What Might Affect the Future of Ethereum

Ethereum (ETH)

is a major driver of the crypto market. It’s the second-largest cryptocurrency by market cap, behind only Bitcoin—and far ahead of the thousands of other cryptocurrencies on the block.

Along with the rest of the crypto market, Ethereum’s price has been volatile: It soared to all-time highs in 2021 along with Bitcoin’s price, but ETH lost more than two-thirds of its value from its 2021 peak to mid-2022. As market watchers try to make price predictions and time their buying and selling accordingly, they consider many factors—including the Ethereum 2.0 upgrade that will change how its system works. 

Ethereum 2.0—with plans for more scalability and enhanced security features—could affect Ethereum’s price, along with factors such as competition in the crypto industry, how much users trust in the platform, and geopolitical events that could rock markets in general.

Is there a way to calculate Ethereum’s future price? 

Will Ethereum go up? Why is Ethereum dropping? Crypto investors have lots of questions about where Ethereum will go from here, but as with any asset, no one can reliably predict Ethereum’s future price.

Some experts think Ethereum is poised to become the No. 1 crypto thanks to the unique features its platform offers, including decentralized applications (dApps), a marketplace to trade other cryptos, and the smart contracts that Ethereum first brought to the market. And Ethereum is also in the middle of a phased-in upgrade process that will bring new features aimed at efficiency and scalability—including a switch from the energy-guzzling Proof-of-work process that currently creates new tokens, to a more sustainable one called Proof-of-stake  

Tegan Kline, the co-founder of blockchain software maker Edge & Node, told Bloomberg in 2021 that Ethereum “will likely exceed Bitcoin at some point in the future, as Ethereum will be superior when it comes to innovation and developer interest.” But in the same Bloomberg article was a flat contradiction: "Bitcoin will still remain king of the cryptos," said Edward Moya, Oanda Corp. senior market analyst.

Many experts won’t even offer a prediction on Ethereum in particular, as its price tends to fluctuate more than many others:  “I dare not speculate” where the price of Ethereum will go this year, Kryptovault’s Kjetil Hove Pettersen told CryptoNews, adding that ETH will likely be “even more volatile than Bitcoin.”

All this underscores that even professional market watchers with expert technical analysis cannot predict where Ethereum’s price will go over the long term. That’s arguably even more true in the cryptocurrency world thanks to its extreme volatility, driven by speculation and wild swings in investor sentiment. And unlike companies that have sales and earnings, allowing investors to calculate valuations, cryptos have no financial results.

Factors that could affect Ethereum’s price

As of mid-July 2022, Ethereum’s native cryptocurrency, ETH, was trading at about $1,500 a coin. Here are a few factors that could drive it up or down:

Post-Merge landscape

The Ethereum blockchain has launched test versions of the new proof-of-stake system, and the hype is high for the so-called Merge when the Ethereum mainnet—the system’s original blockchain—switches over later in 2022. But Ethereum’s performance in 2022 hasn’t so far reflected that hype. Investors may be waiting to see how users and companies alike respond to the long-planned changes, and how people adapt to those changes, once they finally happen.

A broader bear market

The cryptocurrency market’s decline in the first half of 2022 has mirrored that of most asset classes. Geopolitical and macroeconomic factors like the persistent Covid-19 pandemic, high inflation, the Russia-Ukraine war, and more have fueled uncertainty and concern. Markets don’t like uncertainty, and that has been true of the crypto field as well.

Competition

Though Bitcoin and Ethereum tend to receive most of the attention, there are thousands of other cryptos: The database CoinMarketCap tracks nearly 10,000. Some were designed for specific niche purposes, and not all crypto creators aim to dethrone Bitcoin. But it’s an evolving industry, and any day a new or existing currency may break out as a hot competitor. Just think: Years ago, no one could imagine the ubiquitous BlackBerry falling out of favor. It’s just one example of how, especially in tech, disruption can happen fast.

Increased regulatory interest

Cryptocurrency is no longer a buzzy new fad; it’s a bonafide asset class that reached a total market value of $3 trillion in late 2021. New investment products can be a bit of a Wild West when they first begin, but once they go mainstream it’s a sure bet that regulators will look closely. 

U.S. Federal Reserve Chairman Jerome Powell and Securities and Exchange Commission Chairman Gary Gensler are among the top officials who have publicly shared concerns about the lack of crypto regulation. Meanwhile, President Joe Biden signed an executive order in March 2022 calling on the Treasury Department to develop policy. So it’s likely that laws and regulations governing cryptos will evolve over time, and that may or may not limit the growth of Ethereum and its competitors.

The bottom line

Like most cryptocurrencies, the price of Ethereum (ETH) has fluctuated widely, going from a record high in 2021 to losing two-thirds of that value by mid-2022. A number of factors could boost Ethereum’s price, particularly Ethereum 2.0, a system upgrade meant to make the platform more efficient and scalable. Some experts even think No. 2 Ethereum could overtake Bitcoin as the most valuable crypto by market cap thanks to its wider applicability.On the other hand, a bear stock market as well as increased competition and regulation of the crypto industry could drag down Ethereum’s price, along with the rest of the crypto market.