Ethereum (ETH) Price Prediction For 2021: Will Buyers Break 2017 Highs Soon?
Skerdian Meta • 8 min read
Ethereum (ETH) – Forecast Summary
|Ethereum Forecast: H1 2021|
Price: $2,500 – $3,000
Price drivers: Market sentiment, COVID-19, Cash flows, Global economy
|Ethereum Forecast: 1 Year|
Price: $3,500 – $5,000
Price drivers: Safe haven status, Post COVID-19, Hawkish central banks?
|Ethereum Forecast: 3 Years|
Price drivers: Global economy, Crypto market sentiment, Safe haven status
Like most other cryptos Ethereum continues to make new highs, as it broke above $ 2,000, reaching $ 2,130 , but has retreated to around $1,500s now, after having fallen just below $ 1,300 on in the last day of February, which was a very volatile day. Ethereum was the first to resume the bullish trend in February after the retreat during most of January and again in March after the retreat in the last week of February. The price broke above the record highs of $ 1,427 in the first week of February, as buyers pushed the price above the 2018 highs. ETH/USD got pretty close to that big level earlier this month, but it finally broke it after a short-lived pullback down. This was a big psychological barrier to be taken out, while the second one was the $ 2,000 level, which suggests further bullish momentum in Ethereum, while Bitcoin broke above $ 50,000 and is now heading for $ 60,000. The bullish momentum for cryptos resumed soon, with Bitcoin breaking above $ 45,000 after tesla bought $ 1.5 billion worth of that coin and Ethereum made new highs, trading at $ 1,740s, as of February 9. There are some more upcoming events for Ethereum as we have listed below, which will likely add to the bullish momentum.
The crypto market was in the middle of a strong bullish run when we posted our previous long-term forecast for Ethereum, increasing from below $ 100 in March to above $ 400 by August, which is a very impressive 400% increase in value. My colleague Arslan predicted that the bullish momentum would continue in Q4 of 2020 and he was right about that. Except that the bullish run turned into another “gold rush” for cryptocurrencies, similar to what we witnessed in 2017, although it was larger for certain digital currencies, to some degree. Ethereum was one of those currencies, and it joined the surge in the crypto market, which was led by Bitcoin, as usual.
Recent Changes in the Ethereum Price
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Bitcoin surged above $ 40,000 by the beginning of January, while Ethereum got pretty close to the all-time high of $ 1,427 according to most Ether brokers, although after the retreat in the last few days of the second week of January, we can say that Ethereum buyers failed at the first attempt. However, judging by the fundamentals behind Ethereum, and particularly by the current sentiment in financial markets and in the cryptocurrency market, we can say that it won’t be long before Ethereum breaks the 2017 high and makes a new one at some point this year, probably sooner rather than later, judging by the price action and the volatility of recent months.
Ethereum has found itself in the middle of a massive bullish run in cryptocurrencies; while the majority of the market has been surging higher, some important cryptos have remained stagnant, with Ethereum being among the best performing altcoins, behind [[Bitcoin]]. There are quite a few reasons for this, with the sentiment turning massively bullish for digital currencies for safety reasons, at a time when no fiat currency is safe. The coronavirus and the declining global economy have turned the investors towards cryptocurrencies, but the political changes around the globe have also added further fuel to this bullish momentum, which has benefited Ethereum immensely, as it has attracted large investors. Other fundamentals have also been positive for Ethereum, with Ethereum 2.0 in the process of being fully launched, which will make the Ethereum network more reliable as the DeFi transactions boom.
Ethereum Price Prediction for the Next 5 Years
The cryptocurrencies are suddenly taking all the attention in financial markets. While certain shares, like Amazon and Tesla, have performed extremely well in the times of COVID-19, the crypto market has outperformed everything. The value of this market has increased many fold, as digital currencies have earned safe haven status. Bitcoin surged above $ 40,000 last week, while Ethereum has been following suit. In this article, we will take a look at the factors that are keeping the ETH/USD bullish, and the projections for the future.
Ethereum Turning Into a Safe Haven During Coronavirus
COVID-19 has turned out to be extremely beneficial for cryptocurrencies. Traditionally, cryptocurrencies have been seen as risk assets during their short lifespan, which means that they increase in value when the market sentiment is positive and traders are seeking higher returns on riskier financial instruments. When the sentiment turns negative, risk assets turn bearish, and that’s what Ethereum did when the coronavirus first made its way to Europe in February last year. Markets were still in normal mode back then, and cryptocurrencies tumbled lower. But, since the middle of March 2020, the world has changed, and cryptocurrencies have turned from risk assets into safe havens, towards which traders turn for safety in times of trouble.
Bitcoin has been leading the crypto market as always, but Ethereum has had its fair share of gains as a safe haven for nearly a year. All the countries around the globe went through a severe crash in spring 2020, during the lockdown period, and despite a bounce in summer, the global economy is still suffering, with certain economies, like the Eurozone and the EU, probably heading toward a double dip recession. Governments and central banks have been pouring out excessive amounts of cash non-stop, and will continue to do so for at least a couple of years. In this environment, with the global economic meltdown and the excessive amount of cash in the markets, no traditional currency is safe to hold, so traders and investors are turning to cryptocurrencies more and more.
Besides the economic difficulties, global politics have also helped fuel the bullish momentum in cryptocurrencies. The western political landscape is changing, which makes the situation increasingly uncertain from an economic and a social point of view. On the other side of the planet, it seems like China is cracking down on private capital and business people. The founder of Alibaba and the Ant Group, Jack Ma, hasn’t been seen for some time, and some even claim that he is missing. Some of the funds have been frozen, which is panicking other rich Chinese nationals, who are transferring their funds into cryptocurrencies. So, the digital market is benefiting from this new safe haven status, and as we will explain below, Ethereum is likely to keep this status, as the DeFi transactions keep soaring.
Surging DeFi Transactions Are Great for Ethereum
The increasing uncertainty for investors, or anyone who has spare cash for that matter, has led to a higher demand for cryptocurrencies, which in turn has increased the use of the decentralized finance (DeFi) system. In fact, the DeFi transactions have absolutely surged during this time. In January this year, the total value locked (TVL) in DeFi exceeded $ 20 billion for the first time ever. This means that there is more than $20 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 faster 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 last year, 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 since the middle of 2020, and the pace is picking up further. The volume for Ethereum futures reached $ 257.06 billion in December. That means a 4.4% increase compared to the previous month. The spot volume on cryptocurrency exchanges also reached a record high in December, at $ 379 billion. All this data means that the Ethereum network will continue to grow, benefiting the cryptocurrency further. This also acts as a cushion in case of a crash in the crypto market. In that case, Ethereum would lose considerable value, but it would still remain well above the pre-coronavirus trading levels. Not that this will happen any time soon, but we should just take it into consideration.
Ethereum 2.0 and Other Upgrades
The Ethereum network is based on decentralized finance, and DeFi is known as “Lego Money”. DeFi orders can be separated into individual parts, which can then be placed 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. These transactions exceeded $ 20 billion as of December 2020, as mentioned above, so they’re on their limits. 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 implemented completely at some point in 2021.
The expectations for Ethereum 2.0 are that it will become a reliable super-fast version of the previous Ethereum blockchain version. The transition to the Power of Stake (PoS) consensus algorithm and sharding of the Layer 2 payment channels will enable 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.
Ethereum started at around $ 10 and it traded around that level from 2015 until early 2017, when it started its bullish move, increasing to above $ 400 by June that year. That means a 4,000% increase in value. That was the first sign that this cryptocurrency would be a market favourite, and that buyers would take charge. After trading between $ 200 and $ 400 for several months, the extraordinary demand for cryptocurrencies came, and Ethereum surged higher, getting pretty close to $ 1,500 by January the following year. But that wasn’t to last, and the big bullish move was followed by a big bearish reversal in 2018, which took the price down to the 20 SMA (gray) on the monthly chart, where it bounced gain, although the bounce didn’t last too long. The bearish trend resumed again, pushing the price below that moving average, which turned into resistance, and it remained there until August last year. The decline continued, with the ETH/USD dropping just below $ 100, but that wasn’t a proper break, and it pulled up above that level again. Then Ethereum traded sideways until October 2020, when the breakout finally happened, which is represented by the 3 big bullish candlesticks.
Let’s see how bullish this monthly candlestick will end up
On the weekly time-frame chart, the area around the $ 100 level turned into support for Ethereum, and this lasted for nearly 2 years, while the area around $ 400 provided resistance, keeping the price within a range until summer 2020. Moving averages also helped to keep the price subdued at the top, first the 100 SMA (green), which provided resistance, and then the 200 SMA (purple). Ethereum moved above the 200 SMA last summer, as the demand for cryptos increased, and then this moving average turned into support. After a slight retrace during August and September, despite PayPal adopting Ethereum as one of the cryptos for transactions on its site, the 20 SMA caught up on the weekly chart and started pushing Ethereum higher. Eventually the bullish momentum picked up pace, and at the beginning of January, we saw the biggest weekly candlestick ever. The price increased to $ 1,340, but the current week looks bearish. However, this candlestick is only half the size of the previous one, which means that the selling pressure this week has been nowhere as strong as the buying pressure last week.
The price has left the 20 SMA behind since October
On the daily time-frame, the bullish trend since October is also quite visible. The price retreated during September, but the 100 SMA (green) caught up with it and immediately turned into support. It started pushing Ethereum higher, as it moved higher then the other moving averages, with the 20 MA low (gray) and the 20 SMA high (purple). The first 10 days of January were extremely bullish, as Ethereum nearly doubled in value, but after forming an upside-down hammer, which is a bearish reversing signal, the price reversed back down. However, as the other time-frame charts showed, the decline seems to have stopped after that 1-day crash. The moving averages are approaching, and buyers seem to be jumping in again, with the price starting to climb higher. In conclusion, the fundamentals and technicals point higher for Ethereum, although a severe pullback is not out of the picture. But the overall short and long-term analysis for this cryptocurrency is bullish.
The pullback has stopped already