It's hard to believe, but just six months ago, Ethereum (ETH 0.73%) was a $5,000 cryptocurrency. Today, it trades for just half that price. And, given the recent sell-off in the crypto market, there might be a further drop ahead.
Yet, despite this, some crypto traders seem to think that Ethereum can hit $10,000 this year. So, are they right?
The case for Ethereum to hit $10,000
There are two ways to arrive at a potential price target of $10,000. One is by looking at technical indicators related to overall trading volume, liquidity, and the pattern of accumulation by large crypto investors. This would seem to suggest that demand is building for Ethereum. The higher the demand, the higher the price should go.
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The other approach is by looking at key metrics related to the core Ethereum blockchain. Here, too, there are positive signals. Daily transaction volume on the Ethereum blockchain is up 20% month to month, and the number of daily active addresses is up 50%. So, momentum does appear to be building for the digital coin.
And keep in mind: Ethereum traded for $5,000 just six months ago. So a doubling in price to $10,000 would not be so extraordinary when viewed from this perspective. There have been years when it has doubled and even tripled in value.
What do prediction markets think?
But investors should keep their expectations in check. Based on data from prediction markets, where traders use contracts to bet on the outcomes of certain events, few of them seem to think the crypto can reclaim its all-time high of $5,000 this year. Many are dubious that it could even make it back to the $4,000 level.
CRYPTO: ETH
Key Data Points
For example, consider data from the Kalshi prediction-market platform. There, only 31% of traders give Ethereum a chance of hitting the $4,000 price level, and only a 17% chance of hitting $5,000.
The chances get slimmer still, the higher in price you go. For example, there's only a 10% possibility of hitting the $6,000 price level. And Kalshi doesn't even list $10,000 as a potential prediction-market contract.
So why are prediction markets down on Ethereum? The easy answer is that Bitcoin is in a funk right now, and there's no way that Ethereum can march higher without support from Bitcoin. During the past 12 months, there's a 0.74 correlation between the two cryptocurrencies. That suggests that Bitcoin and Ethereum tend to march in lockstep, both on the way up and the way down.
Key takeaways
Taking a quick peek at prediction markets can help people become better investors. It's much easier to separate the signal from the noise once you dig into the data. It's far too easy for traders, investors, and analysts to toss around pie-in-the-sky price targets that have no basis in reality.
With that in mind, I'm maintaining a cautious stance with the crypto right now. Until the big Ethereum treasury companies really start to ramp up their purchases, I'm staying on the sidelines.
