Since its founding in 2015, ethereum (eth -1.43%) has soared nearly 153,000% to reach an all-time high price of $4,892 in November 2021. However, with the overall fall of the cryptocurrency market, the second most valuable digital asset in the world is now selling for $1,077 per token at the time of writing.
Reaching $5,000 per token would equate to a 364% return as of today, and would mark a new price high for this popular cryptocurrency. Let’s discuss why that lofty goal is possible, as well as what might stand in the way.
Reading: Ethereum to $5000
a nascent ecosystem of use cases
As the first programmable blockchain, Ethereum introduced smart contracts to its network, something bitcoin does not have. A smart contract is a computer program that is executed if certain conditions are met, allowing two unknown parties to interact and transact with each other, all without the need for a trusted intermediary. it was a pivotal breakthrough that resulted in ethereum now being called the world’s decentralized computer.
While bitcoin is just a peer-to-peer payment network, ethereum has spawned real-world use cases. Decentralized applications (dapps) are being developed to disrupt a wide range of industries. For example, two popular categories of dapps include decentralized finance (defi) protocols and non-fungible tokens (nfts).
In the defi world, services such as uniswap, a decentralized exchange for buying and selling cryptocurrencies, and compound, a savings and loan platform similar to a traditional bank, were gaining popularity before the recent crash. And while the market for NFTs has cooled off significantly, the potential for this technology, particularly when it comes to things like digital identity and authenticity, is huge.
Unsurprisingly, ethereum is the most popular blockchain when it comes to these budding use cases. it has the most active developers working on advancing the network, and in the world of cryptocurrencies, that is a key competitive advantage.
beware of competitors
Investors expecting Ethereum to hit $5,000 per token should pay attention to so-called “Ethereum killers”. These blockchains, which include cardano and solana, attempt to improve on ethereum’s weaknesses, which center around speed and scalability.
Like bitcoin, ethereum runs a proof-of-work consensus mechanism, requiring enormous amounts of computational power to solve complex mathematical puzzles to gain the right to validate and add new transactions to the network. not only consumes a lot of energy, but is slow. ethereum can only process 13 transactions per second today.
cardano and solana run proof-of-stake algorithms. this energy efficient process allows the actual owners of the tokens to stake their holdings and validate transactions. it’s much faster and much better for the environment.
luckily for ethereum, an update is in the works. Formerly known as Ethereum 2.0, the merger will increase the capacity of the network by adding a new chain of beacons to the fold, at which point the entire network will be proof of stake. and possibly in 2023, shard chains will be added. This means more blockchains will work in unison with the Ethereum mainnet, reducing congestion, increasing throughput, and lowering fees.
While this update has had its fair share of delays, it could finally be here sometime in August. and this would substantially increase developer interest in ethereum. If speed and scalability are no longer an issue, the possibility of a deeper ecosystem of dapps, as well as the growing demand for ethereum, will support a much higher price over time.
The road to $5000 per token will definitely be bumpy, but ethereum has a real shot at getting there if it can integrate the new upgrade in a timely manner, as well as outperform its rival blockchains.