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Published: Jun 20, 2023, 9:38am
In the digital asset space, and certainly among its fans, Ethereum has become a byword for innovation. More than a cryptocurrency, Ethereum is a platform where global innovators can build concurrently, giving birth to new and accessible decentralised financial applications. Its essence lies not only in the coin—ether—but in the potential of the network.
It is second only to Bitcoin in market capitalisation, coming in at $208 billion compared with Bitcoin’s $519 billion market cap. As of June 20, one bitcoin will set you back $US26,000, while you will need roughly $US1700 to buy ether.
Like any emerging technology, Ethereum’s journey has been one of dramatic highs and challenging lows.
Let’s take a look at Etheruem’s journey so far—and where it may be headed in the future.
Related: Bitcoin Price Prediction: Boom or Bust?
Since its inception in 2015, Ethereum (ETH) has been a testament to the famous adage, “high risk, high reward.” Renowned Ethereum expert and Founder of The Daily Gwei, Anthony Sassano, recounts the volatile price trajectory of Ethereum over the years, which has been marked by both tremendous appreciation and significant drawdowns.
“Remembering back, Ethereum has faced some tumultuous times,” Sassano says. “We saw the price plunge over 70% in the second half of 2016 and then a devastating 94% drop in 2018. Then, there was another significant drop of 80% in the first half of 2022.”
However, Ethereum’s price history isn’t just about declines. Sassano reminds us of the other side of the coin. These dramatic price surges have made Ethereum a notable player in the crypto arena. “Ethereum experienced a stratospheric increase of 2500% in the first half of 2016,” Sassano comments. “Then, in 2017, it skyrocketed by a staggering 20,000%. And if we look from the bottom price of $US80 in 2018/20 to the top of $US4900 in 2021, it surged 5400%.”
These meteoric rises are usually reserved for micro-cap stocks or options in other markets. Yet, as the digital asset markets are still in their infancy, and the small size of this emerging asset class compared to other traditional markets means these types of eye-watering gains can still be found, even among the largest players, such as Ethereum.
Significantly, Ethereum’s performance against Bitcoin (BTC), the largest and most well-known cryptocurrency, during the latest downturn was considerably stronger than in the past. “[ETH] went down 90% from peak to trough last time, but now, it’s only down 24%,” Sassano notes. This trend highlights a shift in market perceptions about Ethereum.
“It seems Ethereum is no longer viewed simply as a risk-on, tech play,” Sassano observes. Bitcoin is no longer the only blue-chip asset in the crypto space, and Ethereum is now increasingly becoming the “flight-to-safety” asset within the context of the crypto world. “Ethereum isn’t just a tech story anymore. It’s seen as money and a store of value,” says Sassano.
While it is impossible to accurately predict the performance of any digital asset due to the variety of factors that can affect the price, there are certain events that investors can watch out for which could impact Ethereum’s price.
When asked about Ethereum’s outlook for 2023, Sassano suspects there may not be significant price gains. “Although the Ethereum ecosystem is teeming with activity, I don’t foresee much positive impact on Ethereum’s price in 2023,” Sassano explains. “The broader crypto market is likely to remain range-bound this year.”
The global macroeconomic outlook naturally plays a role. The post-pandemic world is grappling with high inflation levels and increasing interest rates from central banks. This puts a damper on risk assets, such as equities and crypto, as investors seek safe returns in other markets.
However, this doesn’t mean Ethereum will be quiet. On the contrary, Sassano points out several upcoming developments that could shape the platform’s future. “We’re anticipating the Dencun network upgrade by year’s end, which will bring several improvements to the Ethereum network,” Sassano says. “Notably, this includes Ethereum Improvement Proposal (EIP) 4844, an upgrade expected to dramatically reduce gas fees for layer 2 solutions built on Ethereum.”
Alongside this, Sassano sees a strengthening of the layer-2 ecosystem, a technical term for solutions designed to help scale the Ethereum network, allowing for faster transactions and lower user transaction fees. Arbitrum and Optimism are currently the most prominent players in the layer 2 space. However, countless others are being developed.
“These secondary layer solutions will continue to grow stronger and gain wider use,” Sassano predicts.
The emergence of new staking protocols and products, often referred to as ‘StakeFi’, are also anticipated to enhance Ethereum staking. “We’re seeing a flurry of innovation in this area, and it will be exciting to see how these developments evolve over the year,” says Sassano.
Lastly, existing projects within the Ethereum ecosystem are expected to progress and mature. “[These projects] will continue to build out their products and launch new versions of them,” Sassano asserts.
While Ethereum’s price may remain stable in 2023, Sassano outlines a number of scenarios that could fuel an increase in Ethereum’s price in the future.
One such development is a proposal known as ‘MEV-burn.’ “This is a similar bullish catalyst to EIP-1559, which implemented a fee burn and had a significant impact on Ethereum’s value,” Sassano explains. “If MEV-burn gets the green light, Miner Extractable Value (MEV) rewards would be burned instead of being paid out to validators. While there’s no confirmed timeline, it’s possible we could see this come into play in 2024.”
Miner Extractable Value (MEV) refers to the measure of profit a miner can make through their ability to arbitrarily include, exclude, or reorder transactions within the blocks they produce. It’s the extra income miners can earn by manipulating transaction order in a block to their advantage. If the green light goes ahead for MEV-burn, the amount of Ether removed from the circulating supply would increase dramatically, potentially pushing up prices as Ether becomes more scarce.
Sassano also believes the Ethereum ecosystem may be poised for a significant event similar to the “DeFi summer” of 2020, referring to the surge in decentralised finance applications and, subsequently, prices of many DeFi-related tokens. “There’s speculation about a ‘layer 2 summer’ on the horizon, which could stimulate a flurry of activity and potential growth in Ethereum’s value,” Sassano notes.
In a tweet he posted, Sassano outlines other reasons why he thinks a ‘layer 2 summer’ could be on the horizon. Notably, he mentions the novel applications being developed and launched on layer 2s. The speed and low cost of transacting, coupled with the security provided by Ethereum, allows for financial products to be launched that were previously impossible.
The increasing use of Ethereum as a collateral asset is another potential catalyst for a bullish scenario. “We’re seeing many new DeFi protocols coming online that will use Ethereum in this way,” Sassano says. “This includes new types of stablecoins, Automated Market Makers (AMMs), and more integration with real-world assets.”
Real-world assets, often called RWAs in crypto, have been slowly entering the digital asset space. Assets such as property or physical artwork are being tokenised and traded via decentralised blockchains, opening up possibilities for peer-to-peer trading of physical assets in a borderless fashion.
Sassano also points out the ongoing trend of ETH staking as a likely driver of positive price action. “The Shapella network upgrade, which went live in April and enabled staked ETH withdrawals, has made staking a far less risky proposition,” Sassano explains. “We expect more ETH to be staked in the future, which is generally bullish for ETH.” As more ETH is staked, it reduces the circulating supply, which can increase Ether’s price.
The return on staked ETH is slowly becoming a baseline level of yield in crypto markets, much like interest rates in the real world are seen as the baseline of yield for investors. Currently sitting at around 5-6% return a year, this return presents opportunities for new financial primitives to be built from Ethereum’s staking mechanism.
Finally, Ethereum’s fee-burning mechanism, introduced in The Merge upgrade, continues to operate, reducing the overall supply of Ethereum. “This steady burning of Ethereum continues, further supporting a potential rise in value,” Sassano explains.
Although Sassano is optimistic about Ethereum’s potential, he acknowledges the possibility of downturns. He argues, however, that a bearish scenario for Ethereum seems explicitly less likely given the positive catalysts on the horizon. Instead, a bear case would likely be tied to broader market conditions or increased regulatory scrutiny.
“I don’t think there’s really a bear case for Ethereum or ETH right now given all the positive catalysts to come,” Sassano says. “The bear case for all of crypto would be more about a shock in the macro environment or a worsening of the regulatory pressure we’ve already seen on crypto.”
Longer-term, Sassano identifies potential factors that could suppress Ethereum’s growth. “If we think about a bear case for Ethereum over the next five to 10 years, it would be Ethereum failing to continue growing; its product-market fit turning out to be just a niche; and being hampered by regulation, particularly at the ports of entry,” he says. This could involve stricter regulation of fiat on/off ramps, application frontends, or even harsh stablecoin regulation.
However, Sassano emphasises that this scenario seems relatively unlikely. “I obviously give this a very low chance of happening,” he adds. Even though it’s essential to consider all possibilities in the unpredictable world of cryptocurrencies, the current landscape suggests a more positive outlook for Ethereum.
Sassano presents an optimistic view for those wondering if Ethereum is a sound investment. His perspective is not solely based on the potential price appreciation of ETH but also the inherent earning potential within the Ethereum network.
“I continue to believe that ETH is the best risk-adjusted investment across any asset class for the long-term,” Sassano says.
His bullish stance is based on the numerous positive developments within the Ethereum ecosystem, the potential catalysts for future growth, and Ethereum’s performance amid broader market conditions.
Moreover, Sassano draws attention to the benefits of staking ETH. “Not only are there many reasons to be bullish on ETH itself, but people can also stake their ETH and earn an ETH-denominated Annual Percentage Rate (APR), currently around 5-6%,” he explains.
Through staking, ETH holders can actively participate in the network’s operation and earn rewards, providing an additional income stream on top of potential capital gains from ETH’s price appreciation.
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Price predictions for Ethereum in 2023 can vary widely and depend on many factors. The Ethereum ecosystem appears to have a bright future, with numerous improvements in the pipeline for late 2023 and into the future. The major factor affecting the price of ETH currently is the global macroeconomic conditions, with high inflation and, consequently, tightened monetary policy by central banks worldwide, creating an unappealing environment for risk assets like stocks and crypto.
The potential growth of Ethereum is theoretically limitless, as with any cryptocurrency. However, its future value depends on its adoption rate, technological advancements, competition, regulatory environment, and overall market conditions. In the past, ETH has made some meteoric rises and gut-wrenching price drops. While the past is not indicative of future performance, ETH could continue upward in this manner over a long timeframe. It’s important to understand that the crypto market is highly volatile and unpredictable, and investments should be made cautiously.
Predicting specific price points for cryptocurrencies like Ethereum is highly speculative. While some analysts and investors might believe Ethereum can reach such a level, others may have more conservative estimates. A multitude of factors, regulatory as well as economic, will influence whether Ethereum can reach this value.
Seven years is a long time in the propulsive world of cryptocurrencies. Given the rapidly changing nature of technology and markets, it isn’t easy to project accurately what Ethereum could be worth in 2030. However, as one of the leading cryptocurrencies with robust blockchain technology and wide adoption, many believe in its potential for significant long-term growth. As always, potential investors should carefully consider the inherent risks and volatility of cryptocurrency investments.
Patrick McGimpsey is a freelance writer passionate about crypto and its impact on the financial world. Currently working as the content lead for Australian startup CryptoTaxCalculator, Patrick has also covered the crypto industry for Canstar and The Chainsaw. Patrick has over seven years of experience in the crypto space and has previously shared his knowledge with the AML and fraud departments of Australian financial Institutions.