Ethereum (ETH) price started 2023 on a positive note as investors seized their buying opportunity. ETH has been rallying for a few days and is currently trading at $1,218.
This price is about 36% above its 2022 low, bringing its market capitalization to nearly $150 billion.
Can ETH recover?
Ethereum has seen many ups and downs in 2022, as have most stocks and cryptocurrencies. After surging nearly $5,000 in ETH price in November 2021, the coin dropped to a low of $882 in June 2022.
There were three main reasons for this accident. First, the Federal Reserve has adopted an aggressive tone in its monetary policy. As inflation soared, the US Federal Reserve raised interest rates by 450 basis points and began quantitative tightening. This has been positive for bonds, but risky assets like stocks and cryptocurrencies tend to underperform during a period of tight monetary policy.
Second, the price of Ethereum plummeted due to the turmoil in the crypto industry in 2022. In May, Terra crashed, resulting in losses of over $40 billion. A series of bankruptcies of major crypto companies followed, including Three Arrows Capital, BlockFi, Voyager Digital and Celsius. Finally, in November, the world’s second largest crypto exchange, FTX, collapsed.
The third reason for the fall in ETH prices was the poor performance of this ecosystem. The total value of deposits on DeFi platforms has fallen from over $150 billion to less than $50 billion. Similarly, in 2022, the volume of NFT transactions and user activity in the metaverse have dropped.
Still, there are reasons to believe that the price of Ether could rise further in 2023. If the US Federal Reserve stops adopting a hawkish stance as inflation appears to be falling, it will have a positive impact on all cryptocurrency prices. Some analysts expect the bank to raise rates to 5.1%, but then take a strategic break.
The collapse of FTX may also eventually have positive consequences. There is a high probability of clearer regulation of the crypto industry, which will boost investor confidence. Moreover, we have already seen that the problems with centralized crypto exchanges have prompted investors to switch to decentralized DeFi platforms. And since most of these platforms operate within the Ethereum ecosystem, this cryptocurrency will benefit.
Moreover, several Ethereum blockchain upgrades are planned for 2023, which could also have a positive impact on the price.
Ethereum Price Prediction
The price chart shows that ETH price found strong support at $882 in June. Despite all the issues, the coin failed to break below this level even as BTC crashed to $15,500. Still, Ethereum selling is supported by the 25- and 50-day moving average lines.
Additionally, a descending channel has formed, shown in black. The current price is in the middle. Ethereum price is expected to remain under pressure in the first quarter of 2023, but rebound thereafter if the Fed begins to ease monetary policy. If that happens, the next key resistance will be $2,500.
On this page we explain how to buy Ethereum.