Goldman Sachs analysts predict Ethereum will rally by 80% toward $8,000 target

  • If Ethereum maintains its correlation to inflation expectations, analysts expect a rally of 80% within the next two months. 
  • The largest altcoin recently hit its highest monthly close in history.
  • Ethereum 2.0 Altair Beacon chain update was a success and the altcoin is now heading toward deflation with the “Merge.”

Goldman Sachs analysts have predicted that the Ethereum price would break out within the next two months. The altcoin closed October posting over 40% in gains, and its market capitalization is currently six times that of the second-largest altcoin, Binance Coin (BNB)

Investment bankers see possibility of ETH price hitting $8,000

In a note circulated by Goldman Sachs Global Markets managing director Bernhard Rzymelka, cryptocurrencies have traded along a line with inflation breakevens in between for nearly two years now. The director refers to the Bloomberg Galaxy Crypto Index, which compares inflation to the USD 2-year, 2-year forward inflation swap. 

An inflation swap is a derivatives contract between parties that transfer inflation risk by exchanging fixed cash flows, and here the 2-year,2-year is the average inflation rate over a two‑year period starting in two years.

Correlation is not considered causation, however, it is a clear indication that it acts as a driving force for crypto asset rallies and dips. Analysts argue that if the current market-based views of inflation pressures persist, it may be considered“either a sign of exhaustion and peaking… or a starting point of an accelerating rally upon a break higher.”

Analysts hint at the Ethereum price rally and set a target of $8,000 for ETH within the next two months if the historical correlation with inflation persists. 

USD Inflation Swap 2Y2Y Forward.

USD Inflation Swap 2Y2Y Forward

In the case of Ethereum, the inflation swap is key to price prediction, since Ethereum has tracked inflation markets closely, reflecting their pro-cyclical nature as a network-based asset. 

Ethereum closed in October at $4,287.56, its highest monthly close of all time. The successful implementation of the Altair Beacon chain upgrade has taken Ethereum another step closer to the “Merge” (transition from proof-of-work to proof-of-stake). 

Within the past twelve months, the altcoin hit its all-time high and all-time low price. Nearly $3 billion worth of ETH tokens have been burned since the implementation of EIP-1559. Consistently higher burn is expected to drive ETH deflation and Ethereum prices higher. 

FXStreet analysts have evaluated the ETH price trend and predicted that Ethereum will continue pushing higher toward $5,400.