The start of 2023 has been buoyant for ethereum (ETH), with the digital asset firmly on track to record impressive gains.
After kicking off the new year at $1,192, ETH surged to a 90-day high of $1,674 on Jan. 21, representing an increase of 40.43% YTD (year-to-date). As of Jan. 30, ETH was trading at $1,572, down 6.09% from its 90-day peak.
Meanwhile, the crypto community is looking ahead to the Federal Reserve’s decision on interest rate hikes. It expects the regulator to retain its stringent measures to keep the economy in check.
However, most analysts anticipate a 25-basis points increase, which is lower than the December hike of 50-basis points. This hope for moderation has been supported by the slight decrease in overall inflation in December, bringing it down to 6.5% from the 7.1% registered in November.
As the Federal Reserve adjusts its policy tools to respond to economic trends, the crypto market will be monitoring any potential impact that this may have on digital assets such as Ethereum. With this in mind, how will ethereum settle throughout 2023? Let’s find out.
What affects the ethereum price
Ethereum has become the go-to platform for developers, entrepreneurs, and investors. Despite a few hiccups in its journey, the blockchain-based digital asset has demonstrated its resilience and versatility time and time again.
Boasting a wide range of capabilities, from decentralized finance (DeFi) to gaming and data storage, Ethereum has established itself as the platform of choice for many.
As the project progresses, various vital themes and questions will heavily influence its path. From scalability issues to user adoption, what will be the defining factors determining Ethereum’s future?
Ethereum Shanghai upgrade
Ethereum is ushering in a new era with the impending launch of the Shanghai upgrade (EIP-4895).
After their September 2022 upgrade, dubbed The Merge, Ethereum transitioned from the traditional proof-of-work consensus mechanism to a proof-of-stake (PoS) one, allowing users to stake 32 ETH to become validators. This transition made waves in the crypto market, as users had to lock their funds indefinitely to become validators.
But the Shanghai upgrade is set to change that, allowing users to withdraw their funds as validators as early as March 2023. The upcoming fork has sparked a lot of interest in the crypto community, as users wonder what effect this change will have on ETH’s price.
According to Staking Rewards, 14.14% of all ETH tokens are currently staked, and those owners now have the power to withdraw and sell their holdings.
On the other hand, the improved liquidity of ETH staking may lead to increased demand for ETH due to the improved staking conditions and the ability to stake directly with Ethereum. This could cause ETH’s price to go up due to the improved market equilibrium.
An official launch date for the Shanghai upgrade has not yet been announced, but Ethereum developers have agreed on a March 2023 timeline. They anticipate launching a public test network towards the end of February 2023.
Until then, the crypto market can only speculate on the upgrade’s impact on Ethereum and its price.
Fight against scalability: proto-danksharding
The Ethereum network has been no stranger to scalability woes, with skyrocketing gas fees and other unfavorable user conditions becoming increasingly commonplace.
As the adoption of the network grows, so do its troubles with scalability, along with the added complexity of maximum extractable value (M.E.V.), allowing validators to earn extra sums of money.
These issues can be solved with sharding. Sharding involves splitting up a blockchain into smaller ‘shards’ and has been viewed as a possible way to ease the scalability woes currently facing the blockchain networks.
Lately, danksharding, which takes a rollup-centric approach, has garnered much attention as a possible solution to Ethereum’s scalability issues. However, it is not yet ready to be adopted, as the Ethereum network is not ready for such a sharding design.
In response, EIP-4844, known as proto-danksharding, has been put forth, which seeks to implement the fundamentals of danksharding while laying the groundwork for its implementation.
Crucial to this is introducing a new transaction type, “blob-carrying transactions.” These blobs can contain up to 1 M.B. of data, thereby reducing the burden on both validators and clients in terms of bandwidth.
Although the scalability gains of proto-danksharding are modest, it remains an important first step in tackling the scalability issues of the Ethereum network.
Rising TVL levels
As the DeFi market continues to expand and mature, a metric commonly used to measure its success is total value locked (TVL).
TVL indicates the trust people have in these protocols and helps investors, traders, and developers better evaluate the health of the DeFi market.
As of Jan. 31, according to DeFi LIama, ethereum’s TVL totaled $28.2 billion, up from $23.11 billion on Jan.1, representing a 22.26% increase. This marks an essential shift in the market’s trajectory, as ethereum has continuously declined TVL since April 2022.
DeFi’s increasing TVL is a sign of its growth and could lead to further advancements in the industry. Hence, this increase in TVL indicates rising confidence in the Ethereum network and could yield significant rewards for the network in the near future.
What is ethereum price prediction for 2023?
As of Jan. 31, various price predictions for Ethereum have been circulating, with many analysts suggesting an extension of the prevailing bull market.
CoinCodex’s short-term ETH price prediction suggested a climb to $2,082 by Feb.15 and up to $2,174 by Feb. 20.
In the long-term, Gov. Capital provided an Ethereum price prediction for 2023, forecasting a surge to $2,761 by the end of the year before the price could reach nearly $5,261 by 2024.
It is important to note that price predictions are often wrong, and long-term crypto prognoses are typically made by algorithms that can change instantly. Hence, always conduct your own due diligence before making any investment decision.
The road ahead for Ethereum
As we look to Ethereum’s future in 2023, it is clear that the platform is set to experience tremendous growth.
Emerging technologies such as proto-danksharding and the upcoming Shanghai upgrade have bolstered the platform’s prospects as a leading blockchain platform, with investors seeking to benefit from its use case, reputation, and market positioning.
Moreover, in 2023, investors may be looking to move away from risky, volatile assets and instead embrace more secure investments.
According to blockchain research firm WuBlockchain, there is a potential for a wave of market hot spots in the second and fourth quarters of this year, providing no “adverse black swan events or external macro factors” get in the way.
This could mean a big upward trend for the market and investors shifting their money from speculative tokens to more established coins and assets. One such asset that could benefit from this trend is ethereum. Ethereum’s strong market positioning, use case, and reputation could increase its user base and price in 2023.
Source: https://crypto.news/ethereum-price-prediction/