In recent years, Ethereum has managed to make a name for itself as what is now the second-largest cryptocurrency, but can it reach $10000 and make another round of headlines? With its initial release in 2015 being fairly recent, its unique characteristics and active development have fuelled investor confidence ever since. Despite a fairly significant dip in 2018, the cryptocurrency has been on an overall upward trajectory and many investors believe that it is on track to once again hit its previous peak of around $1400 USD in the short term.
With this being said, there are a number of variables at play when it comes to the performance of Ether in the longer term. Whether or not it can reach $10,000 USD in the next five years will come down to the consideration of factors such as its functionality, security, and energy efficiency, as well as the development of a series of upgrades called Ethereum 2.0.
The Promising Characteristics of Ethereum
As an open-source blockchain, Ethereum is innovative and has a number of characteristics that make it one of the most functional – and the most actively used – blockchains in the world. Its goal is to be both a software development platform and a decentralized mining network. So, a significant reason for the popularity of Ethereum is that it can support financial transactions, as well as Dapps and smart contracts.
For a brief overview, Dapps are essentially software applications where the backend code runs across a peer-to-peer distributed network, as opposed to a centralized server. This removes the central point of control, and has immense potential – Dapps that are currently popular include Axie Infinity (an intriguing play to earn game) and Uniswap (an exchange that allows for decentralized token swaps). These Dapps use what are called smart contracts – essentially, a smart contract forms code that operates on the Ethereum network – it allows transactions to happen and be processed by the blockchain, resulting in the lack of a need for a third party. This is what forms the backend of a Dapp. In November of 2020, the top 10 Ethereum Dapps attracted over 1 million users. Ultimately, these factors indicate that ethereum has long term value.
Another reason as to why Ethereum might reach significant heights in the next few years is the development of Ethereum 2.0, of which the opening phase has already been completed. This implementation aims to change how the network settles payments, increasing transaction speeds, scalability, and security. Finally, on top of the fast transaction speed, that Ethereum offers, Ether can be easily bought and sold on almost all crypto exchanges, with an example being Independent Reserve.
The Downsides to Ethereum
Whilst there are a lot of factors that indicate a strong future for Ethereum, this doesn’t mean that the downsides should be overlooked – there are a few aspects of this blockchain that hinder its current potential.
Firstly, as previously mentioned, crypto doesn’t have the ability to support full-scale adoption as a result of the transaction volume required – Ethereum can process somewhere around 10 transactions per second, whereas the Visa payment platform has the potential to process over 45,000 payments per second. With this being said, Ethereum 2.0 is making changes to address
Secondly, a problem with Ethereum is in regard to its second-place status behind Bitcoin. The lack of popularity and awareness that it has in comparison to Bitcoin could overshadow Ethereum and impact the potential it has to succeed. Finally, the 2016 incident that saw the theft of Ether valued at $50 million USD raised concerns throughout the crypto space, and this alongside the 2018 crash in Ether value has appeared to
reduce the enthusiasm of investors to some extent.
The Wider Crypto Debate
Whilst the advantages to Ethereum might appear to outweigh the disadvantages, a significant aspect that will determine whether Ethereum reaches $10,000 in the next 5 years will come down to the crypto space in general and whether it can effectively become part of the mainstream.
In particular, with larger companies such as PayPal beginning to make public displays of confidence in crypto, retail investors are increasing and access to crypto exchange services is becoming more widespread. However, there are a number of factors that are reducing the demand for crypto – in particular, there is a barrier to entry in the difficulty of use associated with crypto. When other factors such as volatility, fees, and widespread misinformation come into play, it is clear that the crypto space has room for growth and improvement.
Ultimately, as Ethereum continues to implement Ethereum 2.0 changes and crypto continues to gain in popularity amongst both retail and institutional investors, it is clear that there is significant potential for the value of Ethereum to skyrocket. With the unique functionality and
extensive use that it has seen in comparison to other altcoins and Bitcoin, Ethereum has a number of factors that make it a great investment opportunity for the future. With all the above factors, only time will tell whether Ethereum reaches $10,000 in the next five years.