Ethereum (ETH) Price Prediction For 2022: The $5,000 Level is the Next Target
Ethereum (ETH) – Forecast Summary
|Ethereum Forecast: Q1 2022|
Price: $4,400 – $5,000
Price drivers: Market sentiment, COVID-19, War on cryptos, London Hard fork
|Ethereum Forecast: 1 Year|
Price: $6,000 – $8,000
Price drivers: Ethereum 2.0 success, Safe haven status, Post COVID-19, Hawkish central banks?
|Ethereum Forecast: 3 Years|
Price drivers: Global politics, Crypto market sentiment, Ethereum upgrades
Ethereum has seen a lot of volatility in 2021, starting the year at around $600, and judging by the price action, it will probably end the year above $5,000. However, it has been less volatile than most of the crypto market, which has earned Ethereum the title of the average market indicator. ETH/USD formed a top at $4,380 in May, as it was leading the crypto market higher back then, but the crackdown on cryptocurrencies in China sent the whole market crashing, and this digital coin fell to $1,700, where it formed a base.
The bullish momentum resumed again in the second half of the year, as investors got used to the war on cryptocurrencies, which was declared by the traditional financial industry. The war on cryptos will continue, but cryptocurrencies are here to stay, and the NFT (non-fungible token) and DeFi (decentralized finance) markets are booming nonetheless. Ethereum made some strong bullish moves in the second half of the year, despite the escalating crackdown on cryptos. So, the price action indicates further bullish momentum in 2022. Fundamentals also look positive, despite some drawbacks, for Ethereum 2.0, which have already been underway since September.
Recent Changes in the Ethereum Price
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Factors Affecting Ethereum
The sentiment in the cryptocurrency market has been one of the main factors affecting the Ethereum prices in the last few years. Ethereum has appreciated when the market has been bullish, and vice-versa. This has earned Ethereum the title of “average indicator” for the crypto market. The market sentiment in itself has been decided by the investor appetite on one hand, and the crackdown on cryptocurrencies during 2021 on the other, so while Ethereum hasn’t been directly affected by the war on cryptos, the deteriorating market sentiment at various times has been weighing on the ETH price too. High gas fees are a moderate factor in Ethereum’s price action, but the London Hard-Fork is trying to tackle that problem, so let’s see how successful this update will be, when it comes to attracting more long-term projects.
Ethereum Price Prediction for the Next 5 Years
After the rollercoaster ride in 2021, cryptocurrencies are attracting a lot of attention in financial markets once again. While certain markets have performed well in 2021, the crypto market has outperformed everything, despite the drama and the crackdown’s affecting it. The value of this market increased many times last year, as digital currencies are deciding whether to be a safe haven. Ethereum kept making record highs during 2021, and it is ending the year on a bullish footing. After breaking above the high of May, ETH/USD reached $4,860 in November, and it will probably break above $5,000 in early 2022 and head for $6,000.
Ethereum – A Crypto Market Indicator
Coronavirus started as a terrible thing for the global economy, but now, many sectors of the global economy have come out much stronger than before, and the cryptocurrency market has benefited immensely during these uncertain times. The total value of the crypto market increased from around $750 billion at the beginning of 2021 to $2.9 trillion by early November. The Ethereum market cap also surged from around $83 billion to $572 billion. The volatility has been immense in the crypto market, especially among the DeFi (decentralized finance) and GameFi/meme coins.
The price of Ethereum has also been volatile, but much less so than these sectors within the market. Now, Ethereum has taken over the title of “market average indicator” from Bitcoin. It has also become a safer place to invest than most other cryptocurrencies, which should attract more conservative investors. Some of the excessive amount of cash that has been thrown into the financial market during these last two coronavirus-plagued years has spilled over into the crypto market as well, and it will continue to do so, but this might start to dry up in 2022, as the central banks tighten the pursestrings.
Ethereum Benefiting From Growing DeFi Market
The crypto market has gone mainstream now, and the demand for cryptocurrencies has increased, which in turn has caused the decentralized finance (DeFi) system to explode in 2021. Global politics are trying to make it difficult for cryptocurrencies, but the global uncertainty has made the decentralized finance market grow at an enormous speed nonetheless. In fact, DeFi transactions have absolutely surged during the past year. In January this year, the total value locked (TVL) in DeFi exceeded $78 billion for the first time ever by August. This means that there is more than $78 billion worth of capital deployed in various DeFi protocols in the system. This surge is due to the fact that DeFi is not subject to central banks and other intermediary institutions.
This is great for Ethereum, since a large part of the DeFi system is built on the Ethereum network. Therefore the quicker DeFi transactions grow, the more Ethereum benefits. So, the fast growth of the Ethereum ecosystem in the last year is mainly a result of growing DeFi. In the middle of 2020, the total value locked in DeFi transactions was heading for $ 1 billion. Now the value has increased around 20 times, and this is expected to continue in the future, as the investor demand for cryptocurrencies increases, attracting both miners and speculators into the game.
The volumes for Ethereum futures keep making record highs
The monthly volumes for Ethereum have also surged in the last two years, and the pace is picking up further. The volume for Ethereum futures peaked at $666 billion in May 2021, while in May it exceeded $700 billion. The volume decreased in May and June, but since then the trend has been upward, and the monthly on-chain adjusted volume stands above $300 billion as of December 2021. All this data means that the Ethereum network will continue to grow, benefiting the cryptocurrency further.
Ethereum Facing Increased Competition
Ethereum is a smart-contract blockchain that is focused on building a secure, decentralized environment to host applications of all types, and it is the blockchain with the most projects. There are over 3,000 projects and decentralized apps “dapps” currently running on the Ethereum blockchain. Some of these projects include Uniswap, MakerDao, Chainlink, Axie Infinity etc., while dapps based on Ethereum include SushiSwap, WBTC, Compound etc. But it is facing increased competition, as more names, such as Solana, Cardano, Algorand etc., enter the market. The gas fees, which remain high for Ethereum mining, have plagued the network for a long time. But the gas fees have come down considerably, after surging to 48% and 52% in August 2020 and February 2021, and they currently stand at around 10% of the total miner revenue. However, Ethereum is trying to tackle this problem with the Ethereum 2.0 London hard fork.
Ethereum 2.0 and Other Upgrades
The Ethereum network is based on decentralized finance (DeFi), and DeFi is known as “Lego Money”. DeFi orders can be separated into individual parts, which can then be put together again to create a different batch of orders. The smart contracts, decentralized applications (DApps) and protocols are mostly run on the decentralized Ethereum network.
But as the DeFi volumes increase, the Layer 1 blockchain networks become less reliable for such a high volume of transactions. When Uniswap v3 went live in June, these transactions declined from a record of $162.02 billion in volume, to $80.85 billion in June 2021 and $56.47 billion in July, but that’s still enormously high, and with the reversal in August, these DeFi transactions will pick up again. The Layer 1 blockchain capacity for processing transactions is quite limited, which means that the number of transactions per second (TPS) is limited. This is expected to be solved with the introduction of Ethereum 2.0, which was introduced on December 1, but it hasn’t gone fully operational yet. According to Vitalik Buterin, it should be fully implemented at some point in 2021.
The expectations for Ethereum 2.0 were that it would become a reliable, super-fast version of the previous Ethereum blockchain version, which it is living up to, so far. The transition to the Power of Stake (PoS) consensus algorithm and sharding of the Layer 2 payment channels are enabling this. The Layer 2 payment channels are built on top of these existing blockchains. It increases the speed of transactions considerably, which means that the Layer 2 transactions will be more suitable for small everyday retail transactions. So far, the new ETH 2.0 has been improving the network, but it will still take some time for this new update to be fully functional. Late in 2021, Vitalik Buterin announced the Ethereum scaling roadmap, which will be done via the graph protocol, so it should help with the scaling problem for Ethereum.
Ethereum Technical Analysis – Incredible Bullish Pressure
Judging by the monthly chart, the bullish pressure in Ethereum has been immense since late 2020. During this period, the price has increased over 40 times, and it is heading for $5,000 now. Ethereum started at around $10, and it traded around that level until early 2017, when the crypto market started its bullish move. Ethereum surged to above $400 by June that year, which means a 4,000% increase in value. That was the first sign that this cryptocurrency would become a market favorite, and that buyers would take charge. After that, Ethereum surged higher again by the end of 2017, getting pretty close to $1,500 by January the following year. That didn’t last though, and the big bullish move was followed by a big bearish reversal in 2018, which took the price to $100. The price traded between $100 and $200 until October 2020, when the breakout finally happened. This was followed by many big bullish candlesticks until the middle of May, with ETH/USD reaching $4,380. The price formed a big doji, followed by a pullback in June, as the crypto crackdown in China intensified. But now, Ethereum has turned bullish once again, pushing the price above the highs of May. Ethereum has formed support zones around $1,700, $300 and $4,000, which are helping during pullbacks lower.
The massive doji candlestick in May indicated a bearish reversal
On the weekly time-frame chart, Ethereum has also been showing immense bullish pressure since late 2020. It was trading at around $350 until October 2020, when the big buy in the crypto market began. The price started surging, leaving behind all moving averages until May, when the big reversal came. ETH/USD fell from $4,380 to $1,700, where it formed a decent support area around that level, which held until July, when the bullish pressure resumed again. Ethereum made a new high in November, just above $5,000, which is now the next target. The 20 SMA (gray) has turned into support for this crypto on the weekly timeframe, pushing it higher.
The zone above $1,7000 was a great buying area
On the daily time-frame, Ethereum has also looked quite bullish this year, with a consistent uptrend, despite the occasional pullback lower. During the first 5 months of 2021, the 20 SMA (gray) and the 50 SMA (yellow) were acting as support during pullbacks, showing that the pace of the uptrend was really strong. Then the bigger moving averages took their turn as the price retreated lower and the bullish trend slowed. Now, Ethereum remains above all moving averages on the daily chart, also remaining above $4,000, which puts it in the bullish zone, with the goal of moving up above $5,000 soon.
On the daily chart, the 50 SMA has turned into support for Ethereum again