It’s not like all crypto tokens are valuable only as a means of exchanging cryptocurrency. Some are more valuable because they have secondary markets and interconnected assets.
Ethereum, the second-largest cryptocurrency by market capitalisation and the most actively traded in 2021, is now underperforming the rest of the crypto market. It’s still down 33% from its 2021 high, despite a 32 per cent increase in the last few weeks. We’ll have to wait and see if this is just a blip on the radar or the start of a new trend.
The latest increase closely resembles Bitcoin’s ascent, indicating that it is most likely a market-driven recovery following a market-driven decline. There are also more variables in the equation now. So, even if Ethereum has the grit to break free from the market’s downward and upward trend, it could be dragged down by the broader market if it encounters headwinds again.
Nevertheless, even if Ethereum maintains its current velocity, how far will it be able to go? And should you make a short or long-term investment in this crypto token?
Potential in the Short and Long Term
When all Ethereum is predicted to reach is its previous top in 2021, buying now will not even return your money. And, at least in the medium run, the increase it does guarantee (about 50%) may not be worth the gamble. If you plan to retain Ethereum in your investment for the long run, a later, more robust growth spurt or surge might be quite beneficial.
For instance, if you predict this cryptocurrency to rise to US$10,000 within the next 3 to 5 years, you will have gained more than 300 per cent on your investment if you acquire it now, which may seem overly optimistic. Still, it’s a sliver of the cryptocurrency’s recent increase and less than a sixth of the price of Bitcoin, which Ethereum is quickly catching up to in terms of popularity. Understanding the fundamentals of Ethereum is easier through crypto platforms like Bitcoin Era.
The NFT market is increasing as the crypto market experiences swings. Because the majority of these NFTs are exchanged on Ethereum’s blockchain, the dependent market activity may stimulate more demand for the native coin than for other cryptocurrencies.
The Dangers
The same NFTs that can propel Ethereum to higher places, as well as a slew of others ranging from digital and markets that rely on Ethereum (along with the destiny of smart contracts), can drag it down. Ethereum is generating a lot of buzzes right now, possibly even more than Bitcoin, which is proving exceedingly challenging to mine and experiencing reaction in a number of places, including China.
However, if Bitcoin goes bankrupt and falls any further than it did in 2021, the potential effects on Ethereum would be severe, and investors may begin to dump their tokens before the market becomes meaningless.
Is it possible that Ethereum will reach $10,000 in 2022?
The second-largest coin by market capitalisation is Ethereum (ETH), which has a market capitalisation of more than $314 billion as of this publication. In recent months, there has been a lot of conversation and media coverage about numerous cryptocurrencies that were labelled “Ethereum killers” by major players in the crypto smart contract field.
Those “killers” are anticipated to jointly outperform ETH because they can process more transactions than the Ethereum network and at a relatively lower price than the daily estimated Ethereum transaction cost of around $30.
However, rumours of Ethereum’s demise are exaggerated, and ETH could be a surprise breakout this year.
This year, the ETH project is ideally placed to capitalise on these trends. It’s presently trading at $2,635, down 46% from its all-time high, and it could easily double or triple in value this year. It achieved a 450 per cent return last year, so considering its use cases and promising future, it’s likely doable. However, given the present macro dynamics in the industry and the looming threat of crypto legislation, surpassing $10,000 per coin is doubtful.
The Takeaway
Trading in Ethereum or tech firms with considerable exposure to this currency and holding it for the long term still looks sensible, but not at the market valuation. You might also want to delay until the next slump to buy if the present growth run is just a phase and the coin will undergo more fall before recovering for sure.
