Citigroup has unveiled its fresh forecasts for ether (ETH), projecting a year-end price of $4,300, down from its current value of $4,515. This forecast underscores a considerable range of outcomes, with a bullish scenario potentially seeing ether reach $6,400, while a bearish case could see it plummet to $2,200, reflecting the volatility inherent in cryptocurrency markets.
In their assessment, Citi analysts identified network activity as the primary factor influencing ether’s valuation. However, they noted that a significant portion of recent growth has been seen in layer-2 networks. The relationship between this growth and the evaluation of Ethereum’s base layer remains somewhat ambiguous. The analysts estimated that only about 30% of layer-2 activity contributes to ether’s overall valuation. Current ether prices, they suggest, appear to be inflated due to significant inflows and heightened enthusiasm surrounding tokenization and stablecoins.
The report further clarifies the distinction between layer 1 and layer 2 networks. A layer 1 network refers to the foundational infrastructure of a blockchain, whereas layer 2 pertains to external systems or separate blockchains that are built upon the layer 1 infrastructure.
In terms of investment flows, although exchange-traded funds (ETFs) for ether are significantly smaller compared to those for bitcoin (BTC), Citi points out that the price impact per dollar invested is more substantial. However, they anticipate that ETF inflows will remain limited due to ether’s smaller market capitalization and lesser visibility among new investors.
From a macroeconomic perspective, Citi analysts expect only modest support for ether’s price movement. With risk assets, including equities, already hovering near the bank’s target for the S&P 500 at 6,600, significant upward momentum is not anticipated in the near term.
