Yesterday VanEck published a very positive forecast on the price of Ethereum.
In fact, they have declared that they have increased the target for 2030 to $22,000, thanks in particular to the news about the ETF on ETH spot, the progress in terms of scaling, and the on-chain data.
Summary
VanEck: The forecast of the price of Ethereum
The current price of ETH is around $3,800, and in fact, it has been oscillating around this level for about three months.
In the last three months, that is after the rise in February that took it from $2,300 to $4,000, it has been above the current level only at the beginning of March, while from mid-March to mid-May it had dropped to $2,800.
The year, however, had started right at the 2,300$ mark, so for now 2024 is to be considered a broadly positive year.
Despite this, the all-time high of 2021 is still far away, because it was recorded near $4,900, so at this moment the target for the current cycle seems to be $5,000, in the medium term.
However, it should not be forgotten that before the last great bullrun, that is in October 2020, its price was only $400, so the current price is already practically ten times higher. Furthermore, the peak of the previous cycle, recorded in January 2018, was below $1,500, that is less than half of the current levels.
All this has allowed some analysts to project the price of ETH even to $10,000 during the current cycle, and this makes VanEck’s forecast less daring than it might appear at first glance.
The forecast of VanEck on the price of Ethereum
The long analysis on the price of Ethereum shared by VanEck aims not only to hypothesize how the price of ETH might evolve over the next six years, but also and above all to identify the optimal portfolio allocation of investments in this cryptocurrency.
The analysis was conducted by Matthew Sigel, head of digital asset research, Patrick Bush, senior investment analyst in digital assets, and Denis Zinoviev, associate product manager.
The starting point is precisely the spot ETH ETFs, which should be nearing completion at the beginning of July.
This would allow financial advisors and institutional investors to hold ETH with the security of qualified custodians, and to benefit from the characteristic advantages of ETFs in terms of price and liquidity without having to worry about the custody of the tokens.
The second key point is the consideration that the Ethereum network will likely continue its rapid growth, particularly with regard to its market share compared to traditional financial market participants and Big Tech.
They even hypothesize that it could attract 66 billion dollars, which consequently should bring its market capitalization by 2030 to 2,200 billion dollars, compared to the current 460, and therefore to an ETH price of 22,000$.
It is worth noting that at this moment Bitcoin capitalizes about 1.400 billion, and the entire crypto market does not exceed 2.800.
This is therefore a very optimistic forecast, but it does not refer to the current cycle.
The cycles of the crypto markets
The crypto markets follow a cycle of about 4 years dictated by the cycle of Bitcoin halving.
Ethereum was born in 2015, during the second cycle of Bitcoin and a little over a year before the second halving of BTC.
What happened in April of this year is only the third halving of BTC experienced by Ethereum, moreover with the first one experienced just over a year after its launch.
So the first complete four-year cycle for Ethereum was the one that started in 2016 and ended in 2020, and it was precisely within that cycle that it recorded the all-time high at 1,500$ in January 2018.
Therefore, the almost $4,900 reached in 2021 is the all-time high only of the second complete cycle of the crypto markets experienced by Ethereum.
Furthermore, between the all-time high of the first complete cycle and that of the second, the price of ETH has marked a x3.2, and this seems to theoretically justify a rise even above $10,000 in this third complete cycle.
At this point, the prediction of $22,000 as the maximum price for the fourth complete cycle of the crypto markets experienced by Ethereum does not seem so far-fetched, while still remaining decidedly very optimistic.
The allocation in portfolio
In light of all these considerations, the extensive analysis by VanEck suggests that adding a modest allocation of cryptocurrencies (up to 6%) to a traditional 60/40 portfolio could substantially improve the portfolio’s Sharpe ratio, with a relatively lower impact on the drawdown.
Within this allocation of crypto to a maximum of 6% of the 60/40 portfolio, they state that
The allocation that provided the best risk-adjusted returns is 70% BTC and 30% ETH.
It should be noted that the hypothesis of allocating up to 6% in crypto is explicitly given as a probably good hypothesis, while the 70/30 split refers only to past performance. This seems to suggest that the crypto markets could change their general trend in the coming years.
The analysts at VanEck also add that investors should still consider their personal risk tolerance before making similar decisions, because crypto remains a high-risk investment.
However, I do not hide that it is precisely the data that suggests that a balanced inclusion of BTC and ETH within investment portfolios can offer enormous advantages in terms of improving returns compared to the incremental risk introduced.
It is however necessary to highlight both that VanEck has in its portfolio both BTC and ETH, as explicitly stated at the beginning of the analysis, and that it promotes some of its derivative investment products on crypto such as ETFs.
