TL;DR: Cryptocurrency is a life changing opportunity for many people that get in early and know what they’re doing. It’s happening with ETH and it will happen with other tokens on Ethereum as well. 

It’s safe to say the crypto industry is still in its infancy with gigantic room left to grow. Ethereum crypto tokens might be quite a good investment, but you have to know how to asses the status of the ETH network and its future value.

In this article, we’re gonna learn how to judge the economics of a blockchain such as Ethereum and draw a conclusion based on it.

Should you buy Ethereum (ETH)?

With a total predicted market cap of $15 trillion by 2025, crypto investing is clearly on the rise. Over the past few years the crypto industry has maturated from “magic internet money” into fully fledged companies that are on their way to become major financial institutions.

From the 40 year old Bitcoin maxi to the 15 year old who flips JPEGs as a side hustle, putting some money in novel technologies such as cryptocurrencies is now a trending activity for investors of all ages. The new generation didn’t get their shot at investing in the tech giants of today, and crypto is seen as the next big technological revolution.

Why is that you ask? To put it short, traditional assets have reached their explosive peak. Digital assets such as tokens, coins, and NFTs are a new financial instrument that you can use to better diversify your investing portfolio.

Tired of small returns people are shifting their attention to more compelling assets — but that also comes with several downsides. Navigating these downsides and preparing yourself for what to expect when buying tokens is a crucial part of investing. Knowing all the intricacies is not always necessary but some knowledge is required to not blow up your account by investing in crypto.

Ethereum is a cryptocurrency and as any other cryptocurrency, it’s prone to volatility. After seeing the performance of the Ethereum chain it’s understandable to ask yourself if ETH is a good buy right now.

Buying its native ETH token is one of the possible ways of making money on Ethereum, but is it worth it? What does ETH do and is Ethereum the future? 

A clear answer to these 2 questions is needed before allocating a part of your portfolio to $ETH.

Ethereum’ was launched in 2015 and introduced the concept of smart contracts at a global scale. Being one of the early chains to emerge, Ethereum has fostered a vibrant community of validators that ensure the network works without a single outage, in a secure manner. 

At its core, the network can only handle 17 TPS. However, layer-2 solutions such as Optimism and Arbitrum are helping Ethereum scale by processing transactions in a faster and cheaper way. All that without compromising on Ethereum’s security.

Even after Ethereum’s transition to Proof of Stake, the network maintains its decentralization. This is in part thanks to the low hardware requirements for setting up a node and the emergence of decentralized staking services.

Why does Ethereum (ETH) have value?

The ETH token is named as “the common unit of account” of the Ethereum ecosystem.

In simple terms, ETH is the native token for the Ethereum blockchain. It is used throughout the ecosystem and has many use cases.

Ethereum is the network (also called blockchain), and the $ETH token is the fuel that powers it. Every interaction on the Ethereum chain requires users to pay a small fee, called gas fee. The gas fee is paid to miners & validators in exchange for securing the network.

Having no fees or a fee that is too low opens up the network to attacks and spam transactions. Blockchains work on the premise that attacks should be very expensive. If the fee is cheap attackers can spam transactions and clog the network. This is the case we’ve seen with blockchains such as Solana.

In the instance of Ethereum, its native ETH token is used by both validators and users. Both of these network members (or “actors”) need $ETH for different purposes. This creates an economic structure that is healthy for the future of the ETH token.

Validators need to stake $ETH to confirm transactions and produce new blocks. Such a rule is implemented so that malicious validators can get sanctioned if they try to attack the network. Being stable and immutable at all times are the primary scopes of a blockchain, everything else comes second. If a validator tries to include a bad transaction in a block then its stake is cut — a concept known as “slashing”.

Using the Ethereum blockchain also requires some ETH, regardless of the type of transaction being sent. Users pay a small fee in ETH to validators for verifying and including their transaction in a block.

Ethereum’s “Casper the Friendly Finality Gadget” consensus mechanism requires ETH tokens to be used as a measure for preventing bad behavior. Without it, users cannot make transactions and validators cannot join the network. With this in mind we can conclude that the main use case of the $ETH token is securing the Ethereum blockchain. 

Can the usage of the network affect the price of Ethereum (ETH) tokens? 

As more people join the network and use Dapps on Ethereum it impacts the dollar amount that new buyers will have to pay when buying ETH coins. If more users join the network, that puts economic pressure on the supply of the ETH token. A bigger number of people will need to buy ETH tokens — making the price of Ethereum go up as more people use the chain and the dapps on it.

This also has an effect on the actors that validate the transactions users make on the network. More people means more transactions, and more transactions means more fees. 

So the more people use the network, the higher the revenue for all validators becomes. As the revenue grows, more validators join the network, buying and staking ETH tokens to participate. 

This correlation between network usage and the value of the native token is a natural occurrence in Proof of Stake blockchains such as Ethereum. It is also what gives the ETH token its primary monetary value. How high that value can be is detailed in the next sections.

Why is Ethereum (ETH) going up/down?

Ethereum, like any other cryptocurrency is volatile by nature. When you see the price suddenly go up or down, it’s normal to ask yourself why that happens. 

The price of a cryptocurrency is influenced by many factors like supply, usage, vesting schedule and market sentiment. Due to its tokenomics, the ETH token is inflationary, meaning the price is naturally trending downwards. Because tokens are being released over time this results in selling pressure from investors. 

But that does not mean it can’t go up or down in price based on how much the Ethereum blockchain is used. Usage is usually the key metric that influences the price of a token.

A negative event such as the DAO hack or a spike in network fees can have broader implications for investors and result in the token price going down.

Positive events such as the release of EIP-1559 or partnerships such as Palm NFT Studio joining the Enterprise Ethereum Foundation gives confidence to investors in the long run.

This brings more users to the Ethereum ecosystem and usually has a positive impact on the price, making it go up. Other parts of the Ethereum tokenomics can also influence the price, let’s see what those are.

A portion of a token’s supply is usually locked at launch, with the rest being slowly released in time. This can mean months, years or even decades — so it’s important to know the specific timeline of the chain you’re investing in. Such releases are mentioned in official documents such the Ethereum roadmap or whitepaper.

Scheduled vesting unlocks and investors selling their newly unlocked tokens can put selling pressure on the token. This can make $ETH — the fuel of the Ethereum chain — go down in price temporarily. 

However, as long as usage continues to grow that shouldn’t have too much of an impact in the long-term. The price of a coin is a complex number that stands on top of many pillars that are constantly changing. 

Blockchains are resilient by design and have a couple of measures implemented at the protocol level to combat possible issues. This ensures the Ethereum network can still function or in the worst case come back online at a later time, unaffected. Unless a catastrophic event occurs it's impossible to pinpoint the price movement to one single cause.

Can ETH reach $10,000 per token?

Buying and hodling ETH — the native token of the Ethereum chain — is one way of potentially making money on Ethereum.

By looking at its current price, it’s natural to think about the chance of ETH hitting $10,000 per token. This can happen sooner, or way in the future, and is determined by a couple of ever changing factors.

Let’s examine the potential growth of the ETH token by analyzing its tokenomics. Ethereum’s current market cap sits comfortably at ${MARKET_CAP}. With {CIRCULATING_SUPPLY} Ethereum tokens being in circulation today, that means a price of {PRICE} per ETH.

How did we come to that calculation? It’s quite easy, the price of an Ethereum token is equal to its current market cap divided by the number of tokens in circulation. Dividing ${MARKET_CAP} by {CIRCULATING_SUPPLY} gives us a result of {PRICE} for each ETH coin. 

By changing the order in the simple formula above we can use it to calculate other things as well. This helps us a lot because we can deduce the market cap of Ethereum at different token prices. Then, we can use the result to compare it to the current state of the network and see what would be required for Ethereum to hit that price.

At a price of $10,000 per token, that means the current market cap of Ethereum would equal ${{CIRCULATING_SUPPLY} * 10000}. Remember that we arrived at this number by multiplying the amount of circulating tokens by $10,000.

Now let’s shift our attention to the fully diluted market cap.

Some blockchains may have their tokenomics built in a way that only a small percentage of tokens are circulating at the beginning. This can be misleading because we don’t have the full picture and only take into account the current number of coins released in the market.

The fully diluted market cap represents the total value of a coin if all tokens were in circulation. Ethereum’s whole supply of tokens is {MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} ETH which means that no more coins above that number will ever be created.

Ethereum has no maximum supply, which means there’s no cap on the maximum of tokens that can be issued.

These tokens are not created at the discretion of a specific entity. They are created automatically by the network to reward different actors that keep it secure.

How does this impact the price of Ethereum? Taking into account the current price of an ETH token, that would result in a fully diluted market cap of ${MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY * PRICE}. ETH coins that have been burned are not taken into consideration because they have been permanently removed from circulation.

Whether it seems gigantic or not, the number we came to above only takes into account the current price of an ETH token. Doing the same calculation but with a price of $10,000 gives us a result of ${{MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} * 10000} for the Ethereum network fully diluted market cap.

These are all crucial details to know when calculating if Ethereum can reach the price of $10,000 per token. If the diluted market capitalization is way too high, the token has little room left to grow. Blockchains in general have no cap on the value they can reach, whether that number seems possible it’s totally up to you.

The future of Ethereum depends solely on its growth as a network used by tens and hundreds of millions of users.

If you’re looking to add some Ethereum (ETH) to your portfolio, the most trusted places to get some are Binance and Coinbase.

Can ETH reach $100,000 per token?

Let’s get to bigger feats now, a price of $100,000 per ETH token. If $10,000 got your attention, a thousand bucks for a single token definitely made you interested about buying some, but is that even possible?

As noted before, we should refer to the total market cap when thinking about the possibility of Ethereum reaching a certain price. The fully diluted capitalization formula is a simple and fast way of assessing the future growth of chains such as Ethereum (ETH). 

At a price of $100,000 per ETH, that results in Ethereum being worth ${{MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} * 100000}. If that number seems high to you, well.. that’s because it is. Such valuation would make the entire Ethereum chain one of the most valuable networks in the world.

While usually reliable, the fully diluted marketcap formula has one small caveat that usually gets overlooked. This small detail might make all the difference in the world when thinking about investing in Ethereum.

The issue with such a simple calculation is that it doesn’t take into account the specifics of each chain. We are not talking about the features of the underlying technology, but rather the future events that might impact it. If the fully diluted market cap is too high it increases the efforts needed for the network to sustain such a price. 

Outliers have been observed, and it’s definitely possible for a cryptocurrency to reach a mind boggling capitalization. The most clear examples of that are giants such as Bitcoin and Ethereum. 

Being the one of the most valuable assets in the world, they have already broken the monetary barriers that a blockchain network can reach. But how did they do it? The answer is pretty simple, but doing it is quite the opposite.

The future growth of the token price is usually tied to the growth of the underlying chain that it powers. Constant updates, sustained development and users joining the platform are notable factors to take into account. 

If the founding team continue to deploy updates that make Ethereum competitive it will result in numerous interested developers building on it. Developers will be incentivized to build revolutionary Dapps on Ethereum and amass new participants to the network.

Whether sooner or later, this will be clearly reflected in the ETH price. Users will come in and put buying pressure on the ETH token, raising the price in return.

So, while a price of $100,000 is theoretically possible — and maybe even more than that — the future growth depends on relevant updates that increase the actual usage of the Ethereum chain.

What a network does and the way it grows directly affects your investment in it. It is rare that you can buy a coin and then forget about it for months or years. 

If staying up to date with the events in the Ethereum ecosystem is important to you then make sure to follow the latest ETH news that come out.

Is Ethereum (ETH) dead?

If the price of a coin has stagnated for a long time, it’s healthy to ask yourself if the project has indeed died. Price, however, is not the only factor that should lead you to this assessment. 

There are many other parts in the lifecycle of a blockchain that have to function properly for it to keep growing. Another important factor is the activity of the Ethereum development team.

If the development team, or Ethereum developers in general, have signaled the abandonment of the network that’s a bad sign for the Ethereum ecosystem. Lower development activity on the Ethereum network means fewer dapps being built.

A blockchain such as Ethereum gets its users from the number of dapps released on it. They’re the primary motive to use a smart contract platform such as Ethereum, without dapps there’s no incentive to use it.

The fewer dapps are available, the less users want to use the Ethereum blockchain for their transactions. When more dapps get deployed, new use cases become available and more users join the Ethereum (ETH) ecosystem. 

Currently, the Ethereum (ETH) blockchain is thriving both in dapps and development activity. This translates into a healthy ecosystem and new participants that join the network. With increased usage of the network comes more fees to validators, which are incentivized to spin up more nodes and further decentralize the network. 

This cycle needs to always function smoothly to keep Ethereum and its ecosystem alive. To asses the current status and future of a network we need to take a look at the latest updates and plans.

The biggest updates on the Ethereum (ETH) chain are EIP-1559 and the transition to Proof of Stake.

More updates are also prepared for Ethereum, with the release of sharding being the most important one.

You can keep up to date with developments in the Ethereum ecosystem by following the most recent news that come out. The two main ways to do that is to periodically check all the Ethereum (ETH) specific web pages, or by following a central news source that posts updates as soon as they happen. 

Even if the network growth starts to stagnate, knowing about it just a bit too late can make your whole investment worthless.