Positive price predictions for Ethereum (ETH) are beginning to circulate.
Although ETH, like the entire crypto market, is also affected by Bitcoin’s four-year cycle, historically it has often performed better in terms of price during bull runs.
Typically, during bear-markets ETH suffers more than BTC, and during crypto winters it performs significantly worse than the world’s leading cryptocurrency. However, it then recovers during bull-runs.
Ethereum: past cycle performance and future price predictions
For example, during the previous cycle’s bear-market, i.e., that of 2018, Ethereum’s price performance had been close to -95%, compared to a -85% for Bitcoin. And during last year’s bear-market, compared to a -77% of BTC, ETH scored -82%.
All this despite the fact that in 2022 there was the Ethereum Merge, which is the replacement of Proof-of-Work with Proof-of-Stake that made ETH a deflationary currency.
However, if we look at the bull run, in 2021 ETH made +4,000% from the lows of the previous cycle, compared to +1,500% for BTC.
So it certainly seems that greater declines during bear-markets also mean greater rises during bull runs.
Right now, compared to the beginning of the year, the price of Ethereum is up only 37%, after -82% during the bear-market, while Bitcoin is already +63%.
In particular, if in January both ETH and BTC prices made a strong rebound, already in March the second rebound of the year was greater for Bitcoin than Ethereum.
Apart from the brief interlude in mid-April with the Shapella update, ETH’s 2023 has been underperforming compared to BTC, such that even the third rebound, in June, was much more pronounced for Bitcoin’s price than Ethereum’s.
In terms of declines, on the other hand, they more or less equaled each other, so if during the bear-market Ethereum’s price fell more, during the rest of the crypto winter it rose somewhat less.
The state of the Ethereum network and the outlook for its price
One thing that bodes well for the future, however, is the state of the Ethereum network.
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Indeed, as the latest Bitfinex Alpha report points out, Ethereum’s second layers are experiencing a substantial increase in activity, coming to process transactions overall at five times the rate of the main network.
This should increasingly lead to improvements in network scalability, and especially in the performance of Ethereum-based applications.
The Total Value Locked (TVL) of the Ethereum blockchain has remained stable at $21.45 billion, in recent times, but the total value of the second layers has more than doubled to $9.56 billion. These are still distant numbers, but getting closer.
The hypothesis that in the event of a bull run the price performance of ETH could once again outperform that of Bitcoin is based primarily on the increased use, and thus adoption, of Ethereum. To achieve this requires second layers to enable as many people as possible to transact faster and faster, and especially at lower costs.
For example right now the average cost of a transaction recorded on the Bitcoin blockchain is less than $2, while on the Ethereum blockchain it turns out to be over $3.5. In other words, currently on-chain transactions on the Ethereum network cost almost twice as much as those on the Bitcoin network, and this is despite Ethereum’s move to PoS.
The future of the network therefore runs precisely through second layers.
Bitfinex analysts commented on the report saying:
“Over the last week, the Ethereum chain has gained $17.4 million alone. Ethereum has also been deflationary since the beginning of the year and is being perceived as a solid investment. August saw the burning of 72,117 ETH, which equates to a substantial $126.5M.
Notably, Ethereum has been a deflationary asset since January 2023.Since the rollout of Ethereum Improvement Proposal-1559 (EIP-1559) in August 2021, a total of 3.58M ETH, valued at $10.17B, has been burned. This indicates the continued impact of the EIP-1559 mechanism on the supply dynamics of Ethereum.”