Several Ethereum price predictions see the nascent cryptocurrency reaching $500 by the end of 2017, regardless of the current pullback.
Yesterday (Monday), the price of Ethereum sunk as low as $209.55 on the CryptoCompare index, a 49.77% drop from the all-time high of $417.21 set on June 12.
Ethereum, a digital currency cousin to the better-known Bitcoin, attracted investor attention this year as it skyrocketed as much as 5,000%. On Jan. 1, the price of Ethereum was just $7.98.
At this point, an Ethereum price forecast of $500 may look like wishful thinking. But investors can't get distracted by the short-term volatility, no matter the severity.
Bitcoin has already taught us that dramatic price gyrations come with the territory. Plus, the Bitcoin price history has also shown that steep drops are, sooner or later, followed by a full recovery and a climb to new highs.
Ethereum has a shorter track record, having launched in 2015. But it has followed Bitcoin's resilient example once already...
The Rise and Fall of the Ethereum Price in 2016
Last year the price of Ethereum rose as high as $21 before a major Ethereum-based project, the DAO (Decentralized Autonomous Organization) was hacked, putting as much as $60 million worth of invested funds at risk.
While the Ethereum Foundation created a "fork," a new version of Ethereum to counter the hack, the damage to Ethereum's reputation resulted in an extended price decline to about $7 - a drop of 67%.
But in January 2017, the Ethereum price reversed course. It blew past last year's all-time high in March and then accelerated. Anyone who threw in the towel last fall missed out on huge gains.
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The current correction in the price of Ethereum is just that - a correction. Clearly, a 5,000% gain in five months was excessive, even for a cryptocurrency with as much promise as Ethereum.
Don't forget that, even with the dramatic fall in the price of Ethereum this week, the cryptocurrency is still up more than 29% over the past month.
And even with all the volatility, the underlying case for larger long-term gains hasn't changed, just as with Bitcoin. Significant price drops are opportunities to buy at a discount before the next big rally.
Going by the Ethereum price prediction of $500 by the end of the year, that rally is just around the corner.
An Ethereum price of $500 represents a doubling from the current price of about $250 (as of midday Tuesday).
Here's why Ethereum will get there...
Why an Ethereum Price Prediction of $500 Is Attainable
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Ethereum price predictions are not as common as Bitcoin price predictions. And in some ways, Ethereum is harder to value.
But some leading members of the Ethereum community have made compelling arguments for an Ethereum price of $500 by Jan. 1.
One is Ken Liu, a cryptocurrency trader and consultant. Liu points to the rapid growth in the number of daily Ethereum transactions.
Over the past week, the number of Ethereum transactions has averaged about 260,000 per day - a 519% increase over the average of 42,000 transactions at the start of the year.
The number of new unique Ethereum addresses (required to send and receive the Ethereum tokens) has increased from 943,417 on Jan. 1, to 3,646,944 as of yesterday - a 287% increase.
"Cryptocurrencies, like social networks, have extremely strong network effects," Liu wrote in a Quora post in May. "As the adoption of Ethereum continues to grow, its utility and value will grow exponentially."
Daniel Mark Harrison, the chair and CEO of global investment company DMH&CO., believes Ethereum will end 2017 in the $480-$550 range. Harrison touts Ethereum's ability to run apps on its network, like a giant computer, as the key to driving the value of the digital currency.
"Ethereum employs most of the architecture for the Internet of Things economy that we've been talking about in the mainstream press for the best part of the past three years now," Harrison wrote in an article on the Coinspeaker website (where he serves as editor-in-chief).
Ethereum's programmability - a trait Bitcoin does not have - has proven a major selling point to large players in the financial industry seeking to harness the blockchain technology that underpins all cryptocurrencies...
Ethereum Has Many Catalysts Pushing the Price to $500
The formation of the Enterprise Ethereum Alliance (EEA) in February helped spark Ethereum's parabolic rise. The 116 EEA members include such giants as Toyota Motor Corp. (NYSE ADR: TM), JPMorgan Chase & Co. (NYSE: JPM), and Intel Corp. (Nasdaq: INTC).
Ethereum is also the foundation of many of the ICOs (initial coin offerings) we've seen over the past year. ICOs can raise millions of dollars in a matter of seconds.
These ICOs offer digital tokens that serve a specific purpose and are integrated in to a company's business model. Most ICOs require investors to use either Ethereum or Bitcoin to buy the tokens.
International interest in Ethereum also has intensified this year.
Russia ended its opposition to cryptocurrencies in April. A few weeks later, Russian President Vladimir Putin was meeting with Ethereum creator Vitalik Buterin.
Investors in China and South Korea have also shown a growing interest in Ethereum. South Korea has accounted for between 20% and 25% of all Ethereum trading over the past few months. Two of the major Chinese exchanges, OKCoin and Huobi, added Ethereum trading in May. China accounts for about 11% of global Ethereum trading now.
That's a lot of new money flowing into Ethereum. And many of those relatively new to cryptocurrencies view Ethereum as their chance to get in early before the price gets up to Bitcoin's levels.
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About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.