Wall Street powerhouse Citigroup has recently published its latest projections for ether (ETH), predicting a decrease to $4,300 by the end of 2023. This figure represents a drop from the current trading price of approximately $4,515.
This forecast, labeled as the bank’s base case, is part of a broader analysis that encompasses a wide range of potential outcomes. In addition to the bearish base scenario, Citigroup outlines a bullish case that sees ether potentially rising to $6,400. Conversely, the more pessimistic bear case anticipates a decline to as low as $2,200.
Citigroup analysts attribute ether’s value primarily to network activity, which they say remains the predominant influence on prices. However, they noted that much of this recent activity is occurring on layer-2 solutions—secondary frameworks built atop the Ethereum mainnet. This raises questions regarding how much of this activity translates into value for the core Ethereum network.
The bank estimates that only about 30% of transactions and activities on layer-2 solutions contribute to the overall valuation of ether. This assessment suggests that the current ether price may exceed what is justified by its activity-based valuation model. The discrepancy is attributed to robust inflows into the Ethereum ecosystem, fueled by growing interest in tokenization and stablecoins.
In the world of blockchain, a layer-1 network refers to the foundational structure that underpins the blockchain technology, while layer-2 solutions enable more scalable and efficient transactions built on top of it. This separation allows for improved functionalities without overburdening the primary network.
While the inflows from exchange-traded funds (ETFs), although less robust compared to Bitcoin (BTC), are noted to impact ether prices more significantly per dollar invested, Citigroup remains cautious about the future momentum of such investments in the ether market. The analysts expect ETF flows to remain subdued due to ether’s smaller market capitalization and relatively low visibility among new retail investors.
Beyond specific market dynamics surrounding ether, Citigroup also considered broader macroeconomic factors, concluding that they could provide only modest support for risk assets like cryptocurrencies. With major stock indices already hovering around the bank’s projected S&P 500 target of 6,600, the analysts do not foresee substantial growth opportunities for riskier assets, further complicating the outlook for ether.
Overall, Citigroup’s analysis highlights both the complexities of the current ether market and the challenges that lie ahead for Ethereum as it navigates its transition and ongoing adaptation in the burgeoning landscape of digital assets.
For those invested in or considering ether, understanding these factors will be crucial as they assess the evolving market conditions and potential future price movements.
