The start of 2023 has been bullish for ethereum (ETH), with the digital asset firmly on track to post impressive gains.
After starting the new year at $1,192, ETH rallied to a 90-day high of $1,674 on Jan. 21, representing an increase of x% YTD (YTD). As of January 30, ETH was trading at $1,572, down x% from its 90-day high.
Meanwhile, the crypto community awaits the Federal Reserve’s decision on interest rate hikes. He hopes the regulator will maintain its strict measures to keep the economy in check.
However, most analysts anticipate a 25 basis point increase, which is lower than December’s increase of 50 basis points. This hope of moderation has been supported by the slight decline in headline inflation in December, which fell to 6.5% from 7.1% in November.
As the Federal Reserve adjusts its policy tools to respond to economic trends, the crypto market will be monitoring any potential impact this may have on digital assets like Ethereum. With this in mind, how will ethereum settle throughout 2023? Let’s find out.
What affects the price of ethereum
Ethereum has become the reference platform for developers, entrepreneurs, and investors. Despite a few hiccups on its journey, the blockchain-based digital asset has proven its resilience and versatility time and time again.
With a wide range of capabilities, from decentralized finance (DeFi) to gaming and data storage, Ethereum has established itself as the platform of choice for many.
As the project progresses, several vital issues and questions will greatly influence its path. From scalability issues to user adoption, what will be the defining factors that will determine the future of Ethereum?
Ethereum Shanghai Update
Ethereum is ushering in a new era with the imminent release of the Shanghai Update (EIP-4895).
After its September 2022 upgrade, dubbed The Merge, Ethereum moved from the traditional proof-of-work consensus mechanism to a proof-of-stake (PoS) one, allowing users to stake 32 ETH to become validators. This transition made waves in the crypto market, as users had to lock up their funds indefinitely to become validators.
But the Shanghai update will change that, allowing users to withdraw their funds as validators starting in March 2023. The upcoming hard fork has sparked a lot of interest in the crypto community as users wonder what effect this change will have on the price of ETH. .
According to participation rewards14.14% of all ETH tokens are currently staked, and those owners now have the power to withdraw and sell their holdings.
On the other hand, the improved liquidity of ETH staking may lead to higher demand for ETH due to better staking conditions and the ability to directly staking with Ethereum. This could cause the ETH price to go higher due to the improvement of the market balance.
An official release date for the Shanghai Update has not yet been announced, but the Ethereum developers have agreed on a timeline of March 2023. They anticipate launching a public testnet around the end of February 2023.
Until then, the crypto market can only speculate on the impact of the upgrade on Ethereum and its price.
Fighting scalability: proto-danksharding
The Ethereum network has been no stranger to scalability issues, with skyrocketing gas rates and other unfavorable conditions for users becoming more common.
As network adoption grows, so do its issues with scalability, along with the added complexity of maximum extractable value (MEV), allowing validators to earn additional amounts of money.
These problems can be solved with fragmentation. Sharding involves dividing a blockchain into smaller “chunks” and has been seen as a possible way to alleviate the scalability issues currently facing blockchain networks.
Lately, danksharding, which takes an accumulation-focused approach, has garnered a lot of attention as a potential solution to Ethereum’s scalability issues. However, it is not yet ready for adoption, as the Ethereum network is not ready for such a sharding design.
In response, EIP-4844, known as proto-danksharding, has been released, which seeks to implement the fundamentals of danksharding while laying the groundwork for its implementation.
Crucial to this is the introduction of a new type of transaction, “blob carrier transactions”. These blobs can contain up to 1 MB of data, which reduces the load on both validators and clients in terms of bandwidth.
Although the scalability gains from proto-danksharding are modest, it is still an important first step in addressing the scalability issues of the Ethereum network.
Increased TVL levels
As the DeFi market continues to expand and mature, a commonly used metric to measure its success is Total Value Locked (TVL).
TVL indicates how much trust people have in these protocols and helps investors, traders, and developers better assess the health of the DeFi market.
As of January 31, according to DeFi LIama, ethereum’s TVL totaled $28.2 billion, up from $23.11 billion on January 1, representing an increase of 22.26%. This marks an essential change in the trajectory of the market, as ethereum has continuously decreased TVL since April 2022.
DeFi’s rising TVL is a sign of its growth and could lead to further breakthroughs in the industry. Therefore, this increase in TVL indicates increased confidence in the Ethereum network and could lead to significant rewards for the network in the near future.
What is the ethereum price prediction for 2023?
As of January 31, various price predictions for Ethereum have been circulating, with many analysts suggesting an extension of the prevailing bull market.
CoinCodex The short-term ETH price prediction suggested a rise to $2,082 by February 15 and as high as $2,174 by February 20.
Long-term, government capital provided an Ethereum price prediction for 2023, forecasting a rise to $2,761 by the end of the year before the price reaches almost $5,261 by 2024.
It is important to note that price predictions are often wrong, and long-term crypto forecasts are usually made by algorithms that can change instantly. Therefore, always perform your own due diligence before making any investment decisions.
The way forward for Ethereum
As we look to the future of Ethereum in 2023, it is clear that the platform is poised for tremendous growth.
Emerging technologies like proto-danksharding and the upcoming Shanghai Update have bolstered the platform’s prospects as a leading blockchain platform, with investors looking to benefit from its use case, reputation, and market positioning.
Also, in 2023, investors may be looking to move away from volatile and risky assets and instead embrace safer investments.
According to blockchain research firm WuBlockchainthere is a possibility of a wave of market hot spots in the second and fourth quarters of this year, provided “adverse black swan events or external macro factors” do not get in the way.
This could mean a huge uptrend for the market and investors shifting their money from speculative tokens to more established currencies and assets. One such asset that could benefit from this trend is ethereum. Ethereum’s strong market positioning, use case, and reputation could boost its user base and price in 2023.
