Ethereum (ETH) is the world’s second-largest cryptocurrency and has skyrocketed in value over the past few years. With decentralized finance (DeFi) and non-fungible tokens (NFTs) expanding at an incredible rate, Ethereum is very much still in the mix in the blockchain community. Investors and analysts are paying close attention to ETH’s price, anticipating that it will climb again in the near term. There are three main reasons that Ethereum’s price will climb even higher in the near term.
1. The Institutional Adoption and ETF Approvals
One of the reasons Ethereum’s price can increase is that more large institutions are adopting it. Large financial institutions, such as banks and asset managers, are increasingly interested in Ethereum due to its smart contract capabilities and massive ecosystem. If a spot Ethereum exchange-traded fund (ETF) is approved in the US, it would be a game-changer, as happened when Bitcoin’s ETF was approved and its price skyrocketed.
An Ethereum ETF would allow institutional investors to gain ETH exposure without direct ownership of the asset, thus making it more accessible to traditional finance participants more readily. This increased demand would drive genuine price appreciation. Industry commentators believe that an Ethereum ETF approval from the U.S. Securities and Exchange Commission (SEC) would arrive in 2024, further fueling bullish sentiment.
2. Ethereum 2.0 and Network Upgrades
Ethereum transitioned to Ethereum 2.0 in order to make the network perform better and scale more. The transition from a proof-of-work (PoW) to a proof-of-stake (PoS) system was completed with the Merge in 2022. The transition reduced energy consumption by over 99% and made Ethereum more environmentally friendly. The following major upgrade is referred to as the Ethereum Improvement Proposal (EIP)-4844 or Proto-Danksharding. It aims to reduce the transaction cost and improve the operation of the system. The upgrade will benefit more developers and users by reducing network busy times. As Ethereum continues to evolve, improved usability and efficiency may cause more people to use it, increasing its price.
3. Growth in DeFi, NFTs, and Layer-2 Solutions
Ethereum is the backbone for the DeFi and NFT industries, which have grown substantially over the past few years. DeFi websites allow lending, borrowing, and exchange without involving a central entity, while NFTs have changed the paradigm for digital content and art ownership. Growth in these industries works in favor of Ethereum by expanding the demand for its central currency, ETH.
Also, the emergence of Layer-2 solutions like Arbitrum, Optimism, and zkSync has reinforced Ethereum’s network. These Layer-2 solutions allow Ethereum to handle more transactions by running them off the main network but still protecting the main network. The more projects and developers use Layer-2 solutions, the cheaper and faster Ethereum will handle transactions, which will attract more investors and users.
Other Things to Consider:
- Regulatory Developments: Government policy and regulatory guidance towards Ethereum can influence its price behavior and usage.
- Macroeconomic Trends: Investor sentiment and Ethereum’s market performance can be influenced by interest rates, inflation, and global economic conditions.
