Macroeconomic expert Raoul Paul is extremely bullish on Ethereum in 2023, citing that its now deflationary supply combined with staking mechanics sets the stage for a supply shock that will send the price much higher. 

According to Paul, Ethereum continues to be the best risk to reward investment in the market and the most vibrant, deepest, broadest ecosystem with the most institutional-style adoption. 

He also discusses the underlying technological advancements of Ethereum, its ability to create decentralized finance applications, and its growing network effects.

Staking Mechanism and the Shanghai Fork

Staking is an innovative mechanism that most people don’t understand. If you stake crypto in Ethereum, you get a yield. The Shanghai fork means that liquidity is available to any staker at any time, creating a money market curve for Ethereum. This provides financial liquidity to build things on top of or incentivizes stakeholders to keep their money and stake it. The staking mechanism is also an important mechanism that is making Ethereum scarcer in supply.

A Deflationary Supply and Bull Market

According to Paul, Ethereum is in a deflationary supply phase, and there’s only 16% of all leaker stakes. If it gets to 40-35%, the number of people who’ve taken Ethereum out of supply doubles, creating a supply shock that can lead to massive upside volatility spikes that become unmanageable. This can also drive up fees, which can bleed into the layer twos, but they too consume less safe. This creates an interesting situation that makes Paul very bullish on Ethereum.

The Game of Network Adoption

Although Ethereum is the easiest way to invest and probably has the least risk, other projects can do much better than Ethereum. For instance, Solana is one project that can do better than Ethereum. However, Ethereum has observable network effects beyond any other token ecosystem.

The number of use cases, the applications, the number of wallet addresses, and the velocity of money make Ethereum special. The game of network adoption is also important, and the token has done a great job of getting attention.

Price Prediction

Although Paul hates giving price predictions, he sees no reason why Ethereum is not about $10,000, which is a decent upside from the current price. The world’s largest altcoin is worth $1,641 at press time.