The year started off great for Ethereum (ETH +3.35%), which soared from a price of $2,350 in January to more than $4,000 by mid-March. But ever since then, it's been a very disappointing year for investors in the cryptocurrency. The price of Ethereum seems to keep falling, and is now trading at about $2,500 as we head into September.
So where does Ethereum go from here? Although there are a lot of naysayers out there, convinced that Ethereum still has further to fall before reaching market equilibrium, my prediction is that the next big move for this crypto will be a return to the $4,000 level. Here's why.
What's up with the Ethereum ETFs?
The starting point for any discussion about Ethereum's price has to be the new spot Ethereum exchange-traded funds (ETFs), which officially started trading on July 23. The current narrative is that they have been hugely disappointing. In fact, according to some estimates, cumulative outflows were running as high as $92 million per week during mid-August. Even the most popular of the new spot ETFs posted five straight days of outflows at one point.
Fair enough. But you have to admit that the timing of the product launch could not have come at a worse time. Remember: The crypto flash crash occurred during the first week of August. So the new ETFs had less than two weeks to gain traction in the market.
During the sudden price plunge, Ethereum lost nearly 15% in a span of just minutes. So are you really surprised that investors weren't lining up to put more money into those ETFs?
CRYPTO: ETH
Key Data Points
I'm a glass-half-full type of investor when it comes to the spot Ethereum ETFs. I think investor confidence in crypto will recover soon, and that will help to push up the price of Ethereum. It then becomes a virtuous circle, as a rising Ethereum price makes the spot Ethereum ETFs look more attractive, which leads to even more money flowing into the spot ETFs, which leads to... well, you get the idea. A constant inflow of new money will send Ethereum's price back to the $4,000 level.
Is Ethereum still the market leader?
Another factor that has been working against Ethereum since March is the growing narrative that a bunch of upstart rivals, led by Solana (SOL +2.85%), are starting to eat Ethereum's lunch. As Ethereum loses more and more market share to these rivals, it should affect the future valuation of Ethereum, right?
For example, take decentralized finance (DeFi), where Ethereum has historically been dominant, with nearly 60% of the market. But that figure seems to be eroding as Solana flexes its muscles. One trend that has crypto investors buzzing is the amount of trading activity that is now happening on Solana's decentralized cryptocurrency exchanges. For the first time ever, Solana seems to be outpacing Ethereum in terms of overall trading volume, and that's certainly a cause for concern.
Image source: Getty Images.
But from my perspective, this phenomenon is largely the result of meme-coin mania. The new popular place to trade meme coins is on Solana's exchanges, and that trading activity has artificially inflated the numbers. People are trading thousands of new meme coins on a daily basis, all in the hopes of getting rich quick.
Once investors realize that the boost to Solana's numbers is largely the result of speculation around meme coins, the narrative around Ethereum should change. Case in point: The latest numbers from CoinShares show that institutional investors are pulling money out of Solana at a rapid pace. During the most recent reporting period, Solana outflows were $39 million. By way of contrast, $4.2 million flowed into Ethereum from these same "smart money" investors.
How likely is a return to the $4,000 price level?
Admittedly, it doesn't look good for Ethereum right now. If you take a look at the Polymarket crypto prediction market, it's possible to see how people view Ethereum's future price trajectory. Right now, speculation is that Ethereum is more likely to hit a price of $2,000 than a price of $4,000. Yikes!
But I'm going to disagree here. People are putting too much emphasis on Ethereum's recent performance during the past 30 days. Yes, the past month has been painful. But don't forget about the ETFs. And don't forget about Ethereum's long track record of being the dominant player in nearly every niche of the blockchain world.
Ethereum was a $4,000 crypto just six months ago. Has so much really changed between now and then?
