ethereum 2.0, we need to go back to 1 December 2020, when Ethereum released a new consensus layer called the Beacon Chain. According to its website, Beacon Chain was the name of the trial proof-of-stake blockchain that ran alongside the original proof-of-work blockchain to make sure everything was running smoothly. When The Merge took place, the PoW blockchain was turned off and the PoS mechanism became the main Ethereum blockchain.

Ethereum explains on its website: “Switching off proof-of-work and switching on proof-of-stake on Ethereum required instructing the Beacon Chain to accept transactions from the original Ethereum chain, bundle them into blocks and then organise them into a blockchain using a proof-of-stake based consensus mechanism. At the same moment, the original Ethereum clients turned off their mining, block propagation and consensus logic, handing that all over to the Beacon Chain. This event was known as The Merge. Once The Merge happened, there were no longer two blockchains; there was just one proof-of-stake Ethereum chain.”

Despite its transition to PoS, Ethereum’s native token will continue to be referred to as ether, or ETH. In other words, no ‘ETH 2.0’ or ‘ETH2’ tokens actually exist.

Ethereum said in a blog post: “Some staking operators have represented ETH staked on the Beacon Chain with the ‘ETH2’ ticker. This creates potential confusion, given that users of these services are not actually receiving an ETH2 token. No ETH2 token exists; it simply represents their share in that specific providers’ stake.”

Ethereum 2.0 expected to reduce ETH supply

Ethereum’s transition to the PoS consensus mechanism should make its blockchain more scalable, accessible and less energy-intensive compared to its PoW model. But how will ETH prices react to the long-awaited update?

Now that PoS has replaced PoW as the consensus mechanism, miners are being replaced by stakers, who will have to lock up their ETH tokens in smart contracts to earn staking rewards from validating transactions. According to Ethereum, a validator must stake at least 32 ETH.

A report by Swiss crypto-financial service provider Bitcoin Suisse said that staking would reduce the circulating supply of ETH. Prior to The Merge, by 29 August 2022 almost 13.7 million ETH had been staked on the Beacon Chain, thereby removing more than 11% of the coin’s total circulating supply. 

It should also be noted that an Ethereum improvement proposal (EIP) called EIP-1559, which introduced burning of base gas fees in 2021, has already reduced the coin’s circulating supply.

“Combined, staking and fee burning have a dampening effect on the supply of ETH. Some argue that with these changes, Ethereum is moving into a deflationary monetary policy that is stronger than Bitcoin’s inflation reduction over time, leading to ‘ultra sound money’ in the end,” Bitcoin Suisse said.

Investors will see Ethereum’s progression towards a deflationary monetary policy as a bonus on top of its status as the leading smart contracts platform. Moreover, Ethereum’s move to PoS will make the network less scrutinised with regards to its energy consumption. According to Ethereum, its energy consumption has been reduced by “about 99.95%” following The Merge.

European authorities have been pushing to limit the use of PoW networks such as Bitcoin because of their high energy consumption and carbon emissions. Harvard Business Review reported that Bitcoin’s annual energy consumption was equal to that of countries such as Malaysia or Sweden.

Bitcoin Suisse was cautious about ETH’s deflationary supply, calling it a “double-edged sword” for Ethereum, whose ambition is to be a “world computer rather than a world currency”.

“Tightening the ETH supply because of staking may be good for investors, but it is less beneficial for those (many more) people who want to develop, run and use smart contracts on Ethereum because it makes much more expensive measured in USD or other fiat currencies. Cheap gas is good for driving, not for investing in the oil industry,” Bitcoin Suisse said.

On 6 July 2022, Sepolia, the second of three Ethereum public testnets, completed its transition to PoS.

“Based on the last 30 days of network revenue – which is at lowest since the summer 2021 thanks to the correction and fee burns – ETH is expected to be net-deflationary, with its supply projected to decrease 0.6%,” Bankless said in a newsletter published on 7 July.
“Coupled with the removal of structural sell pressure due to the upgrade from miners to validators, this represents a significant improvement to the long-term value proposition of ETH.”

Ethereum’s transition to PoS has not addressed the network’s expensive gas fees. According to Ethereum, scaling solutions will be used to make transactions on the network cheaper.

Ethereum said: “The transition to proof-of-stake is a critical precursor to realising [cheaper gas fees].”

It is worth noting that, according to data from Ultrasound Money, the rate of ETH issuance has dropped considerably since The Merge. 

ETH price slumps amid crypto winter

Let’s take a quick look at the ether price history. While past performance should never be taken as an indicator of future results, knowing what the coin has done in the past can help give us some much needed context if we want to make or interpret a so-called Ethereum 2.0 price prediction. 

Over the years, the ETH price has been on a volatile ride with multiple peaks and troughs. Most notably, ETH’s first major bull run came around the time when BTC hit a then-record high of about $20,000 in 2017.

ETH/USD

3,458.76 Price
+0.730% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 6.00

XRP/USD

0.59 Price
+8.450% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.01168

DOGE/USD

0.13 Price
+1.680% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.0012872

BCH/USD

390.70 Price
-0.450% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 2.50

Ethereum to USD historical price chart, 2015 - 2022

On 13 January 2018, ETH rose to hit a then-record high of about $1,419, having seen three straight months of gains in the last quarter of 2017. However, over the next year, ETH would go on to lose more than 90% of its value, and fall to $115 by 13 January 2019.

It would take roughly three years for ETH to pass its 2018 high, after the cryptocurrency saw a positive shift in investor sentiment in 2021. ETH surged 580% from $737 at the start of the year to an all-time high of $4,891 in early November 2021.

2022 was a rough year for the coin, however, amid a wider slump in cryptocurrency markets. ETH prices saw 11 consecutive weeks of losses between April and mid-June amid tightening monetary conditions globally, the collapse of the Terra ecosystem and the bankruptcy of several crypto-native firms. 

On 18 June 2022, ETH hit an 18-month low of $879.

Preparing for The Merge

On 8 September 2022, after completion of the Bellatrix upgrade – the work that would provide the basis for The Merge – and news that Swiss bank SEBA was to offer its customers access to ETH staking, the coin was worth about $1,625.

As anticipation for The Merge grew, and the news came out that the Kiln, Ropsten and Rinkeby testnets were to close, ETH traded at about $1,725 on 9 September.

Google then installed a counter on its Ethereum Merge search page which suggested that The Merge could take place in the early hours of 15 September. On 13 September the price stood at around $1,710, but market conditions saw a drop across the following 24 hours or so and, on 14 September, the ETH price stood at around $1,610.

Once The Merge had taken place, ETH rallied somewhat and was trading at around $1,630 on 15 September. Over the next few days, though, the price slid and, by 20 September, it was worth about $1,360, dropping to around $1,275 the following day. By 23 September, it had recovered somewhat to around $1,340 before dropping to trade at around $1,290 on 26 September 2022.

Over the course of the next few days, the coin made something of a recovery, trading at around $1,340 on 30 September. On 6 October, the crypto reached a high of $1,380.40, but it then dropped somewhat to stand at around $1,355 on 7 October 2022.

A week later, on 14 October, ETH was worth about $1,320. Ethereum co-founder Joe Lubin said the coin’s poor performance post-Merge was down to poor macroeconomic conditions, describing it as a “tail that is being wagged by a very sick dog”.

Despite the news that investment firm Fidelity was to offer its customers the chance to trade ETH, the price continued to drop and, by 21 October 2022, the coin was worth about $1,280. 

However, as we have already seen, the combination of the Google link, Musk’s Twitter takeover and the new roadmap boosted the price to a high of $1,661.33 on 5 November, before the recent market crash saw it drop to $1,083.29 on 9 November, with it going on to trade at a high of $1,346.17 on 14 December.

Despite the news that Visa had made a proposal to allow people to make automatic payments direct from their crypto wallets, by 21 December 2022, it was worth about $1,215 and it closed the year at $1,194.20 before recovering to trade back around $1,325 on 9 January 2023.

The crpyyo lost more than 60% over the course of 2022, but ETH is still the second-largest cryptocurrency, with a market capitalisation of about $162bn.

Data from the analytics firm IntoTheBlock revealed that the concentration of ETH held by large holders was at 39% of circulating supply as of 9 January 2023, against BTC’s 10%.

What next after The Merge?

Even though it has been three months since The Merge happened, we are still waiting for things to settle.

While many developers and investors may have been looking forward to The Merge, there was some understandable trepidation among another group of users.

The system’s miners stood to lose out on a good chunk of income, so it is not a huge surprise to learn that a group of them teamed up to create something called ETHW, basically a fork of the exisiting ETH, which would maintain the proof-of-work consensus mechanism.

On 12 September 2022 the miners, calling themselves ETHW Core, announced that they would launch their mainnet within 24 hours of The Merge going live. This was confirmed by a tweet made not long after The Merge was confirmed, with ETHW Core also listing a number of mining pools beforehand.

The mainnet went live later that day and, on 16 September, the new fork was worth about $13.40, according to CoinMarketCap. By 20 September, it had fallen to about $7, and by 22 September it was worth about $5.90, recovering to somewhere around $6.20 the following day and hitting a high of $13.78 on 24 September. By 26 September, it had dropped to around $9.95.

There was some recovery over the next few days and, by 30 September, it was worth about $12.55. A week later, on 7 October, the new coin had dropped to around $8.10 and the decline continued, with ETH falling below $6 on 21 October. There was a recovery over the following days and, on 26 October 2022, it reached a high of $7.59.

After that, though, ETHW fell to trade at a low of $3.58 on 9 November before making a recovery to $4.60 the next day, and then dropping an all-time low of $3.13 on 22 November. By 2 December, it had made something of a recovery to about $4 before dropping back to around $3.05 by 3 January 2023 before moving up to about $3.35 as of 9 January 2023. We shall have wait and see what, if anything, ETHW does in the future. 

We should also point out that the possibility remains that, without proof-of-work, Ethereum could end up being seen as just another proof-of-stake blockchain.

While the other big players in this field, such as Solana (SOL), Polkadot (DOT), Avalanche (AVAX), Tron (TRX) and Tezos (XTZ) have all seen their prices drop over the past three months, it will be worth seeing what happens if and when the market recovers from the FTX-triggered crash.  

Ethereum 2.0 price prediction round-up

Let’s now take a look at some of the ether price predictions that were being made as of 9 January 2023.

It is important to note that price forecasts, especially for something as volatile as cryptocurrency, are often wrong. What’s more, many long-term cryptocurrency price predictions are made using an algorithm, which means they can change at a moment’s notice. It is also important to remember that ethereum 2.0 is exactly the same thing as “normal” ethereum, or ether. 

CoinCodex was rather optimistic in its short-term ethereum 2.0 price prediction for 2023, saying that ETH could climb to $1,361.88 by 14 January before falling back to $1,899.15 by 9 February. Despite that, the site’s technical analysis was neutral, with 19 indicators making negative signals compared to 12 sending bullish ones. 

LongForecast’s ethereum 2.0 crypto price prediction for 2023 was bearish, and saw ETH closing the year at $795. Its ethereum 2.0 price prediction for 2025, however, suggested the token could trade at $2,247 by the end of the year.

DigitalCoinPrice held a more positive view in its long-term ethereum 2.0 price prediction for 2030, expecting ETH to reach $13,583.68.

CryptoPredictions made an ethereum 2.0 coin price prediction that saw ETH trading at $1,487.79 by December 2025.

Elsewhere, in its Big Ideas Report 2022, ARK Invest said that ETH’s market capitalisation could exceed $20trn in the next 10 years. 

The report said: “According to ARK’s research, ether (ETH) is both the preferred collateral in DeFi and the unit of account in NFT marketplaces, suggesting that it is likely to capture a portion of the $123trn global money supply.”

Note that analysts’ and algorithm-based ETH crypto price predictions can be wrong. Forecasts should not be used as a substitute for your own research. Always conduct your own due diligence. Remember that your decision to trade or invest should depend on your risk tolerance, expertise in the market, portfolio size and investment goals.

Remember that past performance does not guarantee future returns, and never invest any money that you cannot afford to lose. 

FAQs

Is ethereum 2.0 a good investment?

As of 9 January 2023, ethereum was the second largest cryptocurrency, with a market capitalisation of about $162bn despite recent losses caused by a market crash.

In September 2022, the smart contract platform underwent an upgrade called Ethereum 2.0, or The Merge, which saw it transition from a proof-of-work (PoW) consensus mechanism to a proof-of-stake (PoS) one. The impact of this change on Ethereum as an investment remains to be seen.

Remember, you should always carry out your own thorough research before making an investment. Even high-market-cap cryptocurrencies have proved vulnerable to the current bear market. Investors should be prepared to make losses and never purchase more than they can afford to lose.

Will ethereum 2.0 go up or down?

ETH lost more than 60% in 2022 amid bearish cryptocurrency conditions. The Ethereum 2.0 upgrade that went live on 15 September was expected to help ETH turn net-deflationary, which experts expected to be attractive to investors, but we do not yet know whether this will actually happen. 

Note that price predictions are often wrong and that prices can, and do, go down as well as up. In volatile cryptocurrency markets, it is important to do your own research on a coin or token to determine if it is a good fit for your investment portfolio. Whether ETH is a suitable investment for you depends on your risk tolerance and how much you intend to invest, among other factors.

Keep in mind that past performance is no guarantee of future returns, and never invest money that you cannot afford to lose.

Should I invest in ethereum 2.0?

This is a question that you will have to answer for yourself. Before you do so, you will need to conduct your own research, not only on ether but on other cryptos. However, do bear in mind that, despite The Merge, ETH is still ETH. The cryptocurrency has not changed, just the method of mining it.

Remember also that prices can go down as well as up, and never invest more money than you can afford to lose.

Markets in this article

ETH/USD
Ethereum / USD
3458.76 USD
25.16 +0.730%
AVAX/USD
Avalanche / USD
28.6303 USD
1.0422 +3.820%
DOT/USD
Polkadot / USD
6.4885 USD
0.0217 +0.340%
SOL/USD
Solana / USD
159.3727 USD
1.5448 +0.990%
TRX/USD
TRON / USD
0.13645 USD
-0.00313 -2.280%

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