Recently, a panel of experts predicted that Ethereum’s token Ether (ETH) would rise to $20,000 by 2025. Many extol the virtues of the future of decentralized finance (DeFi), and the Ethereum project is at the center of that narrative. Such bold estimates for Ethereum’s value are based on the popularity of DeFi, and Ethereum’s recent upgrades to Eth2.
Sarah Bergstrand, from Bitbull Capital COO, is among the experts who believe that Ethereum’s value will continue to climb. Bergstrand estimates that by 2025, Ethereum’s value may be $100,000 US. The prediction is founded on both recent upgrades to the Ethereum network and DeFi’s explosion.
Others on the panel, including Sagi Bakshi, Coinmama chief executive, and Lex Sokolin, ConsenSys head economist, also believe that Ethereum’s price will remain strong and that investors will see steady returns over the next few years. These DeFi specialists point to the popularity of decentralized finance (DeFi) platforms and Non-Fungible tokens (NFTs), which may give Ethereum an edge over Bitcoin.
The combination of the improvement to Ethereum’s platform and cryptocurrency volatility makes many of us wonder, will the price of ETH rebound in 2022?
Many of these predictions are a dramatic increase from Ethereum’s current price. In May 2021, the Ethereum price was around $3500 CAD. As of June 2021, it is about $2500. The price drop comes after a bullish run alongside Bitcoin between April and May 2021. Given the current value, some may be surprised by such bullish predictions.
Predictions for a rebound are not based on a hope and a prayer. Ethereum has been working to improve its network and overall usability. Ethereum has been central to the progress of DeFi for years. But the Eth2 upgrades are the reason many are primed to see Ethereum’s value soar over the next few years. A few of the current issues facing DeFi are high network demands that drive up the cost of transaction fees and the overall scalability of blockchain.
The upgrades offered by Eth2 make Ethereum’s architecture more scalable, the blockchain more secure, and the computational process more energetically sustainable. These amendments need to be made. Without them, the future of DeFi does not look as promising.
A significant issue that all cryptocurrencies and digital assets need to deal with is the problem of scalability. Improving DeFi access has always been at the center of Ethereum’s ethos, so it is not surprising that these improvements are coming to fruition. Ethereum’s network must be able to support 1000s of transactions per second. Improving the efficiency of transaction speeds is central to making transactions more affordable.
To make these improvements, Ethereum is improving sharding. Shard chains spread the network’s load over 64 new chains. More shard chains make running a node easier because it helps to keep hardware requirements low. This method gives more people more access to running nodes and contributing to the network.
Another challenge cryptocurrencies face is their environmental impact. To keep currencies like Bitcoin secure, the technology needs to use heavy computational, which means high energy costs. Ethereum is working to improve its proof-of-work consensus algorithm and replace it with a proof-of-stake. PoW uses less energy to confirm transactions. The improvements aim at reducing environmental impact and reduce fees. Other plans include increased security to avoid threats and attacks as the network on-loads more projects and actively expands the DeFi sphere.
Will Ethereum Surpass Bitcoin?
Bitcoin is still the world’s most valuable cryptocurrency. In April 2021, BTC rocketed to $60,000 US, and in June 2021 dropped down to around $30,000 US. April’s bullish market was in large part due to a whale purchase by Tesla’s Elon Musk. Musk purchased $1.5 billion US worth of Bitcoin in March 2021.
Despite the value of Bitcoin, the cryptocurrency has limited use and faces real scalability issues. These are precisely the issues that Ethereum and Eth2 have taken on. Bitcoin uses a SHA-256 hash function, which, although practically unforgeable, many are rightly concerned that its energy consumption is unsustainable. An additional limitation arises from the high energy costs of Bitcoin. Transaction rates for BTC are an average of $25 CAD/transaction. Add this cost to Bitcoin’s volatility, and most traders will hold and trade BTC rather than use it for small purchases.
More Than Speculation
Ethereum has taken on Bitcoin’s scalability issue, and its architecture is home to thousands of different cryptocurrencies, as well as games and other projects. Ethereum’s network has a wide range of potential, which is why many expect to see its value climb year over year. Ultimately, the architecture of the Ethereum network means there is room to grow.
Ethereum is building a network that makes space for a realizable DeFi ecosystem. The potential of the technology combined with the ethos of democratizing finance and the internet means that we have only begun to see the potential of the Ethereum project. Although ETHs price has dropped since its bullish run in April 2021, it remains strong.
By investing in ETH, investors get to be a part of a more significant DeFi infrastructure with unlimited potential, Ethereum’s value is not purely speculative. Ethereum’s ETH and ERC20 tokens are the gas that funds the projects on Ethereum’s network. Predictions for Ethereum’s future value are based on the recent network improvements, as well as the project’s past performance. And given Ethereum’s commitment to improvement and innovation, there is good reason to think 2021 will see ETH’s rebound.