The years since the launch of the first cryptocurrency appear to have broken down the mistrust of many skeptics. Given its sustained growth over the years, cynics no longer see the market as a digital casino.
Cryptocurrencies like Ethereum (ETH) continue to be appealing investment choices globally. Although they experienced a steep crash during the fourth quarter of last year, their massive demand helped them cope with economic and political uncertainties.
Today, the price of a single ETH is back up at more than $3,000.
Let us figure out what is in store for its investors with this current trend. Does it still promise wealth and security amidst the emergence of more cryptocurrencies?
Ethereum During the Pandemic
As surprising as it may sound, the COVID-19 pandemic served as Ethereum’s primary growth driver. ETH remains in the top two in the crypto market.
However, its potential could be as much as the Bitcoin (BTC).
In only a year, the price of ETH rose by more than five times. From $131 on January 1, 2020, it ended the year at $737. The empirical study proved it was logical to have a 2% daily increase in ETH.
The uptrend persisted in the following year as the price of an ETH broke $2,000. In November, it set a new all-time high at $4,812. But for the next two months, it went into a downward spiral and did not meet the projection of the Economy Watch.
What Caused its Setbacks
Several factors caused the ETH’s steep decrease. For instance, the Federal Reserve’s (Fed) declaration of its plan to raise interest rates.
The inflation rate climbed up to 7% in only a year, the highest in almost forty years.
Housing, food, and transportation had the highest increases within the Consumer Price Index. The Fed has to increase the rates to encourage savings and lower aggregate demand.
Managing the general price level and stabilizing the economic rebound is crucial.
Another factor is the current political turmoil in Kazakhstan. The protests in the country drove a surge in demand for electricity, causing shortages and shutdowns.
As one of the vital mining hubs worldwide, this unrest directly affected BTC.
Since BTC has the largest market share, it reflected on other cryptos. As a result, miners transferred cryptos to their transaction accounts to protect their earnings.
It came as no surprise then that it intensified market headwinds that might persist for the following weeks.
Lastly, the emergence of newer cryptocurrencies appears to threaten ETH. Their lower prices and other features are enticing to other investors.
What’s in Store for the ETH Market
Given these factors, the market must find more ways to rise above these challenges. Policymakers will be integral in helping it stay afloat.
Government support is a powerful tool for its sustained rebound and growth.
In Singapore, the third-largest ETH market, government agencies accept Ethereum contracts as payments. Other ASEAN members are planning to do the same.
This may extend to other regions, thus stimulating its growth.
The rise in the e-commerce industry and digital transformation may also provide more earnings. As e-payment apps thrive, cryptos may penetrate businesses further.
For instance, PayPal, BitPay, and Coinbase Commerce now accept ETH.
Since more companies and investment entities are now embracing cryptos, groups like decentralized autonomous organizations (DAOs) are flourishing.
Since most DAOs are into Ethereum, the market may find more growth opportunities.
Moreover, the potential of other regions to become new crypto hubs can foster its growth further. For example, Oceania (mainly Australia) now has a million crypto users.
There are also increased capital inflows in South Africa and Nigeria, making them potential crypto hubs. The increased popularity of ETH can help it compete with newer cryptocurrencies.
But, what gives ETH an advantage over other cryptocurrencies is its network effect. It is evident in its demand in DAOs and their smart contracts.
Given the continued transformation in the fintech industry, its network effect may be the best option in keeping an eye on all financial transactions.
What can ETH investors do?
The volatility of cryptocurrencies like ETH shows that ignoring their highs and lows can be logical, as their highs don’t translate to lower unpredictability.
You would only have to look at what happened in the fourth quarter of last year to know this. However, monitoring the trends can give you a clue about its direction.
Right now, ETH is back at over $3,000. We cannot tell yet if it is bound for a steady rise. Even so, the continued uptrend for the last two weeks may show that it is starting to cope with the more recent changes.
Also, ETH’s price is lower than last year’s trend in the same period. This makes it cheaper and safer as an investment choice. Investors can tolerate it better if it takes another fall.
With the improving market environment, ETH’s chances to recover are high. The Economy Watch adheres to its projection that its price will reach $6,500 this year.
Other sources show similar estimations at $6,600.
Investors can treat cryptocurrency like a long-term investment where all they must do is place it and leave it.
Given the growth catalysts in the ETH market, it has more avenues to increase in the coming years.
