24th Dec 2020

How Much Will Ethereum Be Worth in 2021

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In the crypto space, everyone seems to be talking about Bitcoin. Investors just cannot get enough of the crypto king, it seems. Understandably so. Bitcoin entered the year just north of $7,000 and BTC USD rose more than 200% to hit a new record high of $24,000 on December 21. While Bitcoin stole the limelight, the next largest cryptocurrency - Ethereum – delivered an even more phenomenal performance, climbing almost 400%. 

Amid the coronavirus-driven market downturn, Ethereum plummeted in March, from over $200 to below $90, reaching double-digit figures for the first time since 2018. However, the cryptocurrency didn’t look back after that, rising through the year to peak at $673 on December 17. 

Ethereum 2.0

Ethereum has found favour with many dedicated investors over the years. As it does not have a fixed supply and was created to facilitate smart contracts, Ethereum is considered far more scalable than Bitcoin or other altcoins. Ethereum did go through a fundamental shift this year. On December 1, it launched ‘Phase 0’ to mark a shift from proof of work to proof of stake. The transition to Ethereum 2.0 represents a significant increase in functionality. With this, the cryptocurrency is now backed by a highly sustainable network that is faster, cheaper, and much more environment friendly (consuming far less energy). 

Many of Ethereum’s ardent fans believe that the transition to a proof of stake network, known as Beacon Chain, will make this altcoin the de facto cryptocurrency in a couple of years. In fact, there is so much hype around Ethereum’s move to the PoS network that some go as far as to say that this altcoin will become the de facto currency of the world.

Such speculation has gained more momentum than it otherwise would, with the debasement of fiat currencies in 2020. Although the euro had a good run, investors turned their back on the quintessential safe-haven currency – the US dollar. The greenback fell to almost three-year lows amid rising covid-19 cases and deaths in the US, uncertainties around the US Presidential elections and delays in the US government’s coronavirus relief package. With this, crypto became the go to asset instead of FX currency pairs.

What to Expect in 2021

Cryptocurrencies gained significant credibility in 2020, finding favour among institutional investors and payment solutions providers, like Square and PayPal. There’s no reason why this would not continue to boost the crypto space next year, lending upside to Ethereum. 

The rollout of Beacon Chain has placed Ethereum at the forefront of the DeFi (decentralised finance) boom. Andrew Peel, Head of Digital Asset Markets at Morgan Stanley, said he expects the interest in DeFi to continue to grow in 2021.

Markets look forward to an end of the pandemic in 2021, with vaccines being launched earlier in the year. Even if this happens, economic and political uncertainties are likely to persist in 2021. Various governments have planned the injection of funds into their economies next year. On the other hand, the leading central banks of the world are likely to hold interest rates at all-time lows. All these factors could continue exerting pressure on fiat currencies, supporting cryptocurrencies.

The Brexit transition period would have ended and there could be policy swings before the new UK-EU relationship settles. The new US President will take office next year, with the Senate probably being controlled by the Republicans. These developments could also act as tailwinds for cryptocurrencies as well as Ethereum and Bitcoin CFDs, which have gained prominence in investor portfolios as a hedge against pollical and economic uncertainties.

Predictions for Ethereum in 2021

The overall sentiment is optimistic for Ethereum, which is the second-largest cryptocurrency, both in terms of market capitalisation and daily trading volumes. 

Online forecasting service projects Ethereum’s price to cross $900 by the end of next year. Crypto forecasting service WalletInvestor projects Ethereum to trade around $800 next month and surpass $1,000 by November 2021. News website BeInCrypto is far more bullish, expecting the coin to reach about $2,800 by yearend 2021.

Various analysts believe Ethereum has the potential to surge to as high as $10,000 by 2025. What is for certain is that the interest in Ethereum will be high for 2021.
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