The price of Ethereum’s coin, ether (ETH), fell below $1,800 on 23 May for the first time since 31 March, as the market collapsed by 60% from its all-time high of $4,362 reached on 12 May. The coin quickly recovered some of its losses, hiking to an intraday high of $2,911 by 26 May. Though fluctuating dramatically, ETH managed to stay above the $2,000 level until 21 June, when it again dipped to close the day at $1,888. At the time of writing (24 June), the ether price was $1,944.
With the network in the middle of a major upgrade that will change the way transactions are verified and fees are charged, some observers expect the ETH price to rebound and advance to fresh highs. But how realistic are those expectations? Is now a good time to invest in the ETH market and position your portfolio for substantial gains?
This Ethereum price analysis looks at recent volatility in the cryptocurrency, the reasons for those fluctuations, and predictions for 2021 and the coming years.
Ethereum takes the lead in DeFi and NFTs
ETH is the second-largest cryptocurrency after bitcoin (BTC). Its market capitalisation was around $226.3bn on 24 June, less than half of Bitcoin’s $625bn, reflecting the first digital coin’s dominant position. There are around 116.4 million ETH coins in circulation, compared with 18.7 million bitcoins.
In 2013, computer programmer Vitalik Buterin wanted the Ethereum network to develop blockchain technology that could attach to real-world assets. Along with several other co-founders, Buterin crowdfunded its development in 2014 and launched the network in 2015.
At the start of December 2020, the Ethereum 2.0 upgrade got under way. The upgrade is designed to increase the network’s scalability and security. Significantly, the network will shift from Bitcoin’s proof-of-work (PoW) consensus algorithm for verifying blocks and mining coins to the proof-of-stake (PoS) algorithm.
As described in an Ethereum Foundation blog post, the upgrade involves the so-called “Eth1” PoW chain’s applications and tools, and “Eth2” software and protocol layers.
“Eth1 is primarily the operation and upgrading of Ethereum’s user-layer – state, transactions, accounts – all the things the end-user considers when interacting with Ethereum,” writes Ethereum’s Danny Ryan. “Eth2 on the other hand is a series of upgrades meant to overhaul Ethereum’s core consensus – to move from the energy-hungry, inefficient proof-of-work to a more sustainable, scalable proof-of-stake.”
As part of the upgrade and shift to PoS, the Berlin hard fork (blockchain split) was activated on block 12.244.000 on 15 April 2021. The upgrade includes optimising contracts to address transactional efficiencies that have seen transaction fees rise sharply, updates to how the Ethereum Virtual Machine (EVM) reads code, and changes to prevent distributed-denial-of-service (DDOS) attacks.
Simon Peters, crypto asset analyst at eToro, commented: “Post the network upgrade, Ethereum in particular is proving its use case, and with developers piling on to the platform, it is little wonder it is gaining so much traction with investors.
The Ethereum ecosystem has emerged as the first choice for developers launching decentralised finance (DeFi) applications and non-fungible token (NFT) sales, although there are some new applications that are turning to alternative blockchains.
Ethereum is key to the advent of DeFi, which runs smart contracts on the Ethereum Virtual Machine (EVM). It enables holders of various cryptocurrencies to use their coins as collateral for financial services, including loans, insurance, trading and savings. The ability to attach real-world assets to contracts enables developers to launch NFTs on Ethereum.
DeFi applications emerged in 2020, offering new capabilities to the burgeoning fintech space. NFTs came to the fore in early 2021, with high-profile multi-million-dollar sales capturing the attention of investors.
Ethereum upgrade addresses high gas fees
As part of the upgrade to Ethereum 2.0, the Ethereum Improvement Proposal (EIP) 1559 saw further progress made this month. Tim Beiko, a key member of the ETH Core Developers, tweeted that test blocks for the testnet were set on 11 June.
We set the testnet blocks this morning, mainnet TBD based on successful testnet blocks, see: https://t.co/FBq5Yk9dGv— Tim Beiko | timbeiko.eth :bat::loud_sound: (@TimBeiko) June 11, 2021
Scheduled to launch on 14 July, EIP-1559 is expected to change the way Ethereum charges transaction fees, known as gas prices. It will switch from its current auction mechanism, which has resulted in prohibitively high gas prices.
Instead, according to the proposal, it will “start with a base fee amount which is adjusted up and down by the protocol based on how congested the network is”.
In addition to the base fee, there will be a priority fee set by the sender that rewards miners. The base fee will be burned, which will make Ethereum a deflationary asset that observers say will drive up its value.
Ethereum gas prices climbed to around 298.78 gwei (one gwei is a billionth of an ether) on 19 May, and slid to 143.67 gwei on 24 May and 19.36 gwei on 6 June. A year ago, on 7 June 2020, the figure stood at 40.79 gwei. The spike that followed on 10–11 June took prices to 709 gwei. This has prompted developers to launch alternatives to Ethereum, with lower fees that can run DeFi applications and NFTs, making the EIP-1559 upgrade especially significant.
On 24 June, the Ethereum gas price stood at 22.74 gwei.
Ethereum price struggles to recover after selloff
The ether price launched at 2.14 against the US dollar in 2015, spiking to $1,283.42 during the cryptocurrency rally in January 2018. The price had fallen back to $86.17 by December that year, remaining below the $300 level until the market began to rally again in 2020.
Trade Ethereum to US Dollar - ETH/USD CFD
The coin climbed from $125.63 to $729.65 last year, a 480.8% increase. The ETH price briefly touched $2,000 in February’s cryptocurrency rally and moved back above that level in April. It then soared to a record high of $4,380 on 12 May 2021, a gain of 500% from the start of the year.
The price plummeted over the following week to $1,952 on 19 May, after tweets from Tesla (TSLA) CEO Elon Musk and reports of a cryptocurrency ban in China rattled the markets. Ether ticked up to $2,993 on 20 May before dropping to $1,737 on 23 May. After quickly recovering its losses to close 24 May at $2,643, the ETH price fluctuated in the range of $2,000 and $2,700 until the end of the month.
On 10 June, Reddit co-founder, Alexis Ohanian, expressed his support for Ethereum. During his interview with CNBC’s Squawk Box, Ohanian said: “I think that there’s a lot of interesting stuff that is bubbling up. But I do think Ethereum is, at least for the year or two, really got the most to prove. It has the most potential to show something because there are so many interesting applications.”
“NFTs are just the start of what is getting built on top of the ethereum blockchain, and that’s where a lot of my holdings are candidly,” he added.
Ohanian also called ETH “ultrasound money.”
Thank you! Lots of ETH here; ultrasound money! https://t.co/s4G2iarw2G— AlexisOhanian.eth :seven::seven::six: (@alexisohanian) June 10, 2021
In the meantime, on 14 June, Bloomberg reported that Goldman Sachs (GS) was planning to launch futures and options contracts on ETH, in addition to BTC futures. The bank’s head of digital assets, Mathew McDermott, said the introduction of ETH derivatives trading could be expected in the coming months. McDermott added that the bank looked to facilitate trades through exchange-traded notes that track BTC.
The coin was steadily trading well above the $2,000 level in the first three weeks of June, supported by the generally positive market news. However, ether plunged lower on 21 June, and on 24 June was hovering around the $1,938 mark.
The ETH price plummeted this week on the back of the latest announcement from the Chinese central bank. The People’s Bank of China (PBoC) reportedly called on the nation’s financial institutions to cease payment channels for cryptocurrency trading. The news came shortly after China announced a serious crackdown on cryptocurrency mining.
The PBoC said in a statement:
Where do Ethereum price predictions from analysts and forecasters indicate the price will move in the future?
Ethereum price prediction: will the crypto rebound to new highs?
According to CoinCodex, technical analysis indicators for the Ethereum price were bearish at the time of writing, with 13 indicators giving bullish signals and 20 giving bearish signals. At around $1,938, the coin was trading above the 200-day simple moving average (SMA), although it remained below the 5-, 10-, 21-, 50- and 100-day SMA and 5-, 10-, 21-, 50- 100- and 200-day exponential moving average (EMA). There is short-term support around $2,300, with resistance at $2,491.
The Ethereum forecast from Digitalcoin remains bullish, predicting the price will average $2,707 in 2021 and rise to $3,382 in 2022. Over the longer term, it projects the price will climb to average $5,852 in 2025 and $8,488 in 2028.
Algorithm-based forecasting service Wallet Investor has revised down its ether forecast from the $2,826 level at the start of July to $2,139, rising to $3,078 at the end of the year. It predicts the price will move above the $5,000 mark at the end of 2022, closing the year at $5,044, then reaching $10,000 in 2025.
The ether price prediction from the Economic Forecast Agency, which had projected the price would fall to $2,746 by the end of June, now expects it to end the month at $1,789. It predicts the price will drop to $1,586 by the end of this summer, before taking off to $2,790 by the end of 2021. It estimates the price will peak at $7,072 in December 2022, then fall to $3,289 by June 2023. The ETH is forecast to end 2023 at $5,571 and 2024 at $2,131.
Edited by Valerie Medleva
Whether ether is a good investment for your portfolio will depend on your risk tolerance for trading highly volatile assets and whether you expect the cryptocurrency markets to continue rallying in 2021.
Analysts expect ether to rise as the blockchain transitions to Ethereum 2.0 and as developers roll out new DeFi applications. However, cryptocurrency prices can fluctuate wildly, and the price could still drop back again even if the Ethereum forecast for 2021 looks bullish.
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When investing in cryptocurrencies, it’s important to remember that the market is very dynamic. Its volatility makes it difficult to not only give long-term forecasts, but to predict where the coin could be in a few hours. As such, before making any investment decision, we recommend you do as much research as possible, taking into consideration the latest market trends, technical analysis and expert opinion.
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