Other than PayPal’s launch of the MetaMask integration, which is positive news for Ethereum, recent news about the world’s largest smart contract blockchain is mostly a yawn.
Compared to last year this time, ETH is trading at a 68% discount, highlighting the exacerbated bear market of late.
But it’s also worth outlining that it was the cryptocurrency market’s most boisterous bubble with its most catastrophic collapse, knocking out one crypto business and altcoin after another in the wake of its fall.
What Will Happen With Ethereum (ETH) in 2023?
Will Ethereum– and its peers, Bitcoin (BTC) and Binance Coin (BNB) – rally in 2023, remain in an extended bear market, or capitulate even further in Q1 or Q2 of next year?
As long as Bitcoin’s coattails are in the crypto exchange sector – and with the high liquidity among crypto trading pairs and consequent unprecedented velocity of money through crypto exchange infrastructures – major altcoins like Ethereum are likely to share the same fate as BTC.
Just what will that fate be is the question all participants in this market are anticipating the answer to as well as dreading should there be any more shocks to their system.
So what follows, for your consideration, dear reader, are three near-ish term bear cases for Ethereum and three bull cases for the cryptocurrency powering the world’s oldest and strongest smart contract blockchain.
Four 2023 Bear Case For Ethereum (ETH)
Hawkish Fed Policy
The Federal Reserve recently raised its key rate – the federal funds rate – by 50 basis points, bringing it into the range of 4.25% to 4.5%.
The goal of this latest round of Fed rate hikes is to increase the cost of borrowing in the United States’ international banking system by making technical adjustments to its purchasing activities in vast money markets with U.S. banks and lending institutions.
The result is a stronger dollar in the floating exchange rate against other currencies.
That goes for foreign central bank fiat currencies (traditional finance – or TradFi) as well as for major, liquid digital assets like Ethereum. So as a result, Ether which trades against USDs and USD-pegged stable coins will depreciate in some value against the dollar.
All other things remaining equal, this would be a reason to be bearish on the price of Ether over the next two quarters. We’ll see if the Fed’s hawkish stance is a new secular monetary regime, or if the world’s most powerful central bank will back off of hikes in the face of a recession or overly deflationary dollar.
Bitcoin Maximalism and POW
Bitcoin maximalism and the fierce competition for capital between Ethereum and Bitcoin could cut BTC’s way against ETH depending on how things play out between the two.
The much-vaunted merge to upgrade Ethereum’s entire MainNet from a blockchain that achieved network consensus via proof of work to one that uses proof of stake (POS) is not without controversy.
Bitcoin maximalists believe that proof of work on the BTC blockchain is a singularly important development in the global, network-connected economy.
This is not an uncommon view among crypto enthusiasts that Bitcoin eventually will win out over Ethereum and even central bank fiat currencies, stealing massive amounts of Ethereum’s market share along what they believe is a moonshot to become the entire world economy’s reserve currency for final settlement and cross-border trade.
They have specific criticisms of Ethereum’s network consensus model and believe it is vulnerable to reaction from centralized and federalized corporate players. For instance, many Ethereum stakers under the POS model use Amazon Web Services cloud servers to host their nodes.
Extended Bitcoin Bear Market Could Drag Ether Down With It
As go the fortunes of Bitcoin, the world’s king crypto with the largest crypto market share by far – so goes the rest of the exchange market for cryptos.
Bitcoin’s future over the first half of 2023 is anybody’s guess, however, anyone waiting for the market bottom to be in for BTC should not hold their breath. Bitcoin keeps taking the hits as we round out the final quarter of 2022. The absolutely vicious crypto winter this year shows no clear signs of abating.
November’s break below the key psychological support level of $20K, where Bitcoin markets traded range-bound for since June, was the final nail in the coffin of any hope that it would be impossible for the Bitcoin price to sink any lower.
Four 2023 Bull Cases for Ethereum (ETH)
The Ethereum Merge and A Fundamental Analysis of ETH
Not only was the Ethereum merge the most impressive upgrade to a very sophisticated network distributed database in the history of the Internet, but it also went quite well without any significant hiccups up to date.
The sheer scale of investment by the programmable money’s stakeholders (80,000 depositors x 32ETH =~ $3 billion USD worth) is difficult to overlook in the long-term view of ETH as a digital asset worth investing in.
That doesn’t mean it’s worth buying at fever pitch bull market prices, but as far as prices have corrected from the last ATH, it looks cheap to me the longer it trades in
Shanghai Upgrade and Institutional Investment / Corporate Inroads
The Ethereum network has hardly been fully operational as a proof-of-stake network after the migration of Ethereum’s Mainnet to the POS Beacon Chain, yet a new one is underway.
The merge was accomplished via a two-step process called the Bellatrix and Paris upgrades. The next in line is the Shanghai upgrade.
It will come in March and will add some value to Ethereum by enabling users to withdraw staked ETH, but lookout – that could result in a lower trading value for the crypto as well.
Gas Fees, Usage and Developer Statistics
Before and after the Ethereum Merge earlier this year, crypto market watchers were debating whether or not it would lower gas fees on the network. While they’re not any lower than they were pre-merge, gas prices on Ethereum have not really gone up any higher than they’ve been since we were last in bubble territory.
Ethereum fees outside of bubbles have been remarkably stable over the years. The number of new projects and developments, meanwhile, continues to climb for the same fees. If we factor in the soaring rate of inflation for other commodities over the last macro market cycle, we could argue that Ethereum gas prices are cheaper now than before the pandemic and massive global expansion of fiat monetary bases.
The Ethereum Network continues to rank number one among blockchain-powered distributed computers in the number of new projects and development, in the number of new coins, tokens, and contracts minted, in all the fundamental measures of a blockchain ecosystem’s size, impact, relevance, and rate of healthy, useful growth.