Ethereum (CRYPTO:ETH) has been rising this week. After a brutal start to the year, which saw ETH fall nearly twice as hard as Bitcoin, the token started gaining momentum this past Sunday. On that date, ETH was trading at around US$2,860. By Tuesday afternoon, it had risen to US$3,000. It was some of the best momentum from ETH all year.
In 2022, non-fungible tokens (NFTs) have been declining in popularity, taking ETH down with them. Today, it looks like the NFT crash may have bottomed. If you look up ‘NFT’ in Google Trends for Search, you’ll see that it is still trending down long term but is up a little over the last week. Perhaps, then, the biggest headwind for Ether’s price has petered out, leaving room for the token to rise. If that’s the case, then it could easily re-test $3,500 — a level it hit long before NFTs even entered the conversation.
NFTs no longer driving the price
NFTs — special tokens with unique cryptographic data — were widely thought to be responsible for driving ETH’s price higher in 2021. Last year, investors scrambled to buy the ultra-rare tokens, each of which is completely unique. NFTs have digital signatures that point to digital assets like JPEG images. This unique quality led to people buying them as digital art pieces. Some of them sold for prices well in excess of $10 million.
NFTs are bought and sold with Ether. There is an NFT marketplace for Solana as well, but Ether’s was and is much more popular. Whenever anyone wanted to buy an NFT, they went out to buy Ether first. As a result, Ether rose dramatically compared to other cryptocurrencies in 2021.
Unfortunately, when interest in NFTs started to dry up, so did interest in Ether. With NFTs waning in popularity, those who weren’t already die-hard Ether fans had little reason to buy it. So, demand for the token was reduced. That resulted in Ether underperforming Bitcoin for much of the first quarter.
Today, however, we may be at a bottom for NFTs. The Google Trends chart no longer shows continual declining interest; instead, it shows a plateau followed by a small uptick. The more recent search interest is too short term of a trend to draw any conclusions from. But it could signify that fair-weather Ether buyers have already been shaken out of the market. If they are, then ETH will be free to rise and fall based on more “normal” crypto market dynamics.
A second reason why ETH may test $3,500 this year is because a massive round of upgrades is coming. This year, the Ethereum Foundation will conduct a series of blockchain upgrades aiming to take ETH up to 100,000 transactions per second, up from the current 15. If these upgrades are successful, then ETH could become one of the fastest cryptocurrencies in the world. That could, in turn, drive interest in Ether, leading to its price re-testing $3,500. That’s no guarantee, of course. But a positive catalyst or two certainly wouldn’t hurt ETH’s momentum.