Ethereum to be worth $7.5 thousand?

Will the price of the second largest cryptocurrency fly away to the moon?

Ethereum (ETH) says version 2.0 of its blockchain network is expected to be released on September 19. The famous update has already been hailed as "the biggest event in the cryptocurrency markets" some time ago. This is because it will bring with it the migration of the Ethereum network from the Proof of Work (PoW) consensus mechanism to the Proof of Stake (PoS). Although due to the level of complexity this movement was postponed many times and eventually delayed by several years, we finally got the so-called "The Merge". How will this affect the future valuation of Ether - the network's native cryptocurrency - and, consequently, will it rebound from its many-month lows?

The Merge is getting closer

The positive attitude of investors in 2021 and the growing popularity of decentralized applications (dApps), non-exchangeable tokens (NFT) and decentralized finance (DeFi) helped ether (ETH), the native cryptocurrency of the Ethereum network, jump by over 400% in 2021 from just $ 730 at the start of the year to over an impressive $ 3600 by the end of December 2021

The much anticipated The Merge aims to help ETH achieve its sustainability goals as well as improve scalability and security of the entire project. However, no one is able to say unequivocally how this will affect the price of ETH, which has suffered a large drop in this cryptocurrency winter.

The Merge, also known as Ethereum 2.0, has been on the radar of many cryptocurrency investors since it was first announced by Ethereum's CEO, Vitalik Buterin, in October 2018 at the Devcon conference in Prague.

Before we look deeper at it, however, let's take a look at what Ethereum is.

Ethereum is a community-led technology that powers the ether cryptocurrency and thousands of decentralized applications. As a rule, it is a programmable blockchain that allows people to build dApps on their network thanks to the ability to run smart contracts.

But why is there so much talk about The Merge? As of today, the Ethereum network uses the PoW consensus mechanism to carry out transactions, as is the case with Bitcoin (BTC), for example. However, PoW has many disadvantages, the most notable being that it is expensive, consumes a lot of energy, which makes the platform unfriendly, lacks disk space and suffers from network clogging.

Contrary to the problems described above, PoS aims to make Ethereum more secure, less energy intensive and better for implementing new scaling solutions. Originally known as "Serenity" or "ETH2", this update is in active development since 2014! In the opinion of Vitalik Buterin - the creator of Ethereum - the change includes "a bundle of different functions that Ethereum has talked about for several years and researched over the same period of time, and which functions will eventually merge into this one coherent whole."

ETH / USD: What is the factor behind Ethereum's valuation?

One of the biggest market drivers in 2022 is the monetary policy pursued by the US Federal Reserve (Fed). The Fed took a firm stance on bringing US inflation down to the target of just 2%. However, the latest CPI data in the US show that inflation in this country is currently (August 29) as high as 8.5%. Despite a decline from the previous 40-year high of 9.1%, the Fed is determined to maintain the pace of its monetary policy tightening.

- Lowering inflation is likely to require a sustained and consistent downturn period. While higher interest rates, slower growth and softer labor market conditions will lower inflation, they will also bring some pain to households and businesses. These are the unfortunate costs of bringing down inflation. But failure to restore price stability would be much more pain, said Jerome Powell of the US central bank's plans on August 26.

Mike McGlone, senior commodity strategist at Bloomberg Intelligence, recently stated that Ethereum is highly correlated with the US stock market and that if stocks continue to decline, ETH will also "come under pressure, possibly even more than Bitcoin."

It should be noted that the transition from Ethereum to PoS is expected to reduce the supply of ETH in circulation. This is because it will be stacked rather than mined, which may increase its price. Moreover, the hype surrounding the upgrade has the potential to raise the price of ETH.

However, McGlone noted that even though The Merge has the potential to influence ETH prices in the long run, macroeconomics is a key driver of the token in the short term.

“This is a rather bad situation in the near term, with a rising tide of all risky assets under pressure from the jackhammer the Fed holds above the market. Many merger issues could go wrong, but the assumption is that the move from PoW to PoS is likely to be bullish for ETH in the long run, McGlone said.

Will the Ethereum price go up? The forecasts are up to $ 7.5 thousand

Despite the recent downturn in price action, the AI-powered prediction service Wallet Investor released a bullish ETH / USD forecast. The website noted that ETH is an "amazing long-term investment," adding that it has long-term growth potential of up to 405.45%.

Based on an analysis of ETH's past price performance, Wallet Investor noted that the market price of the coin could be over $ 2,600 during the next year. During the next five years, ETH is to fly to the moon because its price will even exceed $ 7,000.

DigitalCoinPrice supported the positive ETH / USD forecast, with the difference, however, that it predicts a much slower growth rate of the coin. This portal's forecast for ETH / USD for 2022 predicts that the coin will reach around $ 2,100 by the end of the year.

A study by DigitalCoinPrice ETH / USD for 2025 suggested that the price of ETH could exceed $ 3,000. By the end of 2027, ether could reach $ 4,100 a piece. The long-term ETH / USD forecast for 2030 assumes that the price of the second largest cryptocurrency may reach over USD 7.5 thousand.

"I see Ethereum as stuck between around $ 1,000 to $ 2,000 and more likely the price will skyrocket in the long run," McGlone said in an interview with Capital.com.