Despite the economic turmoil caused by COVID-19, 2020 has been an impressive year for Ethereum. The price of the world’s most famous altcoin has risen steadily over the past 12 months, as the cryptocurrency world eagerly awaited the launch of the Ethereum 2.0 update, which finally became a reality in December.
What to expect from Ethereum in the coming year?
Overall, Etheruem has gained more than 330% since the beginning of 2020, which is very impressive considering the boring performance of some other tokens. Naturally, the resilience demonstrated by Ethereum, combined with an exciting new network overhaul, has largely brought the altcoin into the spotlight in 2021. Some industry figures believe that ETH will continue to grow at a pace that is relatively stable for the crypto market.
Let’s take a look at how Ethereum 2.0 can provide growth in the value of a crypto asset, and also see what some industry experts have to say.
History of Ether and price movements
Ethereum is the most well-known digital currency after Bitcoin, so before proceeding with our analysis, it is worth taking a closer look at what exactly distinguishes the altcoin from its predecessor.
Of course, there are many similarities between the two technologies: both Bitcoin and Ethereum were originally based on the concept of Proof of Work protocol, in which transactions are verified through a network of nodes competing to solve complex equations – a process better known as mining.
Similarly, both Bitcoin and Ether use blockchain technology to make all of this possible. However, in addition to these common features, BTC and ETH are two very different crypto assets.
Launched in July 2015, Ethereum is a decentralized open software platform that not only supports its own crypto asset, ETH, but also allows you to develop and run smart contracts and distributed applications (dApps) without any third-party influence.
Ethereum also has its own programming language, which opens up numerous opportunities for developers who want to create and run special applications on the platform. Thus, although both Bitcoin and Ethereum offer a decentralized payment system, the main purpose of Ethereum is not a digital payment system, but a platform to facilitate the exchange of secure contracts and applications using its own currency.
Ether does not have a general limit on the number of coins that will eventually be in circulation, unlike Bitcoin. However, it limits the number of coins available from year to year. Another key difference is the speed of block creation. While BTC transactions can take more than ten minutes, Ether transactions are usually processed in seconds.
The many applications of Ethereum and its almost limitless potential made it an interesting investment prospect and allowed it to quickly gain a foothold in the already competitive cryptocurrency market. But what does all this background information mean for our 2021 price analysis?
As we’ll see, understanding the key differences between Ethereum and other cryptocurrencies, especially those with BTC, is vital if we want to predict how the coin might perform in the future. Although all cryptocurrencies will be affected in one way or another by a significant change in the value of Bitcoin, our goal here is to find other ways in which the price of Ether can change.
- History of the Ethereum price movement
Before starting our price analysis for the current year 2021, it would be wise to take a look at the historical price movement of the altcoin. By doing so, we can better identify past trends and predict how different market forces may affect the value of ETH in the future.
As is the case with most cryptocurrencies, Ether had a very small asking price when it first appeared on the market, with the asset being worth less than $ 1 in 2015. Over the next 18 months, the situation remained fairly modest for the emerging digital currency. So, when ETC reached a modest $ 10.00 by January 2017, it was at this time that the limitless potential of this new blockchain technology really became known, and prices soon soared. After a significant jump towards the end of 2017, ETH reached a record high of almost $ 1,400 in January 2018. However, the rest of 2018 was something of a roller coaster, and by the end of the year, the price of ETH had fallen to $ 85.
The situation remained fairly calm for more than a year after the highs of early 2018. Ethereum has struggled to overcome $ 250 for 18 months, despite many in the crypto space continuing to hail Ether as the altcoin that will one day displace Bitcoin from the top spot. After another bearish run in the summer of 2019, ETH ended the year trading at just $ 132.
Ethereum Price in 2020
Naturally, an important point for our analysis of Ethereum prices for 2021 is how well the coin has performed in recent months. After quite dismal results during 2019, ETH has slowly started moving towards 2020. However, investor sentiment seems to have returned to the summer, and by July prices soared above $ 250 and continued to rise until they reached around $475 in September.
Ether then fell to about $ 350, and rose at the end of the year, peaking at $ 615 in December. The sharp jump at the end of the year is likely due to the long-awaited launch of Ethereum 2.0, and it is this overhaul that makes ETH such an important cryptocurrency to watch out for in 2021.
Experts ‘ forecasts for Ethereum in 2021
To form a balanced price analysis of Ether for 2021, it is necessary to collect information from several areas. Naturally, studying the opinions and forecasts of leading experts in the field of cryptocurrencies is a good way to assess the attitude of the industry to the asset, and the market as a whole.
- Craig Russo
Craig Russo, founder of the Boston-based Peer startup behind SludgeFeed, believes that Ethereum’s ability to deploy decentralized applications and tokenize real assets ensures that it remains a popular platform, which will attract a lot of investor interest. “I see no reason why ETH will not return to all-time highs by 2021 if the project develops according to its plans and developers continue to develop the network, “he said, adding:”I believe that ETH / BTC may have already bottomed out and ETH / USD will start a new uptrend once Bitcoin volatility slows down”.
- Alex Saunders
Meanwhile, Nugget’s News CEO Alex Saunders is also very optimistic about the potential of Ethereum, and is another expert predicting a high probability that ETH will reach a new all-time high in a year or even less.
- Michael van de Poppe
Cointelegraph Markets analyst Mikael van de Poppe also expects the next bullish rise in ETH and believes that the future of the altcoin is likely to be bright, and the next surge in value will exceed the previous record. While he did not offer a full price analysis for 2021, he took to Twitter to predict there that “the next ATH cycle for ETH will probably be $ 10-20, 000”.
A crypto trader and analyst known as SalsaTekile, who gained notoriety after turning a couple thousand dollars into 100,000 in a summer trading competition, has expressed confidence in Ethereum by adding it to his portfolio as he believes the asset will surpass Bitcoin in 2021. “I owned a small amount of ETH, but I corrected this misunderstanding, and bought it again, with a trading profit. I think it will surpass the BTC next year, ” he tweeted. While it has yet to conduct an in-depth analysis, the addition of salsatekile ETH to its portfolio should be seen as a positive sign.
- Ryan Selkis
At the time of writing, Messari’s Ryan Selkis did not offer an analysis of Ethereum prices for 2021, but he did offer his own opinion on why Ethereum might do well in the coming year.
In his report on what can be expected from the cryptocurrency space in the coming year, he said: “Bitcoin may be calculated in the long term due to its macro positioning, but it is Ethereum that has become the most important cryptocurrency platform, and can power a completely new financial system and a more open and sustainable Internet”.
Factors affecting the price of Ethereum
- Ethereum 2.0
Ethereum 2.0 is a major upgrade to the old public Ethereum network, designed to speed up the use of the blockchain, and eliminate existing performance limitations.
One of the most significant changes is the transition from the Proof of Work architecture to the implementation of the Proof of Stake consensus mechanism. The update started at the end of 2020.
It has been predicted that ETH 2.0 will increase throughput by more than 1,000 times, which will reduce the high fees associated with Ethereum transactions that currently haunt the coin. Naturally, this event is a key factor in the analysis, and if it proves successful, prices could skyrocket in 2021.
Ether, like all altcoins, will always be tied to Bitcoin in some way. First, the BTC is the most well-known and (comparatively) a stable cryptocurrency, and therefore analysts often use it as an indicator of investors ‘ appetite for the digital currency in general.
Secondly, many exchanges require the exchange of BTC for other coins, which makes Bitcoin something of a reserve cryptocurrency. Hence, for the foreseeable future, the price of BTC will reflect to some extent the broader cryptocurrency market.
- Rules regarding cryptocurrencies
Cryptocurrency and the idea of decentralized payments are relatively new concepts, so many countries are still trying to figure out whether and how to regulate them.
In the UK, for example, the FCA recently banned the sale of derivatives and exchange-traded notes (ETNs) that reference certain types of crypto assets to retail consumers. In addition to this, new EU regulations are also coming, which could have a huge effect on all cryptocurrency prices. Of course, regulation can be good or bad for the markets, but any experienced crypto investor should keep a close eye on potential changes.
- Customer demand
Everyone knows that the value of an asset is determined by supply and demand. Ethereum doesn’t have an upper limit like Bitcoin, and this has historically been a problem for altcoins. However, the emergence of Eth 2.0, and the transition to the Proof of Stake protocol, is projected to reduce the current inflation rate from 10% to 0.5-2% per year.
In terms of demand, 2021 will be an interesting year, as during 2020 there was a surge of interest from traditional investment institutions and a record number of new cryptocurrency wallets were opened. Naturally, this is of great interest for any analysis of Ethereum prices for 2021 and may well mean that demand in the crypto sphere will grow next year.
In 2020, Ethereum had something of a shaky year. The COVID-19 pandemic not only plunged the financial world into chaos, but the delay with Ethereum 2.0 also increased investor uncertainty and led to a drop in prices. However, as our analysis showed, the sentiment in the industry seems to have changed, and ETH is expected to perform well in the coming years.
Of course, it is too early to say how the launch of Eth 2.0 will affect the value of ETH in the next few years, as the upgrade will take place in stages. However, if we assume that the first stage will be successful, we may well see that the price of Ether will start to rise, as it is today – $ 1,147, and this will continue throughout the year.
The next twelve months are positioned as an important transition period for the cryptocurrency, and our analysis of Ether shows that the popular altcoin has the necessary technical credentials to become one of the best investments in the industry.