The ETH price briefly touched $2,000 (£1,500, Є1,680) in February’s cryptocurrency rally and has moved back above that level in April, gaining 183.2% so far this year.
The Ethereum ecosystem has emerged as the first choice for developers launching decentralised finance (DeFI) applications and non-fungible token (NFT) sales, although there are some new applications that are turning to alternative blockchains.
Some observers see the ETH price continuing to skyrocket, but how realistic are those expectations? Is there still time to invest in the ETH market to rack up substantial gains?
This Ethereum price analysis looks at the recent movements in the cryptocurrency, reasons behind those fluctuations and predictions for the direction of coin’s price for 2021 and the coming years.
Ethereum takes the lead in DeFi and NFTs
ETH is the second-largest cryptocurrency after bitcoin (BTC). Its market capitalisation of $240.8bn (£175bn, Є202bn) is still far behind bitcoin at $1trn, reflecting the dominance of the first digital coin. There are 115.4 million ETH coins currently in circulation, compared with 18.7 million bitcoins.
Computer programmer Vitalik Buterin proposed the Ethereum network in 2013 to develop blockchain technology that could attach real-world assets. Along with several other co-founders, Buterin crowdfunded its development in 2014 and launched the network in 2015.
At the start of December 2020, the Ethereum 2.0 upgrade got underway. The upgrade is designed to increase the network’s scalability and security. Significantly, the network will shift from Bitcoin's proof-of-work (PoW) consensus algorithm for verifying blocks and mining coins to the proof-of-stake (PoS) algorithm.
As described in an Ethereum foundation blog post, the upgrade involves the so-called “Eth1” PoW chain, applications and tools and “Eth2” software and protocol layers.
“Eth1 is primarily the operation and upgrading of Ethereum’s user-layer – state, transactions, accounts – all the things the end-user considers when interacting with Ethereum. Eth2 on the other hand is a series of upgrades meant to overhaul Ethereum’s core consensus – to move from the energy-hungry, inefficient proof-of-work to a more sustainable, scalable proof-of-stake.”
The post added: “this relative isolation of concerns (user-layer vs core consensus) has allowed for Ethereum (eth1) to keep chugging along while simultaneously supporting a major overhaul of Ethereum’s core consensus (eth2) in a relatively de-risked fashion. In the future, this isolation of concerns might support more specialisation across the stack and software components. The heroes (eth1 client devs) that keep Ethereum alive and well today can continue to focus on user-layer optimisations and stability, while the eth2 engineering teams can do what they do best – build sophisticated proof-of-stake consensus”.
As part of the upgrade and shift to PoS, the Berlin hard fork (blockchain split) is scheduled to be activated on block 12.244.000, which is expected to happen around 14 April, 2021. The upgrade includes optimising contracts to address gas efficiencies that have seen transaction fees rise sharply, updates to how the Ethereum Virtual Machine (EVM) reads code, and changes to prevent denial-of-service (DDOS) attacks.
Ether miners and node operators are required to update their Ethereum clients as any nodes that are not upgraded will be abandoned and they will be stuck on an incompatible chain, preventing them from operating on the network or sending ether.
Ethereum is key to the advent of DeFi, which runs smart contracts on the EVM and enables holders of various cryptocurrencies to use their coins as collateral for financial services including loans, insurance, trading and savings. And the ability to attach real-world assets to contracts enables developers to launch NFTs on Ethereum.
DeFi applications emerged on the scene in 2020, offering new capabilities to the burgeoning fintech space. NFTs exploded onto the scene in early 2021, with high-profile multi-million-dollar sales capturing the attention of investors.
Ethereum gas prices have climbed to 124.44 from 11.58 a year ago, with occasional spikes to as much as 700. That has prompted some developers to launch alternatives to Ethereum with lower fees that can run Defi applications and NFTs.
Ethereum average gas price chart
The ether price launched at 2.14 against the US dollar in 2015, spiking to $1,283.42 during the cryptocurrency rally in January 2018. The price had fallen back to $86.17 by December that year, remaining below the $300 level until the market began to rally again in 2020.
ETH price chart
The coin then climbed from $125.63 to $729.65 last year, a 480.8% increase, and has gained another 178.1% so far in 2021 to trade around $2,080. It reached an all-time high of $2,153.08 in early April 2021.
Where do Ethereum price predictions from analysts and forecasters indicate the price will move in the future?Ethereum price prediction: will the crypto reach new highs?
On 8 April, Philip Gradwell, chief economist at Chainalysis, said on CoinDesk TV that there was little ether bought above the supporting level at $1,850, with even less demand at $2,000 or above.
However, the Ethereum future price is expected to continue rising over the longer term. Billionaire investor Mark Cuban said on the Unchained podcast on 6 April that after the upgrade, applications on Ethereum will see it “dwarf” Bitcoin. Cuban said he now holds “a lot more” ether than bitcoin.
The Ethereum forecast from Digitalcoin is bullish, predicting that the price will double by 2023. The forecast puts the average price at $2,922.64 in 2021, rising to $3,651.21 in 2022, $6,317.73 in 2025 and $9,163.19 in 2028.
ETH price predictions for 2021-2028
Algorithm-based forecasting service Wallet Investor is also optimistic in its ether forecast, with the price estimated to rise from $2130.79 at the start May to $2,809.09 at the end of December 2021, $3,776.94 at the end of 2022 and $6,677.23 by the end of 2025.