Source: PaxForex Premium Analytics Portal, Fundamental Insight
To say that last year was a tough one for the cryptocurrency industry would be an understatement, as the entire market lost about 64% of its value in 2022. The situation for Ethereum was not much different, and the popular digital asset fell 68% over the year. Now, investors are wondering if the situation will change for the better this year.
Based on Ethereum's recent price target of around $1,265, a $2,500 price target suggests roughly 100 percent growth for the world's second-most valuable cryptocurrency by the end of the year. Let's take a look at how likely that scenario is.
Last year saw a major update to the Ethereum network. Known as "The Merge," Ethereum moved from the energy-intensive proof-of-work system that Bitcoin detractors hate to a proof-of-stake (PoS) mechanism. Its fans have long awaited this development because it makes the blockchain network much more resilient and energy efficient.
The Merge allows Ethereum to introduce a new feature called sharding. Sharding essentially divides the entire Ethereum network workload into different parts that can have smart contracts. According to Ethereum's official website, sharding will be added in 2023. But don't be surprised if, as with The Merge, the introduction of sharding will be delayed several times before it is fully implemented.
The PoS upgrade combined with the ability to create sharding paves the way for Ethereum to become more widely adopted. That's because the hope is that after these two upgrades, commissions will go down and network bandwidth will increase.
And these two positives will eliminate two of the biggest criticisms of Ethereum: that it is slow and expensive. Right now, Ethereum can only process 13 transactions per second, which is not enough to be more widespread.
To be fair, there are still many unknowns in the future. This is a brand-new technology, and the likelihood that unexpected obstacles will arise is much higher than the likelihood that they will occur. In addition, there is uncertainty about the new regulation that may come after the negative events that occurred in the industry in 2022.
However, Ethereum proponents now have concrete successes to which they can confidently refer as the network prepares to realize its long-term potential.
Since its launch in July 2015, Ethereum has posted incredible returns of nearly 42,000%, outperforming the S&P 500 and Nasdaq Composite Index over the same period. Digging a little deeper, there have been four different calendar years when the price of Ethereum rose at least 100%. So it's not out of the question that it will show the same performance in 2023, especially due to technical upgrades to the network.
But hoping for such a huge price increase in such a short period of time, no matter how speculative the asset class is, is a misguided approach. What the price of Ethereum will be at the end of 2023, no one knows. In fact, close your eyes and name any number.
Complicating matters is that the U.S. Federal Reserve is planning to raise interest rates to curb skyrocketing inflation and essentially put the brakes on the economy. Other major central banks around the world are following a similar path. And it has led investors to push back against risky assets, including Ethereum.
The right thing to do is to simply invest a small amount in Ethereum and plan to hold it for years--that is if you believe in its disruptive potential. Don't buy expecting a short-term price spike.
As long as the price is above 1200.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 1305.70
- Take Profit 1: 1400.00
- Take Profit 2: 1500.00
Alternative scenario:
If the level of 1200.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 1200.00
- Take Profit 1: 1080.00
- Take Profit 2: 990.00
