2021 has certainly been the year of cryptocurrency with Ethereum, Bitcoin, Dogecoin, and even Shiba Inu Coin reaching new all time highs. Many in the cryptocurrency industry have begun throwing out crazy high numbers for what Ethereum will cost in 2022. This is usually the case when cryptocurrency hits a new all time high. The inverse is also true when cryptocurrency hits an all time low.
With that in mind, this article will examine the possibility of Ethereum hitting $25k in 2022. In short, we find it unlikely to occur, but certainly within the realm of possibility because Ethereum has so many great things in the pipeline.
The Case for $25,000 ETH in 2022
As we just mentioned, we find it unlikely that ETH will reach $25,000 in 2022. That would be over a ~500% increase from the current price of ~$4,000.
It’s certainly possible for something like that to occur because it has occurred in the past with almost every type of cryptocurrency including Ethereum at the beginning of the year. The problem is that well-established, valuable cryptocurrencies have a more difficult time seeing high percentage growth like that.
Anyway, here is our case for why $25,000 in 2022 is not as unlikely as you might think.
Ethereum 2.0 and Sharding Will Arrive
The long awaited release of Ethereum 2.0 will occur at either the end of 2021 or beginning of 2022. It actually seems likely that it will get released in that timeframe because the testnet has already been released along with some staking options.
For those that don’t know, Ethereum 2.0 is a major upgrade to Ethereum that will see it change from a proof of work consensus model to a proof of stake consensus model.
This is huge news because proof of stake is generally considered more scalable (at the risk of more centralization) than a proof of work consensus model. Scalability means lower gas fees and faster transactions per second.
The gas fees would be somewhere around $0.00 and the transactions per second (TPS) could scale to ~100,000 TPS.
A major increase from the gas fees that range from 50 Gwei at the absolute lowest to an average of around 100 Gwei with spikes that range from 200 Gwei to 700 Gwei in extreme cases. The transactions per second on Ethereum are also low at 13 transactions per second.
The current gas fees translate to about $100 for the average Uniswap and OpenSea transaction.
It makes entering the NFT and DeFi space on Ethereum quite costly for those without much money.
Gas that is practically free and faster transaction times would greatly improve the usability of Ethereum. And that increase in usability could easily send the price of Ethereum to $25,000 in 2022.
Decentralized finance is a huge, some say the biggest, driver of the growth of Ethereum.
This is a reasonable assumption considering that Uniswap is always the #1 user of gas on Ethereum.
Not to mention that there is a total of $160 billion of total value locked on DeFi protocols on Ethereum.
That is saying a lot considering how expensive the fees are on Ethereum.
With that in mind, it’s fairly reasonable to assume that DeFi will see a large increase in TVL once the fees on Ethereum drop. A decent chunk of the TVL on other blockchains and layer 2s will likely move to Ethereum at that point.
A price surge in Ethereum will likely occur due to the increased demand for Ethereum to use on DeFi protocols.
NFTs are in a similar situation with the difference being that the NFT market tends to be negatively correlated to the price of Ethereum. When the price of Ethereum rises; the price of NFTs drop because people want to hold Ethereum.
Now, this problem will likely become more magnified with lower gas because selling NFTs will become much cheaper.
However, lower gas fees will open up the NFT market to a large swath of the population that cannot afford lower priced NFTs. It simply does not make much financial sense to purchase a $100 NFT and pay $100+ in gas fees and another $100 in gas fees to initialize the account on OpenSea.
The same applies to artists and musicians attempting to turn their work into NFTs. It’s a risky proposition at the moment because paying all that gas is expensive for something that probably will not work out because lower priced NFTs are not practical due to gas costing more than the NFT.
We will likely see a boom in the NFT marketplace when gas fees drop. NFTs are purchased with Ethereum, so that will add some buying pressure to Ethereum.
Don’t Get Your Hopes Up For $25,000 ETH in 2022
There are a lot of reasons that ETH could hit $25,000 in 2022.
The problem is that $25,000 ETH is a massive increase for a little over a year. This is a cryptocurrency and crazier things have happened (Dogecoin, Shiba Inu, etc.), but it’s a very large price gap to cover in a somewhat short amount of time.
A more reasonable prediction of the price of Ethereum is somewhere in the $10,000 price range. It’s about a 150% increase, which is more than possible for Ethereum.
The other thing we have not mentioned, but will mention now, is that bull runs in cryptocurrency are always short lived. Ethereum and Bitcoin have already experienced a bull run, so it is a very real possibility that the bull run ends in 2022.
With that in mind, the current bull run is a little different than previous bull runs because institutional money has entered the industry. Goldman Sachs and other banks have opened a DeFi desk, publicly traded companies like MicroStrategy and Tesla have invested billions into Bitcoin, and El Salvador has made Bitcoin legal tender.
Basically, the environment with this bull market is much more institutionally driven than previous bull runs that were mostly retail driven (with a few major whales at the top).
That sums it up for whether or not Ethereum will reach $25,000 in 2022. We find it unlikely that this price will be reached in 2022, it will be reached in the future, because that would require a huge amount of growth in a cryptocurrency that has already passed the exponential growth phase.
Growth at this point will likely be a slow adoption until it becomes mainstream.
With that out of the way, Ethereum still could hit $25,000 in 2022. Cryptocurrency is one of the most unpredictable markets in the world and has continued to experience unprecedented growth since its inception. You should probably temper your expectations for 2022 because even if it’s a good year, it likely won’t be a 500% year for Ethereum.