ETHEREUM | Fundamental Analysis + Next Target | MUST READ | LONG

The price of Ether, the cryptocurrency of the Ethereum blockchain service, hit an all-time high of more than $4,800 last November. At the time, BOOX Research predicted that the price of Ether could continue to rise to $7,500 by the end of 2022. Unfortunately, rising interest rates and other macroeconomic factors subsequently caused a hasty retreat from risky assets such as cryptocurrencies, and Ether now trades at less than $1,400.

Ether remains the second most valuable cryptocurrency after bitcoin, but is it attractive to buy after the recent pullback? Let's take a look at Ether's rise, its growth potential, and the challenges ahead to come to a decision.

Ether appeared in 2015, and it reached parity with the U.S. dollar in its first year. If you bought 100 Ether tokens for $100 when it happened, your investment would be worth $140,000 today.

Ether got a big boost because the Ethereum blockchain supports decentralized "Web3" technologies such as smart contracts, decentralized applications (dApps) that are not tied to centralized app stores or operating systems, and NFT. Some of these technologies can be used to secure financial services, Web surfing, gaming, advertising, cybersecurity, identity management, and supply chains.

By comparison, Bitcoin's blockchain is only used for direct cryptocurrency mining. Therefore, Bitcoin is often seen as an asset, while Ether is considered the leading cryptocurrency for the next generation computing platform.

Ether is also a slightly greener alternative to Bitcoin because it requires less energy to mine. Moreover, the upcoming "Merge" (also known as Eth2) update is expected to reduce overall mining energy consumption by about 99% when it is implemented as planned over the next few months.

Bulls believe the Merge update will allow Ethereum to scale up its blockchain network and support the expanding Web3 application ecosystem. Since Ether will be used as the default currency for these applications, its market value should eventually stabilize. If that happens, it could become a safeguard against inflation, like gold, silver, and other precious metals.

Bears believe that decentralized apps will remain a niche concept because most consumers will still download their apps from centralized marketplaces like Apple's App Store or Alphabet's Google Play. Tighter regulation, liquidity problems on cryptocurrency exchanges, and the collapse of smaller altcoins will also prevent new buyers from entering the market.

The bears point out that other environmentally friendly blockchain-based cryptocurrencies such as Solana and Avalanche, which also support smart contracts and other Web3 technologies, are not yet gone. These competitors may continue to gain momentum, especially if the long-awaited Merge update is delayed.

Last but not least, the darkest bears will argue that the whole crypto bull market was just a mirage created by low interest rates, stimulus measures, and a temporary spike in speculative trading last year. According to Coinbase CEO Brian Armstrong, when these favorable factors subside, a new "crypto-winter" will begin, which probably won't end until the macroeconomic situation improves.

The main catalyst for Ether is still months away, but interest rates will continue to rise for the foreseeable future. Even if broad markets stabilize, bargain hunters are likely to buy battered growth stocks, which are much easier to value than speculative cryptocurrencies. Even if investors turn their attention back to the cryptocurrency market, bitcoin will attract more attention than ether because it is still a major cryptocurrency.

So we still think it's not safe to buy Ether - or any other cryptocurrency - as long as investors avoid the more speculative investments in the market.

Comment: