Ethereum, the second-largest cryptocurrency by market capitalization, had a remarkable year in 2021. Ether (ETH), the Ethereum blockchain’s native cryptocurrency, surged by more than 300% to be worth more than $4000 per token by December 2021, from roughly $700 on December 31, 2020.
Ethereum is a decentralized, open-source blockchain with smart contract capability created in 2013 by programmer Vitalik Buterin. It has since risen to the second-largest cryptocurrency in terms of market capitalization and price.
Several reasons have contributed to Ethereum’s popularity among investors. Indeed, how Ethereum differs from Bitcoin is one of the critical elements that has made it the ideal alternative to Bitcoin.
- Ethereum is a distributed ledger platform that companies can use to create new applications, whereas Bitcoin is just a digital currency. While both Bitcoin and Ethereum use “blockchain” technology, Ethereum’s blockchain is significantly more trustworthy.
- Ethereum introduced the notion of smart contracts to the crypto world for the first time and decentralized programmes (dApps) that run without the need for top-down oversight and control by any single organization or individual. Due to the introduction of applications such as decentralized finance (DeFi) and non-fungible tokens, institutional investors have demonstrated a great interest in Ethereum during the last year (NFTs).
- Last summer, NFTs controlled the market, thanks to a flood of celebrity sponsorships and partnerships. Ethereum has recently become a key asset in new crypto marketplaces such as NFTs, DeFi, and the Metaverse. Firms in this industry use Ether to run their smart contracts, boosting demand for the cryptocurrency and keeping its price on an upward trend.
- In addition, Ethereum is being propelled ahead by Web 3.0. In essence, Web 3.0, a younger internet generation, is in charge of determining how we use it and decentralizing it. Decentralized programmes that run on the blockchain are referred to be Web3.0 in the context of Ethereum. This will not only give people more control over their material, but it will also improve the security and efficiency of everything that happens on the Internet.
Ethereum has been trading in the $3,000 to $4,000 range since hitting a high of $4,100 on December 27, 2021. However, Ether values have plummeted in recent days, reaching their lowest point in over three months. Ethereum is now trading at $3,263 at the time of writing.
So, what’s behind this sharp drop in prices? What does Ethereum’s future hold? Will it be worthwhile to invest in Ethereum?
Continue reading to learn everything there is to know about Ethereum’s future in 2022.
The sudden drop in the price of Ethereum
The cryptocurrency market is no stranger to wild swings in price. The recent price drop may appear small when seen in this light. Furthermore, the crash isn’t just affecting Ethereum.
Bitcoin’s value has also dropped to a three-month low in recent days. After a year of significant gains and unprecedented highs, cryptocurrencies appear to be facing significant volatility once again.
The advent of the Omicron COVID-19 variant and the resulting uncertainty can be blamed for a substantial part of the price drop. The pronouncements of Federal Reserve Chairman Jerome Powell on the economy’s health and ongoing comments by US politicians on cryptocurrency regulations have had a substantial impact on prices and the general market environment in the United States.
Ethereum's Future
Despite being more sophisticated than Bitcoin, Ethereum still has some difficulties that it must overcome to acquire market dominance. This is precisely what Ethereum 2.0 developers intend to do.
Ethereum 2.0 is a significant upgrade to the Ethereum network that will change the consensus mechanism of the underlying blockchain from proof-of-work to proof-of-stake. The network will indeed become more scalable, secure, and long-lasting due to this.
The upgrade will also bring a sharding processing technique to the network, which will improve Ethereum’s efficiency and scalability. All participating nodes must confirm any data added to the chain in the current version of the blockchain.
As a result, the system’s overall processing speed is restricted by the slowest participant’s speed.Ethereum 2.0 will greatly enhance the efficiency of its resource consumption with the inclusion of sharding, potentially scaling to 100,000 transactions per second or more.
Ethereum’s transition to proof of stake is virtually complete, with devnets being set up, specs being finalized, and community outreach gaining traction. There’s no doubt that this update will have a substantial impact on Ethereum’s value, as lower fees and faster transactions will entice more people to join the network.
The rise of the metaverse and Web 3.0 and layer 2 scaling solutions that aim to transform the way we transact on Ethereum are all coming together for the cryptocurrency.
Traders and investors expect the ether price to rise in the long run as the Ethereum blockchain is increasingly used for dApps and NFTs. Ethereum’s demand is expected to remain robust in 2022, prompting numerous analysts to predict prices between $6,000 and $10,000.
Final thoughts
As with any other long-term investment, experts advise disregarding the ups and downs, emphasizing that the current decrease does not rule out.
Ethereum as a viable option. 2022 will undoubtedly be a watershed moment for Ethereum and its blockchain. While most experts and investors are unconcerned about the recent price dip, they are confident that Ethereum’s scalability problem will be solved with ETH 2.0, which will open up limitless possibilities for the blockchain.