The price of Ethereum (ETH) rose by more than 15 percent in the past 24 hours, shortly after the Federal Reserve of the United States allowed another significant rise in interest rates to combat inflation. The second-largest cryptocurrency by market cap was trading at over $1,500 as of Wednesday afternoon.
This comes on the heels of Ethereum’s price increase of 40 percent the previous week, which was triggered by the creators of the network publishing a tentative release date for the network’s major software update.
This upgrade, which investors and engineers regard to as “the Merge,” will change the sequence of transactions on Ethereum, so changing it into a system that is very effective and scalable for widespread use. It is presently planned to take place on September 19, but experts are waiting until then to see how investors and companies who are creating technology on Ethereum’s platform will respond to it.
The underperformance of Ethereum in 2022 thus far may be attributed by experts to increased anticipation for the network’s transition from proof-of-work to proof-of-stake, as well as a broader market retreat from risky assets. In June, the market for cryptocurrencies saw a precipitous fall when the Federal Reserve unexpectedly increased interest rates, cryptocurrency firms announced layoffs and suspended withdrawals, and the industry continued to face difficulties posed by regulatory authorities.
“After numerous delays, this week’s successful testing gives us confidence that the timeline is still doable,” says Ben Small, head of partnerships at GlobalBlock. “After several delays, this week’s good testing gives us confidence that the schedule is still attainable. As we get closer to the month of August, it may be good to keep an eye on these events since another wave of volatility may result if the subsequent round of testing fails to live up to expectations.”
The heightened volatility induced by war, consistently increasing inflation, and changeable U.S. monetary policy are all factors that analysts believe contribute to the increased volatility seen in the cryptocurrency market. The present situation of bitcoin pricing is attributed to a number of factors, including the link between the cryptocurrency market and the equities market, the increased prevalence of cryptocurrency usage, and recent price drops. Additionally, government officials have continued to take an active part in additional cryptocurrency supervision and maybe the formation of a state-backed digital currency. This is something that has been happening for some time now. A similar challenging stretch has been experienced by the price of Bitcoin in recent times.
The beginning of the year has not started off well for ethereum due to all of these factors. This week, the price of Ethereum has ranged anywhere from $1,100 to $1,600 at various points. The following is a comparison of the current price of ethereum to its daily high point throughout the course of the preceding several months:
Since hitting a high of $4,100 on December 27, the price of ethereum has ranged anywhere from $2,100 to $4,000 throughout the course of the succeeding days. Despite the poor start to the year 2022, a number of experts continue to maintain an optimistic outlook, predicting that the price of ethereum would either reach or even exceed $12,000 this year.
In spite of the recent drop, the price of ethereum remained quite strong as the year 2021 drew closer. After breaking above the $4,850 barrier on November 10, Ethereum reached a new all-time high, which it maintained throughout the month of December before beginning to move in the other direction towards the end of the same month. Despite the steep drop in value at the end of the year, Ethereum finished the year far higher than it started. In January 2021, the price of one ether was only a hair over one thousand dollars.
In a manner similar to that of Ethereum, the value of bitcoin has leveled out over the course of the last month after a successful November; on November 10, the value of bitcoin topped $68,000, marking a new all-time high. The price of bitcoin and ethereum is anticipated to vary much more in the future, and the recommendation that financial professionals provide to investors has not altered.
When making any kind of wager with a lengthy time horizon, experts recommend disregarding volatility. Even while Ethereum’s price has been relatively stable as of late, this does not mean that the cryptocurrency has become less volatile.
If you own these coins, the key question is whether or not their value will continue to appreciate at a compound and exponential rate in the future. Jeremy Schnieder, the resident investment guru at Personal Finance Club, is not of the same opinion. His argument is that “there is nothing in the fundamentals of cryptocurrencies that implies that the conclusion is yes.”
Because there is no way to know for certain that the value of any cryptocurrency will rise in the future, financial experts advise putting no more than 5 percent of your portfolio into cryptocurrencies. Never allow the pursuit of other financial goals, such as paying off a debt with a high interest rate or saving for retirement, to come at the price of your investment strategy.
If you have already accomplished all of these goals, the most prudent thing for you to do is to ignore the enthusiasm around new record highs or lows. As is the case with more traditional forms of long-term investing, the optimal strategy is to “set it and forget it,” a personal finance expert named Humphrey Yang, who is also the creator of Humphrey Talks, said in a recent interview with NextAdvisor.
