Signs Of Life After Year Of Turmoil – Forbes Advisor Australia

Last year was one that will not be forgotten by many crypto investors. Not only was there a general decline in all asset markets, but crypto in particular experienced extreme volatility to the downside due to a number of catastrophes. From exchanges collapsing, lending platforms going bankrupt and major cryptocurrencies falling to zero overnight, 2022 was nothing short of a bloodbath.

However, 2023 has been much more positive for the digital asset markets. ETH, the native currency of Ethereum, has been one of the market leaders, rising over 50% since the start of the year, prompting more positive interest from investors who had previously deemed the crypto markets “dead”.

It is yet to be seen whether the digital asset markets can maintain the rally for the rest of the year. After the market made a push to highs not seen for almost a year, prices have stagnated for many currencies, including ETH.

ETH’s Outlook in 2023

This year brings a tide of change for the cryptocurrency market, following the traumatic memories of the past year. As the market has shown significant signs of life since the beginning of the year, investors have once again become optimistic about the outlook for digital assets, and in particular, for Ethereum. 

Grzegorz Drozdz, a market analyst at Conotoxia, reflects on this upswing, stating: “After a year of significant declines across the cryptocurrency market as a whole, 2023 seems to present a much more optimistic picture.” This optimism is, in part, due to key developments within Ethereum’s ecosystem that have reinvigorated investor interest.

In April, the Shanghai update was introduced, which brought a suite of new features and improvements to the Ethereum network. These enhancements increased the system’s efficiency, making it more user-friendly and versatile, ultimately boosting its attractiveness to both developers and investors.

Simultaneously, another update, Capella, was rolled out. This update significantly altered the dynamics of Ethereum’s staking mechanism. Drozdz explains: “An update called Capella was also introduced, which allowed investors to withdraw funds from cryptocurrency staking, i.e. making money from holding cryptocurrency.” 

Staking ETH, which involves locking some Ether tokens into a smart contract in order to earn rewards, became more flexible and investor-friendly because of these recent updates. This development has opened up new avenues for investors to earn returns, further strengthening Ethereum’s position in the crypto market.

These developments within Ethereum, combined with an overall positive market sentiment, paint a promising outlook for ETH, making it a cryptocurrency to watch closely.

Crypto to Fiat Currency: How Does the Price of AUD Affect Ethereum?

The link between digital coins like Ethereum and traditional money like the Australian Dollar (AUD) is more complex than it seems. It’s not just about how Ethereum is doing, it’s also about how the AUD is faring on the global stage.

As Drozdz explains: “In the case of Ethereum, when compared to the Australian dollar, the price of a cryptocurrency is not only dependent on sentiment towards the cryptocurrency itself, but also on the valuation of the Australian dollar in the markets.” So, the value of Ethereum in AUD depends on both how people feel about Ethereum and the global standing of the AUD.

Here’s an example: if the AUD weakens against other currencies, and people’s opinion about Ethereum stays the same, the AUD value of Ethereum would increase. In other words, for Australians, Ethereum would become more expensive, even if Ethereum itself hasn’t changed.

This connection is important for investors in Australia, or anyone trading in AUD. They need to watch not just Ethereum’s performance, but also the AUD’s.

And remember, it works both ways—Ethereum’s market performance can affect its AUD value, too. As Drozdz notes, Ethereum’s value doesn’t just reflect the AUD’s performance, but also depends on Ethereum’s own market standing. So, for effective trading, Australian investors need to keep an eye on both Ethereum and the AUD.

Related: Bitcoin to AUD Forecast

What Drives the AUD?

The Australian Dollar (AUD) is influenced by a mix of domestic and international factors. As Drozdz highlights, the AUD doesn’t exist in a vacuum; its value dances to the tune of economic indicators and global events.

A key factor that influences the AUD is commodity prices.

“Australia is a major commodity exporter, particularly of iron ore, coal, and natural gas,” Drozdz notes. When global commodity prices shift, the AUD often moves with them, due to Australia’s significant export earnings.

Interest rates also sway the AUD. These rates, set by the Reserve Bank of Australia (RBA), can make the AUD more or less attractive to investors. If Australia’s interest rates are higher than in other countries, this can boost the AUD as investors hunt for better returns.

Australia’s economic health is another influence on the AUD. As Drozdz points out, “Australia’s overall economic health and performance impacts the AUD.” So, strong GDP growth, low unemployment, and steady inflation can support the AUD, while weaker economic data could devalue it.

Finally, global economic trends also affect the AUD. Things like shifts in the world economy, geopolitical events, trade tensions, and changes in global monetary policy can all impact the AUD. Even how investors feel about other currencies, like the US dollar or Chinese yuan, can indirectly affect the AUD.

ETH to AUD: Six-Month Forecast

Predicting trends in the crypto world is a complex task, given the volatility of digital assets. Yet, understanding potential trends and influences can guide investors through this turbulent landscape.

Discussing the possible trends for ETH to AUD in the next six months, Drozdz underscores the significance of broader economic indicators. He states: “Factors that seem to be currently steering the broad cryptocurrency market include the likelihood of a possible change in policy regarding interest rates.”

Changes in interest rates, especially in economies like the US, can ripple across the crypto market. Weaker economic indicators might push Ethereum prices up, as investors might turn to crypto as an alternative investment. Drozdz suggests that the cycle of interest rate hikes could conclude by September this year, which could boost sentiment towards cryptocurrencies like Ethereum.

Yet, as Drozdz cautions, “Due to the lack of clearly defined fundamentals for the cryptocurrency, it is very difficult to predict what levels will be reached in the future.” The price of Ethereum, like other cryptocurrencies, is often driven by a shifting market sentiment, which can change quickly.

In the short term, ETH’s value, especially against AUD, seems largely driven by market sentiment. Looking forward to the next six months, both investors and observers should watch global economic trends, particularly interest rate changes, and shifts in sentiment towards Ethereum. Balancing these factors can give a clearer view of the crypto market, aiding decision-making in this fast-paced sector.

ETH to AUD: 12-Month Forecast

Predicting cryptocurrency prices for a long-term horizon, such as a 12-month period, involves a thorough evaluation of many elements. These range from broad economic indicators to specific factors related to Ethereum, like network upgrades and adoption rates. Drozdz’s insights are valuable in this context, providing a roadmap for possible trajectories over the next year.

Drozdz emphasis on interest rates as a key influence on Ethereum’s value, particularly in relation to a fiat currency like the AUD, is particularly noteworthy. It is well known that changes in interest rate policies, especially in major economies like the US, can have ripple effects on the crypto market. If these changes materialise by September as Drozdz expects, this could create a favourable environment for Ethereum, leading to potential price increases.

However, crypto markets are known for their crazy price swings, which can go both up and, of course, down. Echoing Drozdz’s sentiment, predicting exact levels that Ethereum might reach in the future is challenging due to this unpredictability. This sense of uncertainty becomes more pronounced over a longer period, especially with the global economic outlook remaining so uncertain.

Ethereum’s price will likely continue to be shaped by a mix of global economic factors, changes in the value of the AUD, and attitudes towards Ethereum itself. On the Ethereum-specific front, significant developments like successful network upgrades or increased adoption rates could also impact its value.

While precise predictions for the ETH to AUD pair over the next 12 months are difficult, keeping an eye on key influencing factors can help investors navigate this dynamic field. As always, staying informed and weighing potential risks and rewards before making investment decisions is key.