Ethereum price analysis: Where is ETH heading in 2022?
Ether (ETH) traded at an all-time high in 2021, ending the year with a gain of 400%. That was down on the peak 558% gain reached in November, however, and sentiment on the market has turned negative.
Cryptocurrency markets as a whole have weakened since the November highs, hit by a combination of profit taking at the top, leverage unwinding, and macroeconomic concerns as the US Federal Reserve begins tapering asset purchases and makes plans to raise interest rates.
Will ethereum go up or down in 2022? In this market update, we look at the latest analyst forecasts for the price direction of the second largest cryptocurrency.
Ethereum price retreats despite dApp growth
The price for ether, the Ethereum blockchain’s native cryptocurrency, started 2021 at $737.80. It hit an all-time high of $4,859.50 on 10 November, the price chart shows.
Unlike the Bitcoin blockchain, Ethereum has emerged as the main smart contract platform for developers to build decentralised applications (dApps) for finance (DeFi), non-fungible tokens (NFTs) and the metaverse. Many Layer 2 protocols – including the likes of Polygon and Arbitrum – have developed to provide enhancements for the Ethereum blockchain, such as lower transaction fees and faster processing speeds.
NFTs took off in 2021, becoming a hot topic beyond the cryptocurrency investment community. The utility of NFTs is expected to continue evolving with the growing popularity of play-to-earn games and other metaverse settings. They are also expected to enable the tokenization of physical assets such as fine art and real estate.
The role of Ethereum in dApps has attracted the attention of individual and institutional investors looking to gain exposure to these trends. Ethereum saw digital asset investment inflows double from $920m in 2020 to $1.3bn in 2021, according to data compiled by investment firm CoinShares. There was a total of $16.7bn in assets under management (AuM) for Ethereum.
Market observers are also looking to see the impact of Ethereum’s transition from a proof-of-work (PoW) consensus algorithm to proof-of-stake (PoS), which is expected to be completed during the second quarter of this year in a process called “the merge”. The transition, which began in late 2020 with a series of network upgrades, is expected to increase Ethereum’s scalability, security and sustainability. The introduction of coin burning last summer is expected to make ether deflationary over the long-term by reducing the number of coins in circulation as network usage increases.
However, as sentiment turned negative in late November, the ether price ended the year at $3,682.63, down by 24% from the high. The coin traded down to a three-month low of $2,947.68 on 10 January and then moved up to $3,401.22 on 12 January, but slipped back to $3,055.21 on 19 January.
Ethereum saw total investment fund outflows of $30m last week according to CoinShares, its 6th week of outflows for a total of $230m. “From a relative perspective Ethereum remains the focus of negative sentiment with outflows representing 1.5% of AuM.”
The Ethereum blockchain accounts for around 60% of the $229.14b total value locked (TVL) for DeFi applications, according to data compiled by DeFi Llama.
Is the outlook likely to remain negative in the near term, or will the ether resume its upward price trend in 2022?
Ethereum price analysis: Where should you position for 2022?
Former hedge fund manager and billionaire investor Mike Novogratz expects cryptocurrency prices to remain under pressure with US Treasury bond yields and interest rates rising. “As long as rates go higher we will see pressure on Nasdaq and crypto,” he tweeted on 18 January.
Tens, bonds breaking down. As long as rates go higher we will see pressure on Nasdaq and crypto. 2% seems a logical target for tens.
— Mike Novogratz (@novogratz) January 18, 2022
“Things [have] been looking pretty bad so far as we kick [off] the new year, continuing the downtrend since early December 2021 well into Jan 2022. We just had a 2nd major dump and ETH bulls will have to hold the fort at $2800 (if we do get there), else it's further goblin town,” according to analysis by cryptocurrency research company Santiment.
“ETH's supply on exchanges [continues] to decrease even as price falls, suggesting that certain market participants might be still accumulating regardless.
“Will we see ETH go back to its glory days? Perhaps only when we are closer to the merge in Q2 but until then, it's likely to cruise and see more participants flocking to other L1s/L2 solutions. Weighted sentiment is now at its lowest in 6 months, suggesting that market participants are very bearish about ETH and have been so since late December 2021. So far so good, if we are to have a bottom forming, this is what we want to see.”
Ethereum technical analysis from CoinCodex showed support for the price at $3,047.54 and $2,994.10, with the strongest level at $2,928.28, at the time of writing (20 January). There was resistance from $3,166.80 to $3,232.62 and $ 3,286.07. CoinCodex’s short-term ethereum price prediction was bearish, expecting the coin to drop by 1.16% to $3,093.58 by 25 January.
Algorithm-based forecasting site Wallet Investor expected the ether price to slide towards $2,500 by the end of January, but trend higher throughout 2022 to reach a new high of $6,115.83 by the end of the year.
“We see a high probability that $5,000 gets taken out which will represent a milestone. Longer term, an expanding market can send the price significantly higher with a view that the crypto segment is still in the early stages of reaching its potential,” according to ETH price analysis from BOOX Research.
“We are bullish on ETH while recognizing it won't be a straight line higher. Consider buying a small position over several days and weeks to secure a favorable cost average. To the upside, a move above $5,000 can make way for a run towards $7,500 as our 2022 price target for ETH.
“Depending on where Bitcoin is trading, the exchange rate between the two cryptos is an important monitoring point with an expectation that ETH outperforms going forward,” the analysis added. “In the near term, as long as the price of ETH remains above $4,000 the bullish momentum remains intact. On the downside, a break below ~3,500 could open the door for a deeper correction with $2,000 as the next level of major support, although we view this scenario as unlikely.”
When looking at analysts’ forecasts you should keep in mind that the high volatility in cryptocurrency markets makes it difficult to accurately predict long-term prices. Analysts and algorithm-based forecasters can and do get their predictions wrong.
We recommend that you always do your own research, and consider the latest market trends, ethereum news, technical and fundamental analysis, and expert opinion before making any investment decision. And never invest more than you can afford to lose.
Markets in this article
Related topics