The Ethereum (CRYPTO: ETH) price rocketed up 25% in March.
That came as welcome news to crypto investors, who'd watched the world's number 2 crypto by market cap tumble more than 36% from 1 January through to 24 February.
Down just over 2% in the past 24 hours to US$3,321 (AU$4,551), the Ethereum price has now fallen 12% year-to-date.
With a big month of gains behind us, we asked an expert panel what could send the token higher and what might drag it lower over the coming quarter.
We'll start with the potential headwinds.
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What headwinds could send the Ethereum price lower in Q2?
Josh Gilbert, crypto analyst at multi-asset investment platform eToro, told The Motley Fool:
The biggest expected headwind for the Ethereum price is the threat of the merge and consequential upgrades being delayed. Since the start of the ETH 2.0 rollout most of its announced upgrades have been pushed back. This isn't unusual though, as there are always associated risks when it comes to high technological upgrades.
Gilbert also pointed to rising competition from rival altcoins, particularly in the non-fungible token (NFT) space as a potential headwind:
Ethereum has started to see NFT volumes impact its price, due to the number of transactions on the network. One of the world's biggest NFT marketplaces, Opensea recently announced that it would integrate Solana-based NFTs into the marketplace. As a direct response to this, users could choose to transition to Solana if gas fees get out of hand on the Ethereum network.
Ian Lowe, CEO of crypto wealth platform Dacxi, also pointed to the coming merge, or protocol upgrade, as something crypto investors should watch closely:
The Ethereum price may become more volatile in the coming months, mainly because Ethereum is transitioning its technology to 'Ethereum 2.0.' using less energy-intensive Proof-of-Stake protocols. We will have to wait to see how the wider community responds to these upgrades.
Our third crypto expert, Daniel Sekers, managing director of crypto trading platform YourPortfolio, said the Ethereum price could come under pressure if investors lose confidence in its security.
Sekers told The Motley Fool:
I think the biggest impact you will see here right now will be driven by market sentiment. As recently as last week we saw reports of a US$600 million theft of Ethereum with hackers allegedly breaching gaming platform Ronin. This would be the second-biggest theft of assets using Ethereum that we are aware of.
Whilst this recent hack should reflect on the security of the platform from where the Ethereum was stolen, what we have seen in market reactions previously to these types of hacks is that investors lose some confidence in that particular currency.
Those are some headwinds for crypto investors to keep on their radar.
But what might push the Ethereum price higher?
What are the tailwinds that could send Ether higher in Q2?
Gilbert said, "The most significant tailwind for Ethereum in Q2 will be the scheduled rollout of ETH 2.0's highly anticipated 'merge' upgrade. The merge represents Ethereum's official switch from its Proof-of-Work model, to the Proof-of-Stake model."
Should the merge go as planned, it will make Ethereum "more scalable, secure and sustainable by eliminating the need for energy-intensive mining," he said.
Lowe said that the recent strong run indicates a "shift in momentum [that] should continue to drive the Ethereum price in the short to medium at least, with Ethereum breaking US$3,000 early on, after breaking through prior resistance at US$3,200".
Sekers said that Ethereum's coming shift from Proof-of-Work to Proof-of-Stake consensus is "one of the biggest developments that we will likely see in the near future".
According to Sekers:
This is super important to the ongoing cost of transactions and will reduce the cost of transacting on the Ethereum blockchain. In addition, this will likely reduce the energy consumption underlying the Ethereum blockchain making it more popular with mainstream investors who are considering the ESG impacts of their investments.
