Quick overview

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Citigroup recently announced that Ethereum (ETH)  could reach $4,300 by the end of 2025. This target reflects a slight decline from the current market value of approximately $4,500, indicating the bank’s cautious yet optimistic approach.

The bank’s forecast is multifaceted. In its base scenario, Ethereum is expected to end the year at $4,300. However, Citigroup also outlined a bull case where Ethereum could soar to $6,400, driven by widespread adoption and increased capital investments. Conversely, their bear case predicts a drop to $2,200, pointing out risks such as decreased network usage and tighter global liquidity.

Citi analysts highlighted that Ether’s value is heavily reliant on network activity. The more Ethereum is used for applications, transactions, and decentralized finance (DeFi), the greater the demand for it. As demand increases, so does the value of ETH, its native token.

Recently, layer-2 scaling solutions, including rollups, sidechains, and off-chain systems, have gained popularity. These platforms can process transactions more quickly and at lower costs before settling them on the main Ethereum blockchain, which helps alleviate congestion. However, Citi notes that not all activity on these layer-2 systems is detrimental to the ecosystem.

Citi estimates that only 30% of layer-2 activity significantly impacts Ethereum’s valuation. Based on this metric, Ether is currently trading above its fair value. The analysts believe that other factors, such as consistent inflows from institutional investors, enthusiasm for tokenization initiatives, and the growing importance of stablecoins on Ethereum’s network, can explain this discrepancy.

The introduction of exchange-traded funds (ETFs) focused on Ethereum has added another layer of complexity. Although ETH ETF flows are still smaller than those for Bitcoin, they have a larger price impact per dollar invested. However, due to Ethereum’s smaller market capitalization and lower recognition among novice cryptocurrency investors, the bank expects that Ether ETFs will attract fewer inflows compared to Bitcoin.

Citi does not see much potential in the macroeconomic environment outside of crypto-specific factors, especially alongside U.S. stocks that are currently trading near the bank’s assessments.