In a recent report, global financial powerhouse Citigroup has provided a forecast regarding the future of ether (ETH), predicting that the cryptocurrency could decline to $4,300 by the end of the year. This projection marks a decrease from the current price of approximately $4,515.
Citigroup’s analysis isn’t limited to a single perspective; the bank presents a spectrum of scenarios for ether’s price trajectory. While the base case anticipates the decline to $4,300, a more optimistic bull case projects a price of $6,400, whereas a more pessimistic bear case anticipates a price drop to as low as $2,200.
Analysts at Citigroup attribute the intrinsic value of ether largely to network activity. They note that while recent growth in the Ethereum ecosystem has been significant, much of it has occurred on layer-2 solutions. These solutions operate on top of Ethereum’s base layer, complicating the path for value transfer back to the original blockchain. Citigroup estimates that only about 30% of the activities on layer-2 networks contribute to the overall valuation of ether, suggesting that the current prices might be buoyed by speculative investments, enhanced user interest in tokenization, and the growing appeal of stablecoins.
In blockchain terminology, a layer 1 network refers to the foundational architecture of a blockchain, while layer 2 includes supplementary systems or independent blockchains that are built atop this primary layer. The distinction is critical, as many of the advancements and user activities currently happening tend to occur off the main Ethereum chain.
Citigroup further discussed the impact of exchange-traded funds (ETFs) on ether’s price movement. Although the capital flows into ether ETFs are smaller than those seen for bitcoin (BTC), the bank suggests that they exert a more substantial influence on price movements relative to the amount of money invested. Nonetheless, with ether’s market cap significantly lower than that of bitcoin, Citigroup anticipates that ETF interest will remain modest, implying limited visibility among new investors.
Macro-economic elements are expected to contribute only slightly to ether’s price support in the near future. With the S&P 500 already approaching Citigroup’s target value of 6,600, analysts do not foresee major upside potential for risk assets, potentially placing additional downward pressure on the cryptocurrency market.
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