Goldman Sachs sees ethereum rallying 80% to $8,000 within two months if it keeps tracking inflation

• Ether could surge 80% to $8,000 in the next two months, Goldman Sachs has said.
• A strategist at the bank said ether closely tracks inflation expectations - which have recently jumped.

Ether, the cryptocurrency of the ethereum network, could well jump 80% to $8,000 in the next two months if it keeps tracking inflation expectations, Goldman Sachs has said.

Goldman's global markets managing director Bernhard Rzymelka noted Monday that crypto assets have closely tracked inflation over the past couple of years.

Rzymelka compared the Bloomberg Galaxy Crypto index with a market-based measure of inflation expectations and found there was a strong correlation.

He said ether has tracked inflation markets particularly closely. The strategist added that the token is pro-cyclical - that is, it tends to go up when the economy does better.

Given that inflation expectations have recently risen sharply, ether could well be about to jump as well, Rzymelka said.

Ether rose to an all-time high of close to $4,500 on Tuesday, according to Bitstamp data. Goldman said the recent chart pattern suggests that the cryptocurrency is either becoming exhausted or is reaching a "starting point of an accelerating rally."

Rzymelka's note included a chart looking at the potential future direction of ether, showing that it could surge to $8,000 by the end of the year. That would be around 80% higher than Tuesday's record high of $4,468.

Read more: Beware of 'The Flippening': 7 crypto experts break down the ominous-sounding event and its implications for bitcoin, with some investors fearing it could unsettle the crypto market

However, Goldman cautioned that central banks are unlikely to let inflation keep rising sharply. If ether continues to follow inflation expectations, then there is likely to be a rally followed by a "longer-term market top ahead."

JPMorgan has also recently seen signs that inflation is driving crypto markets, noting that investors seem to favour holding bitcoin rather than gold as a hedge against sharp price rises.

Many institutional investors are highly skeptical of this argument, however, and say that cryptocurrencies such as bitcoin and ether are far too volatile to include in financial portfolios.