Ethereum Price Prediction: Can Crypto’s Bridesmaid Stake Its Claim?

Since its inception in 2015, Ethereum (ETH) has lived up to the famous investor adage of “high risk, high reward”, experiencing both soaring highs and sweeping lows.

“Ethereum has faced some tumultuous times,” Ethereum expert and founder of The Daily Gwei, Anthony Sassano, tells Forbes Advisor.

“We saw the price plunge over 70% in the second half of 2016 and then a devastating 94% drop in 2018. Then, there was another significant drop of 80% in the first half of 2022.”

However, Ethereum’s price history isn’t just about declines, and, as Sassano notes, Ethereum experienced a stratospheric increase of 2500% in the first half of 2016.

“Then, in 2017, it skyrocketed by a staggering 20,000%. And if we look from the bottom price of $US80 in 2018-20 to the top of $US4,900 in 2021, it surged 5400%.”

These meteoric rises are usually reserved for micro-cap stocks or options in other markets. Yet, as the digital asset markets are still in their infancy, the small size of this emerging asset class compared to other traditional markets means these huge gains can still be found, even among the larger players like Ethereum.

Significantly, Ether’s performance against bitcoin (BTC), the largest cryptocurrency, during the latest downturn was considerably stronger than in the past.

“It went down 90% from peak to trough last time, but now, it’s only down 55%,” Sassano notes. This trend highlights a shift in market perceptions of Ethereum, as bitcoin is no longer seen as the only blue-chip asset in the crypto space. Ethereum is increasingly viewed as another “flight-to-safety” asset.

“It seems Ethereum is no longer viewed simply as a risk-on, tech play,” Sassano says.

Over the past year, Ether’s price action has lagged behind bitcoin and Solana. Experts have mixed opinions on why this could be the case, with some pointing to users moving onto Ethereum layer 2 chains, taking revenue from fees and associated activity with them. This fragmentation of activity and capital makes competitors like Solana appear more compelling when comparing the activity on the two chains. Others point to the late start to the listings of ETH ETFs on US stock exchanges. While BTC ETFs have been available to US investors since mid-January, it wasn’t until July that ETH ETFs were launched.

Nevertheless, the re-election of crypto fan Donald Trump to the White House bolstered Ethereum’s fortunes, with the ETH coin breaching the $US4000 watermark in mid-December, 2024.

While it is impossible to accurately predict the performance of any digital asset, there are certain events that investors can watch out for that could impact Ethereum’s price.

In 2025, flows into the ETH ETFs are expected to ramp up significantly as they have since mid November. Additionally, the current ETH ETFs are not staking the ETH, which could change with the approval of staked ETH ETFs in 2025 thanks to a crypto-friendly US administration.

We can also anticipate the layer 2 networks on Ethereum, such as Base and Arbitrum One, continue to grow in market share and usage. DeFi on Ethereum is also expected to grow, with stablecoins in particular already witnessing strong growth thanks to high yields across DeFi.

Sassano, for one, thinks there may be significant price gains in 2025.

Ethereum is set to undergo an upgrade in early 2025, dubbed Pectra, which promises several significant improvements to the network. The upgrade will allow users to pay transaction fees (gas fees) with tokens other than ETH and even enable third-party services to cover these fees on users’ behalf. The change will make the network more accessible by eliminating the need for investors to hold ETH in their wallets for transactions. 

The upgrade also introduces improved network speed and costs through more efficient smart contract execution. For those interested in staking, the upgrade increases the validator stake limit from 32 to 2048 ETH and introduces flexible withdrawals, making the staking system more efficient and rewarding for larger investors. These enhancements collectively aim to make Ethereum faster, cheaper and more user-friendly.

Pectra will also assist Ethereum’s layer-2 ecosystem, a technical term for solutions designed to help scale the Ethereum network, allowing for faster transactions and lower user-transaction fees, which Sassano sees strengthening over the next year. 

“These secondary layer solutions will continue to grow stronger and gain wider use,” Sassano says.

Existing projects within the Ethereum ecosystem are also expected to progress and mature. 

“[These projects] will continue to build out their products and launch new versions of them.”

The global outlook naturally plays a role, too. Over the past few years, the post-pandemic world has grappled with high inflation and  interest rates from central banks. This dampened risk assets, such as equities and crypto, as investors found safe returns in other markets, such as bonds.

However, now that inflation is largely under control, the US Federal Reserve has begun cutting rates, signalling that the high interest-rate environment is ending. This is significant for Ether and the broader crypto market, as more liquidity is injected into the financial system, some of which flows into digital assets.

The Bull Case

Sassano says there are many factors that could fuel an increase in Ethereum’s price, pointing out that “we are halfway through the Ethereum roadmap that was published in 2020, and the next half is the most crucial as it’s where the culmination of years’ worth of work will be delivered”.

The successful development of restaking protocols continues to be a bullish factor for Ethereum.

“Restaking unlocks a brand new primitive for Ethereum and extends ETH’s strong market cap and liquidity profile to secure services,” Sassano says. Investor excitement surrounding restaking remains high, with tens of billions worth of Ethereum deposited by investors across various protocols, such as Eigenlayer.

Following the approval of spot Ethereum ETFs in July, the Ethereum ETF narrative has evolved.

“ETH ETF flows are expected to continue ramping up with the possibility of staked ETH ETFs on the horizon,” Sassano says. By enabling staking within the ETH ETFs, investors can earn a staking yield on their ETH holdings, attracting a new type of investor. 

Layer 2 development represents another significant growth vector for Ethereum, with more performant layer 2s coming online, such as MegaETH and Rise.

The DeFi sector also presents a compelling bull case, according to Sassano.

“DeFi and stablecoin growth shows no signs of slowing down,” he says.

“Interest in DeFi utility tokens is going up again thanks to an assumed crypto-friendly US administration under Trump where these tokens may be able to do things like profit-sharing.”

The Pectra upgrade represents another potential catalyst in 2025. This significant network enhancement will introduce more user-friendly features, including the ability to pay transaction fees with tokens other than ETH and improvements to the staking system.

Finally, Ethereum’s fee-burning mechanism, introduced in The Merge upgrade, continues to operate, reducing the overall supply of new Ether. “This steady burning of Ethereum continues, further supporting a potential rise in value,” Sassano adds.

The Bear Case

Although Sassano maintains an optimistic outlook on Ethereum, he acknowledges several potential challenges ahead. One significant concern relates to the regulatory environment.

“The biggest potential bear case for Ethereum could be that the new US admin isn’t as friendly as we assume it’s going to be and ends up still making it difficult for Ethereum-based DeFi companies to operate in the US,” Sassano notes. 

“A crackdown on stablecoins would be particularly detrimental, though I think this has a very low chance of happening.”

Competition from other blockchain platforms presents another potential headwind. 

“There’s no shortage of other chains in crypto trying to compete with Ethereum, and some of them have taken marketshare away over the last 12-18 months, so we may see that continue in 2025,” Sassano says.

“Though in saying that, Ethereum has a very strong ecosystem of layer 2s that are ready to compete in the high-performance chain arena.”

Some critics have raised concerns about layer-2 solutions potentially cannibalising Ethereum’s base layer. 

“There’s this notion that layer 2s are ‘parasitic’ to Ethereum layer 1 and ETH because they take activity away from it, but, in my opinion, this is not the case,” Sassano says.

“The Layer 2s pay Ethereum to settle down to it (in ETH), and these Layer 2 ecosystems also expand the use of ETH as a money, store of value, collateral asset, fee token (and more).”

In the long-term, Sassano maintains that the most significant risks would likely stem from broader market conditions or increased regulatory scrutiny, particularly at the “ports of entry” where traditional finance meets cryptocurrency. 

However, he emphasises that these bearish scenarios seem relatively unlikely given Ethereum’s strong technological foundation and growing ecosystem.

Sassano is optimistic about Ethereum’s investment prospects based on its possible price appreciation and inherent earning potential within the Ethereum network.

“I continue to believe that ETH is the best risk-adjusted investment across any asset class for the long-term,” Sassano says.

His bullish stance is predicated on the numerous positive developments within the Ethereum ecosystem, the potential catalysts for future growth and Ethereum’s performance in a wide range of market conditions.

Moreover, Sassano draws attention to the benefits of staking ETH. “Not only are there many reasons to be bullish on ETH itself, but people can also stake their ETH and earn an ETH-denominated Annual Percentage Rate (APR), currently around 3% to 4%,” he says.

Ethereum’s earning potential is also relevant to the pending spot ETH ETF applications now that the pro-crypto Donald Trump has been re-elected president of the United States. With the resignation of Gary Gensler, the vocal anti-crypto SEC chairman, the current spot ETFs are likely to re-file to add staking for a percentage of ETH held in the funds. This would enable ETH ETF investors to benefit from Ethereum’s staking yield. Investors are known to love yield-bearing assets, which means the approval for staking in any of the spot ETH ETFs, could draw attention from a significant number of investors. 

However, it’s important to keep in mind that this is the best-case scenario, and cryptocurrencies are inherently volatile. Naturally, whether Ethereum or cryptocurrencies more broadly are a good investment for you will depend on your financial situation, risk tolerance and goals.

This article is not an endorsement of any particular cryptocurrency, broker or exchange nor does it constitute a recommendation of cryptocurrency or CFDs as an investment class.  Cryptocurrency is unregulated in Australia and your capital is at risk. Trading in contracts for difference (CFDs) is riskier than conventional share trading, not suitable for the majority of investors, and includes the potential for partial or total loss of capital. You should always consider whether you can afford to lose your money before deciding to trade in CFDs or cryptocurrency, and seek advice from an authorised financial advisor.

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