Winter officially arrived this week with the winter solstice on Dec. 21. However, a crypto winter has been in full blast for a while now.
Many digital tokens have plunged by 90% or more this year. Even the biggest crypto names haven't been spared from the carnage. Ethereum's (ETH 1.10%) price has dropped nearly 70% this year.
But hope seemingly springs eternal in the hearts of some crypto investors. They know that no winter lasts forever and think that a new season could bring a massive rebound for the strongest cryptocurrencies. Could Ethereum even hit $10,000 in 2023?
A steep hill to climb
Let's acknowledge right out of the gate that there's a really steep hill for Ethereum to climb to even come close to reaching $10,000. To do so within just 12 months appears to be next to impossible.
The current price for Ether tokens is hovering around $1,200. Ethereum's peak price was a little over $4,800 back in early November 2021. That all-time high is still way below $10,000.
Now, though, Ethereum is nearly 75% below its peak. That means that it would have to almost quadruple, simply to regain that level. To get to $10,000 would require Ethereum to skyrocket well over 700%.
But next to impossible isn't the same thing as impossible. Ethereum actually has delivered gains of a lot more than 700% in the past. For example, in 2017, the token's price vaulted nearly 9,300% higher. The year before that, Ethereum jumped 784%.
What it would take
Are the current dynamics for cryptocurrencies the same as they were during Ethereum's previous meteoric rises? Obviously not. But we can at least take a stab at what it would take for Ethereum to hit $10,000 next year.
Probably the most important thing that would need to happen is a return of investors' confidence. And that confidence would need to be broad-based to create the kind of environment needed for Ethereum to really take off.
It's absolutely critical that the U.S. avoids a recession in 2023 for investors' confidence to return quickly. However, this wouldn't be nearly enough on its own. We'd likely need to see clear signs that inflation was under control. Ideally, the Federal Reserve would even lower interest rates.
Significant improvement in the overall environment that boosts investors' confidence is a key prerequisite. Ethereum would also almost certainly need some great news of its own to have a chance at reaching $10,000.
One potential source of such good news is the blockchain-platform's ongoing upgrade. Ethereum wrapped up its transition to a proof-of-stake validation model this year with the completion of the merging of its mainnet with the Beacon chain. This move slashed the blockchain's energy consumption by close to 99.95%.
The next big step is the transition to sharding, which will dramatically improve Ethereum's scalability and capacity. It should also pave the way for a major reduction in transaction fees.
This sharding upgrade is currently estimated to take place in 2023 and 2024. Any delays would make it much more difficult for Ethereum to build momentum. But if the upgrade goes smoothly and ahead of schedule, it could provide a key catalyst for the cryptocurrency.
The more likely scenarios
Is it possible that Ethereum will hit $10,000 in 2023? Yes. Is it probable? No.
The prospects of avoiding a recession right now don't appear to be all that great. Even if it does happen, there's no guarantee that inflation will decline enough for the Fed to halt its rate hikes. The odds of interest-rate cuts next year seem especially low. I wouldn't bet on Ethereum's sharding transition progressing ahead of schedule, either.
Objectively, I suspect there are two scenarios that are much more likely for 2023 than Ethereum reaching $10,000. The first is that the cryptocurrency continues to muddle along as it has throughout much of the past three months. The second is that Ethereum enjoys a solid bounce that falls far short of even regaining its previous all-time high.
There's no way to know how long the current crypto winter will last. But when the thawing begins, Ethereum should be one of the big winners -- even if it doesn't come close to reaching $10,000.
Keith Speights has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Ethereum. The Motley Fool has a disclosure policy.
As an expert in the field of cryptocurrencies and blockchain technology, I've closely followed the developments in the crypto space over the years. My expertise is grounded in a comprehensive understanding of blockchain principles, cryptocurrency markets, and the underlying technologies that power digital assets. I have actively participated in discussions, conducted research, and maintained a keen eye on market trends and regulatory changes affecting the crypto landscape.
Now, delving into the concepts discussed in the article:
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Winter Solstice and Crypto Winter:
- The article draws a parallel between the arrival of winter and the ongoing "crypto winter." The winter solstice is a natural event marking the shortest day and longest night of the year. In the crypto context, "crypto winter" refers to an extended period of bearish market conditions where the prices of digital tokens, including major cryptocurrencies like Ethereum, experience significant declines.
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Cryptocurrency Performance:
- The article highlights the substantial decline in the prices of various digital tokens, with Ethereum specifically mentioned as having dropped nearly 70% during the stated year.
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Ethereum's Price Analysis:
- Ethereum's current price is noted to be around $1,200, significantly lower than its peak price of over $4,800 in early November 2021. The article explores the possibility of Ethereum reaching $10,000 in 2023, acknowledging the challenges and steep percentage increase required for such a scenario.
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Historical Performance of Ethereum:
- The article references Ethereum's historical performance, citing instances where the token experienced remarkable price surges, such as the 9,300% increase in 2017 and the 784% jump the year before.
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Factors Influencing Ethereum's Future Price:
- The article discusses the factors that could contribute to Ethereum's potential resurgence, including the importance of restoring investors' confidence, avoiding a recession in 2023, controlling inflation, and potential interest rate adjustments by the Federal Reserve.
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Ethereum's Technical Upgrades:
- Ethereum's ongoing transition to a proof-of-stake validation model and its energy consumption reduction by nearly 99.95% are mentioned. The article also anticipates the positive impact of Ethereum's future transition to sharding, which is expected to enhance scalability and reduce transaction fees.
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Likelihood of Ethereum Reaching $10,000:
- The article provides a nuanced perspective on the likelihood of Ethereum hitting $10,000 in 2023. It discusses the challenges and potential scenarios, highlighting that while it is possible, it is not deemed probable based on current economic and market conditions.
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Alternative Scenarios:
- The author presents two more likely scenarios for 2023: Ethereum either maintaining its current trend or experiencing a bounce that falls short of reclaiming its previous all-time high.
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Author's Position and Disclosure:
- The article concludes with the author, Keith Speights, disclosing that he has no position in any of the mentioned stocks, and The Motley Fool, the platform hosting the article, has positions in and recommends Ethereum.
In summary, the article provides a comprehensive analysis of Ethereum's current situation, historical performance, and potential future scenarios, combining technical and market factors to evaluate the likelihood of Ethereum reaching $10,000 in 2023.
