Even with thorough analysis, the prediction of an ETH price in the long term is, at best, a guessing game.  Several factors go into any projection, all of which could drastically affect the outcome, and therefore, it is much more likened to a prophecy than science. 

At the beginning of the year, a price of $2,000 was considered good performance and $4,000 by year-end was deemed to be optimistic.   In August, ETH sits at nearly $3,200, and $4,000 was surpassed in May.  Even with abundant info, crypto prices have been notoriously difficult to predict; human FOMO psychology influencing supply and demand has proven to make this process even more difficult.  That said, this article will discuss the key factors that affect the ETH price and, through these, attempt to provide our best guess as to which way the price may be going, combined with a conglomeration of educated guesses. 

Highly Attractive

At writing (Mid-August 2021), Ethereum is the second-largest crypto by market cap at $370.671B.  It is the choice for smart contracts, and with its ERC20 standard is the network used for several other coins.  With the recent London hard fork and the in-process ETH2.0 upgrade switching Ethereum to Proof of Stake from Proof of Work consensus mechanism, Ethereum will continue to be a driving force in the crypto space as we advance. 

Inflation/Deflation (Burn Rate)

During the COVID 19 pandemic, the USD has been printed at a faster rate than ever seen before. 

If actual inflation exceeds the expected USD inflation, which is in the range of 1.6 to 2.8% for 2021 and an average of 2.3% through 2024, an ETH of $6,000 is easily possible.  Other Fiat currencies like the Yen, Euro, and Yuan and currencies of less stable economies could have high inflation or, in the case of smaller nations, chose to make cryptos a legal tender.

Ethereum is also likely to have deflation as an attribute for the foreseeable future.  With the London Hard fork, the burning of ETH has begun, and in the first ten days, there have been 45,834.98 ETH burned with a net 89,661.58 issued, still increasing, but in 2022 the net ETH issued is expected to be overtaken by burning.  The result will be the opposite of fiat currency’s supply that is always increasing a process that leads to inflation, but rather a decreasing supply and deflation that comes with it.

Courtesy of ultrasound.money

This rate of deflation for ETH would also increase its price relative to the dollar.  The two main factors that would affect this deflation rate are the amount of staked ETH and the gas price. 

The Eight Major Factors

Boiling the previous sections down, we come up with eight influencing factors, all of which can have a major effect on the ETH price.  They are as follows:

• Ethereum 2.0 deployment speed– if it is held up with issues, then the price will go down
• Burn Rate- the higher the burn rate, which is determined by the gas price, the faster ETH’s deflation will occur, and in turn, an increased ETH price compared to the dollar. For every 10 Gwei gas price 1000 ETH are burned/day; at a gas price of 20Gwei the burn is 2.0K a day, 30Gwei= 3000/day
• Total Staked Ethereum- The more ETH that is staked, the higher the issuance of eth to the stakers. For example, if 10M ETH are staked, 1.4K ETH will be issued each day, if 20M ETH are staked then 2.0K ETH are issued daily, and with 30M=2.5KETH/day.  The issued ETH counteracts the burn rate’s effects of deflation.
• Fiat currency inflation- citizens and governments may choose ETH over their local currency due to fiat’s hyperinflation potential
• Governmental regulations and their cryptos- moves against proof of stake by the US, moves against mining and trading by governments and creation of government cryptos like an E-dollar, e-euro, or e-yuan
• Economic/global Conditions (including Covid recovery)-rate of vaccine vs Delta variant
• Ethereum Foundation changes– continued increases in the functionality and speed lowering transaction costs price is up, an attack against the system price goes down
• Other altcoins– another has a killer app taking over the DeFi space

Any of these factors could change the price of ETH entirely, thus making a prediction very difficult.  We, therefore, take a fairly simplistic approach to pricing.  Using the 50-day moving average increase from an October 14^th 2020 $325 till our August 17^th $2353 average.  This is an increase of $2028 in 300 days or approximately and $200 a month and $2467 a year.

ETH/USD price with 50-day moving average

Graph Courtesy of Barchart.com

Since we have seen a significant run-up in the past year, we can reduce this rate by about 5% to get an expected and by 10% to get a more conservative estimate. Coming up with the following:

While this year is likely to exceed these numbers, even surpassing its $4,375 high, we believe that the actual numbers will eventually return to the mean, and the longer term is more likely. 

As a single entity, the accuracy of making a long-term valuation is, at best, a shot in the dark.  However, the statistician Francis Galton showed that a crowd’s wisdom indicates that the larger the number of predictions, the more accurate the average becomes to reality.  In July, Finder brought together a panel of 42 crypto experts and academics who predicted that by year-end, Ethereum could be worth $4,596, and in the longer term, $17,810 by 2025’s end, and $71,763 by the end of 2030.

It should be noted that there are outliers that do change these numbers, most notably the $1,000,000 in 2030 prediction by one “expert.” When we look at the median, the $71K prediction for 2030 does drop to $20,000, not far from the prediction of $21,200 that we make.

It should also be noted that 67.5% of the panel also believe that Ethereum’s market cap would eventually surpass that of Bitcoin. 

And all but 7.5% think that the number of transactions on the Ethereum network will surpass that of Bitcoin. 

Summary

The price of ETH will likely be a rollercoaster for the foreseeable future.  Several factors can push the price up or down, and how the psychology of humans will react to factor changes will exacerbate these movements.  As we have seen, the consensus of experts says that ETH will continue to climb, certainly faster than the stock market rate.  The current uses of ETH in its smart contract form are showing to be quite useful, but some uses, like ICOs, NFTs, and other DeFi, may prove to be novelties and unlikely to be the ‘killer apps’ needed to bring smart contracts mainstream.  Suppose a group can create security tokens that run on the Ethereum network and replace trade settlement of legacy systems while also gaining the legal acceptance needed to do so.  Or, through an ever-increasing use of deApps, the web becomes further decentralized, cost-effectively running on the Ethereum network.  In either case, Ethereum will have a very bright future. 

Disclaimer:  The author of this text, Jean Chalopin, is a global business leader with a background encompassing banking, biotech, and entertainment.  Mr. Chalopin is Chairman of Deltec International Group, deltecbankstag.wpengine.com.

The co-author of this text, Robin Trehan, has a Bachelor’s degree in Economics, a Master’s in International Business and Finance, and an MBA in Electronic Business.  Mr. Trehan is a Senior VP at Deltec International Group, deltecbankstag.wpengine.com.

 The views, thoughts, and opinions expressed in this text are solely the views of the authors, and do not necessarily reflect those of Deltec International Group, its subsidiaries, and/or its employees.