The beginning of the year is the ideal time to look at the investment portfolio and analyze each asset. After all, realizing perspectives is essential to pursue objectives and improve the investment strategy. So today we are going to present the Ethereum forecast for 2023.
The Ethereum network is heading towards its eighth year of existence, which will be celebrated on July 30, 2023, the date on which the network was launched. But after all, is it worth investing in Ether in 2023?
We know that there is no way to guarantee the accuracy of forecasts for variable income assets. Cryptocurrencies are part of these assets, and therefore, any scenario is just a compilation of information that is important to analyze this cryptocurrency throughout the year.
In this sense, understanding the outlook for Ethereum in 2023 is essential for cryptocurrency investors and traders, as 2022 was a delicate year for the crypto market and of major changes for Ether and its network, which continues to feature on the list of promising cryptocurrencies .
Why Ethereum catches the attention of investors?
Ethereum is a Blockchain network launched in 2015 by a group of developers, including the best known, Vitalik Buterin, and Charles Hoskinson, who is also the co-creator of the Cardano network.
Unlike Bitcoin, Ethereum was not created with the sole purpose of being a native money of the internet, but also a network for running smart contracts and decentralized applications (DApps).
The network’s native token, Ether (ETH), is the second largest crypto asset on the market and serves as a way to pay for using the protocol, and is widely used by industry investors as a store of value or investment vehicle. Due to its relevance to the crypto ecosystem, Ether is also on the list of the best cryptocurrencies for 2023 .
Ethereum was the pioneer Blockchain in allowing the tokenization of assets , that is, registering new tokens on the blockchain, which have multiple purposes.
After ETH, the top cryptocurrency hosted on the Blockchain is USDC , which has over $40 billion tokenized on Ethereum, according to Cointelegraph . USDT follows the list, with over $39 billion tokenized on the Blockchain alone.
Due to its design, Ethereum allows for the execution of more complex applications than Bitcoin, originally being described as the “computer of the internet”.
How did Ethereum perform in 2022?
Ethereum, since its launch, has shown significant gains, being for most of its existence the second largest crypto asset in market capitalization, behind only Bitcoin .
During the last bull cycle, ETH reached its all-time high in November 2021, alongside BTC and most of the market. Since then, the sector has seen a sharp correction in 2022, with ETH falling by around 75% .
This drop, however, was smaller than the last bear market, in 2018, when ETH dropped more than 92%. ETH currently sits just below the 2018 high, an important support for the price, which was first broken in July 2022.
The Merge and the Impacts on the Ether Price
The year 2022 was marked by the long-awaited The Merge update , which changed the network’s consensus algorithm from Proof of Work (PoW) to Proof of Stake (PoS) . The upgrade, which had been delayed for years, was only completed in September, triggering price movements.
The new version of Ethereum brought a more sustainable form of validation to its operations, reducing more than 99% of energy consumption. In addition to reducing the computational requirement, this new model allows for the staking process , a way of earning passive income with Ether units blocked on the network.
What is the Ethereum prediction for 2023?
Despite having already taken place successfully, the transition to the Proof of Stake (PoS) consensus mechanism should still have a significant impact on the price of the crypto asset during 2023.
Before the upgrade, users could already stake their ETH through a parallel network called Beacon Chain, which merged with the main network during the transition. Since then, the network operates on the PoS consensus.
However, these staked assets are “locked” until the next update, known as Shanghai, which will unlock these ETHs on the market, allowing transfer between wallets.
According to data from explorer Beacon Scan , over 15 million ETH are currently at stake. The release of these assets on the market could have a negative impact on the price of ETH, at least in the short term, as part of the investors will certainly want to liquidate their assets.
However, according to an analyst at the Coin Bureau channel, the release of staked ETH may be negative in the short term, but it will bring investor confidence , which may increase the number of assets allocated to network security in the long term:
The more ETHs in stake, the scarcer the crypto asset becomes in the market, which tends to increase its price.
In other words, the logic of PoS is the opposite of PoW-based mining. While miners are forced to sell their BTC to cover high electricity costs, validators are rewarded for letting their ETH sit idle.
What to expect from Etherem development in 2023?
2023 will be the first year we see the power of a Proof of Stake based network on a protocol as robust as Ethereum.
Even today, blockchain networks can be considered too slow or too expensive for many purposes, and Ethereum is trying to change that through protocol changes .
In parallel, second-layer networks, such as Polygon (MATIC) , allow transactions to be processed with lower cost and greater speed, facilitating the use of the Ethereum network.
Polygon’s popularization is lowering Ethereum’s transaction fees, which are one of the protocol’s main problems. During the bull market, it has become normal for standard transaction fees to exceed tens of dollars.
Despite having its own native token, Polygon still requires ETH for transactions to be processed on the main Blockchain. The network works in a way to group transactions and data to be later processed in layer 1 of the protocol.