Ethereum (ETH -2.27%) has followed the same path as the general cryptocurrency market this year. And that's downward. The general market fell to about $800 billion in value from more than $3 trillion a year ago. Ethereum, the world's second-biggest cryptocurrency player, is heading for a 68% annual decline.
This has been tough on Ethereum investors. But the good news is this performance isn't a reflection of the top cryptocurrency's potential. In market downturns, investors tend to favor the safest investments -- and flee riskier ones such as crypto. Now the question is whether things will turn around for Ethereum in 2023. And could this cryptocurrency leader make you a fortune? Let's find out.
Performance over time
Ethereum's performance these days might be getting you down. But, over time, the cryptocurrency has climbed -- and after every difficult period, it's gone on to gain further.
Ethereum Price data by YCharts
This probably has to do with this cryptocurrency's strength in many areas. Ethereum is a blockchain with a native token called Ether. The blockchain has become a leader in decentralized applications (dApps) and non-fungible tokens (NFTs). Ethereum hosts nearly 3,000 dApps in areas from finance to technology and gaming.
Its position in finance could be particularly significant down the road. Decentralized finance has the potential to change the way the world does business. For instance, crypto holders can lend or borrow money or make payments without an intermediary.
As for NFTs, Ethereum is the biggest blockchain by sales volume over time and in recent days, according to CryptoSlam.
Today, Ethereum is actually in a better position to climb than ever before. That's because the crypto player is in the middle of an upgrade project that's eliminating its biggest problems. I'm talking about energy use, slow speed, and high cost.
The shift to proof of stake
Ethereum completed "the merge" phase this fall. The merge transitioned Ethereum to the proof-of-stake validation method from the energy-intensive proof of work. This cut Ethereum's energy use by more than 99%. Proof of work requires complex computations. Proof of stake doesn't.
Proof of stake also doesn't involve rewarding miners with tokens. This, along with an Ethereum fee-burning mechanism, should progressively reduce token supply. And that should support a higher price over time.
As for speed and cost, Ethereum's sharding upgrade -- set for 2023 -- should do the trick. The idea of sharding is to split up a workload horizontally across a database. This reduces congestion, increases speed, and decreases transaction fees. Sharding could open up the door to 100,000 transactions per second.
Now, let's get back to our question: Could Ethereum make you a fortune in 2023? No one can predict the timing of the next wave of gains. After a tough year like this one, though, it's possible Ethereum's positive developments and market strength will result in a rally in 2023.
Considering the strengths I've mentioned above, Ethereum has what it takes to return to the high reached last year. If that happens, you could turn an investment of $1,000 today into about $4,000. Ethereum also has what it takes to climb beyond that over time if cryptocurrency truly takes off.
Of course, it's impossible to guarantee any of this. And the fact that crypto is a new industry makes it particularly risky. So don't invest more than you can afford to lose.
If you are an aggressive investor, though, and aim to identify tomorrow's crypto winners, Ethereum is a solid choice. It could help build your fortune in 2023 -- and beyond.
