Citigroup Forecasts 4.7% Drop in Ethereum Price by Year-End

Citigroup has released its latest forecast, predicting that the price of Ethereum (ETH) will decrease to 4,300 dollars by the end of the year, down from its current price of 4,515 dollars. The bank has also provided a range of predictions, suggesting that in a bullish scenario, ETH could rise to 6,400 dollars, while in a bearish scenario, it could drop to 2,200 dollars.

The analysis emphasizes that network activity remains the core driver of Ethereum's value. However, recent growth has primarily come from Layer-2 networks, with only about 30% of this activity being transmitted to the main network. This results in the current price being higher than what an activity-based model would predict. The discrepancy could be attributed to the strong inflow of funds and market enthusiasm driven by tokenization and stablecoins.

Citigroup also points out that Ethereum's market capitalization is relatively small, and its recognition among new investors is limited. This could constrain further inflows. Additionally, macroeconomic factors are expected to provide only limited support, as the stock market is nearing the bank's target of 6,600 points for the S&P 500 index, suggesting that risk assets are unlikely to see significant gains.

The development of Layer-2 solutions introduces uncertainty into the valuation of ETH. The bank assumes that only 30% of Layer-2 network activity contributes to ETH's valuation, implying that the current price may be higher than what the activity-based model predicts. This discrepancy could be due to the strong inflow of funds and market enthusiasm driven by tokenization and stablecoins.