This may sound far-fetched but Ethereum hitting $20k by 2022 is within the realms of possibility. A few years back, no one would have imagined that Ethereum could be trading at over $4000, yet it hit $4300 in April and then $4800 in November 2021. Anything is possible in a highly speculative market like crypto, more so for top cryptocurrencies like Bitcoin and Ethereum.
However, besides the speculative aspect of the market, Ethereum has so much going for it, that hitting $20,000 within the next year is a possibility.
Ethereum is in the process of a shift towards Ethereum 2.0, and so far it has made a lot of progress towards this transition. For instance, in August, Ethereum had the London hard fork, which helped deal with the problem of high gas prices.
Several benefits came with the London fork that has contributed to Ethereum’s recent price rally.
For starters, the fork has rationalized gas prices. In the past, Ethereum gas prices were determined through a bidding system. Those who paid the highest gas fees were the ones who got their transactions processed first. This led to a situation where gas prices were shooting to unsustainable levels, especially in peak demand.
Things changed with the London fork, and now it is an algorithm that determines the gas prices. The algorithm takes the aggregate demand and uses that to determine the gas prices at any given time. This has helped reduce gas prices by a huge margin.
The long-term implications of low gas prices on Ethereum are many. The biggest one is that it will help Ethereum cement its position as the number one platform blockchain in the market.
In a bid to win a slice of the platform blockchain market, a lot of projects have come up, all using Ethereum’s gas prices as a key selling point. Now that Ethereum gas prices are coming down, such projects may no longer have a basis to compete. That’s because other than fees, none of them can match Ethereum’s network effect. By extension, this means none of them can match Ethereum in terms of security and decentralization.
By making Ethereum attractive to developers, the London fork set the stage for the growth of Ether demand going into the future. This makes it is easy for Ethereum to possibly hit $20k, or more, in the next one year or thereabout.
One key factor that could trigger such a rally is DeFi. The DeFi space has experienced exponential growth in the last two years. Ethereum has the majority of this market. With regulations getting better, and Ethereum gas prices more stable, Ethereum demand for DeFi purposes could grow quite significantly over the next year, and for many years to come.
Another aspect of the London fork that could be a game-changer for Ethereum is the Ether burn. The fork introduced a feature whereby Ether generated during transactions is burned instead of being distributed to miners. This has effectively made Ethereum deflationary.
In fact, it is the reason why Ethereum has been one of the best performing cryptocurrencies since August last year. While most cryptocurrencies have been sluggish for the last 2-months, Ethereum has come close to retesting its all-time highs, and momentum is growing.
With its supply shrinking relative to its demand, Ethereum can only go higher. The increased growth of DeFi will most likely push this crypto to $20k or even more in the foreseeable future.
Institutions have been the key drivers of crypto prices since 2020. Going forward, institutions will play an even bigger role in the growth of cryptos. This is already evident in the excitement that has hit Bitcoin after a Bitcoin ETF was approved in the U.S.
The top crypto had been trading sideways for months, but news of this ETF has seen it come close to retesting its all-time highs. It is an indicator of how important institutional money is in this market.
This is also good news for Ethereum because it is the only altcoin that the majority of institutional money seems to be interested in at the moment. There are a lot of factors that could keep drawing institutional money towards Ethereum going forward.
One of the most important ones is that Ethereum is becoming more environmentally friendly. The world population is increasingly conscious of the impact of human activities on the environment. By extension, this means the stakeholders of major investment funds have to be conscious of where they put their money.
Over the last few years, cryptocurrencies have got a bad rap for consuming too much power. In fact, this was one of the reasons that China used to justify its total ban on Bitcoin mining.
Ethereum has shed this negative tag with its move from a Proof-of-Work blockchain, to Proof-of-Stake. Once the transition is complete, Ethereum will consume only a fraction (less than a percentage) of the energy it was consuming as a PoW blockchain.
This, combined with its growing adoption, makes it a perfect cryptocurrency for institutional money. Such adoption, coupled with the now deflationary nature of Ethereum, could easily push it to $20k or more by the end of 2022.
The Bitcoin Factor
Individual altcoin fundamentals are a huge factor in their price gains or losses. However, the most significant factor that overrides all others is Bitcoin. Bitcoin has always been the number one market driver, and whenever it moves, the market follows.
From 2020 to 2021, Bitcoin rallied from around $10k to $68k. It uplifted the whole market with it and saw Ethereum test a high of $4800. With institutional money set to flow into Bitcoin, even more, thanks to the growing number of ETFs, Bitcoin could easily trade at over $100k by 2022.
In such a scenario, the rally it would trigger could easily see Ethereum trade at over $20,000. This makes Ethereum one of the best crypto investments today.
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