Ethereum was approved by the U.S. Securities and Exchange Commission (SEC) last week and passed the 19b-4 application document for spot ETFs. This step is an important progress for Ethereum spot ETFs to enter the market, which means that it has obtained the approval of the U.S. government, and only the final S1 document is left to pass this procedural obstacle. The S1 document is expected to be approved in early June, and it is only a matter of time before it is listed on the U.S. stock market. For those of us who are active in the cryptocurrency or stock market, the listing of Ethereum spot ETFs is undoubtedly a highlight worthy of our attention.
Ethereum breaks through $3,900
With the approval of the Ethereum spot ETF, the cryptocurrency market has seen a wave of rising prices in the past two weeks. While Bitcoin ($BTC) has been hovering between $68,000 and $71,000, the most eye-catching performance has been the second largest cryptocurrency by market value, Ethereum ($ETH).
Ethereum ($ETH) broke through $3,900 this morning and is trading at $3,915 at the time of writing, a 2.3% increase in a single day. Its growth has surpassed Bitcoin’s for two consecutive weeks.
The rise of Ethereum has also attracted market attention. Investors all have a question in their minds: Can Ethereum’s rise exceed that of Bitcoin in this cycle?
Ethereum is predicted to surpass Bitcoin by a large margin
Bluntz, a well-known analyst who is known for his accurate predictions on the social platform Less than 8 days remain before a rare bullish divergence occurs.
Judging from the chart he provided, Bluntz believes that the target of ETH/BTC is the level of 0.1 $BTC. Based on the current price of Bitcoin, it is approximately 1 $ETH = 6,907 US dollars, which is nearly 95% higher than the current ETH/BTC exchange rate. It can be foreseen that Bitcoin will not stagnate, which means that Ethereum’s next increase is likely to exceed 95%.
"0.1 is obviously the target, and we're either going to be below it or above it."
Whether it is the bullish divergence signal observed by Bluntz or the ETF products that have made important progress, they all show the market's strong demand and growth potential for Ethereum in the future.
Public chains are changing, but Ethereum is unchangeable
Ethereum is still the public chain with the highest TVL.
According to DefiLIama data, Ethereum currently accounts for 59.93% of TVL, and TRON ranks second with only 8.61%. It ranks second because Tether issues $USDT on it. BSC ranks third with 5.31%, and Solana, which has a great voice in this bull market, ranks fourth with 4.69%. It can be seen that Ethereum is still the only one, and it is difficult for other public chains to surpass it.
Why is Ethereum so dominant?
Ethereum was established in 2013 and officially put into use in 2015. It can be said that Ethereum was born for smart contracts. It is the first blockchain to achieve Turing completeness. It was established to be able to carry various applications. It is also the emergence of Ethereum that has brought more possibilities to the blockchain.
But during the last bull market, the DeFi ecosystem on Ethereum flourished, the number of users surged, and the Ethereum network became congested, resulting in longer block times, slow transactions, and rising transaction fees.
For retail investors, Ethereum has become a public chain with low cost-effectiveness.
In this context, a number of new public chains have emerged. They have made improvements to the problems existing in Ethereum, or directly want to replace Ethereum. Some public chains have raised the banner of "Ethereum killer" and started to divide up the market share.
The "Ethereum killers" that emerged in the last bull market include Cardano ($ADA), Avalanche ($AVAX), BNB Chain ($BNB), Solana ($SOL), and Polkadot ($DOT).
These "killers" have one thing in common, that is, they all claim to have high throughput and low transaction fees. Of course, each has its own advantages. BNB Chain is backed by Binance, has a large flow, and its token $BNB has more capabilities. Avalanche has greatly optimized its transaction speed through its groundbreaking protocol consensus mechanism and three subnets that each perform their own duties. Its low latency and low fees make it a public chain that GameFi loves. The biggest advantage of Polkadot is its multi-chain structure and active developers on the chain.
Public chains hope to comprehensively improve their technical level from the perspective of underlying frameworks such as development language, code complexity, and operating mechanism, in order to make up for some of Ethereum's shortcomings. Although they all have their own strengths, they can forget about surpassing Ethereum, as their TVL is less than one-tenth of Ethereum's.
Not to mention public chains like Aptos that were born in a bear market. Although they have the support of VCs, their performance is disappointing.
Although public chains are emerging one after another, there is no public chain that can really shake the position of Ethereum. Even these public chains combined cannot shake Ethereum. There are two reasons. First, Ethereum has a long history and has accumulated a large number of users and projects. Second, those criticized expansion problems, congestion problems, high gas, and even problems such as EOA address restrictions have already been solved.
For example, the expansion problem has evolved into various solutions such as Rollup, Plasma and Validium. The limitation of EOA addresses has also been solved by relying on the ERC-4337 Account Abstraction upgrade, and even evolved into an account abstraction track. Even due to the potential limitation of the block capacity limit, heavy solutions such as EigenLayer have been launched, and the capabilities of DA have been expanded. It can be optimized through the modular combination of third-party DA solutions such as Celestia and the optional replacement of the VM execution layer.
Layer2 is now an important narrative of Ethereum and has become an independent track in the industry. It is designed as a key solution to Ethereum's scalability problem. It builds an additional network layer on top of the Ethereum main chain, allowing more transactions to be processed while maintaining the security and decentralization of the main chain.
Moreover, Ethereum's mainnet also has a very clear development path. For example, in order to improve performance, Vitalik planned five development stages for Ethereum: Merge, Surge, Verge, Purge and Splurge.
From the above, we can see that Ethereum has never stagnated. In most cases, it is actually driving the technological progress of the entire industry.
Why was the Ethereum spot ETF suddenly approved?
For retail investors, the recent approval of the Ethereum spot ETF by the U.S. Securities and Exchange Commission (SEC) is undoubtedly exciting news. I think the approval may be related to the current U.S. political environment, especially the upcoming 2024 U.S. election.
At present, the main competition in the US election seems to be the showdown between current President Biden and former President Trump. Cryptocurrency has become a hot topic that cannot be ignored during this election, with its popularity and attention increasing significantly since the election four years ago. Candidates have also begun discussing cryptocurrency issues.
The Biden administration has taken a stricter stance on cryptocurrencies over the past four years, and has always taken an unfriendly attitude towards cryptocurrency policies. Trump has softened his stance in recent years, from pointing out that "Bitcoin is a scam" in 2021, and has actively participated in the NFT market, which shows that he has shown a friendly attitude towards cryptocurrency issues. Trump even announced that his campaign team will accept cryptocurrency donations. Not only does he support cryptocurrency in his words, but he has also adopted cryptocurrency applications through his own behavior, which may have attracted the favor of a large number of cryptocurrency supporters.
In this political context, I think the approval of the Ethereum spot ETF may be a positive signal released by the Biden team to the cryptocurrency community, aiming to increase its support among cryptocurrency voters. Observing recent polls and market reactions, Trump's support rate in various polls is slightly higher than Biden's, which may prompt the Biden team to make some strategic adjustments in cryptocurrency policies.
Outlook for Ethereum Spot ETF Listing
As the Ethereum spot ETF approaches the listing stage, let me make a small prediction for the performance of the ETF after listing. Compared with the listed Bitcoin spot ETF, I think the performance of the Ethereum spot ETF may be slightly inferior, mainly due to several core factors.
First of all, compared to Bitcoin, Ethereum’s underlying technology and operating mechanism are more complex. Ethereum uses a proof-of-stake (PoS) mechanism, which is significantly different from Bitcoin's proof-of-work (PoW) mechanism, which may affect the investment decisions of institutional investors. Because Bitcoin may be more attractive to institutional investors looking for stability and less technical risk.
Secondly, although Ethereum has a solid position in the crypto market and is currently the second largest cryptocurrency by market capitalization, Ethereum's market history and traditional value recognition are still far less than Bitcoin. This difference may also lead to institutional investors being less enthusiastic about Ethereum spot ETFs than Bitcoin spot ETFs.
Despite this, I believe that the listing of the Ethereum spot ETF will have a positive impact on the price of Ethereum in the short term. However, I have doubts whether this growth can be maintained in the long term. Perhaps I need to wait until it is actually listed before I can make a detailed observation and analysis.
Ethereum spot ETF's potential impact on the crypto market and projects
I think the passage of the Ethereum spot ETF is extremely important for the entire cryptocurrency ecosystem, especially for some exchanges that are under SEC charges such as Coinbase, Kraken, and Uniswap. These platforms have long faced unreasonable scrutiny and accusations from the SEC, accused of selling securities to the public. The passage of the ETF may play a key reference role in the legal challenges faced by these exchanges, and perhaps put them in a favorable position in future legal rulings.
In addition, the approval of the Ethereum spot ETF may also indirectly boost the market performance of other altcoins. Although I don’t think that after the Ethereum spot ETF is approved, other altcoins will launch their own ETF applications one after another. However, as the second largest cryptocurrency by market value and the leader of altcoins, this milestone victory will undoubtedly drive other small coins to gain greater exposure.
Especially for Ethereum Layer2 expansion solutions such as Arbitrum, Base, and Optimistic, the success of the Ethereum spot ETF will likely drive the value of these projects, as they directly support the expansion and efficiency of the Ethereum network. Similarly, staking service providers such as Lido, RocketPool, and other re-staking services such as EigenLayer and EtherFi may also benefit from the approval of the ETF, further consolidating their important position in the Ethereum ecosystem.
For other large altcoins such as Solana, XRP, Cardano and Chainlink, the approval of the Ethereum spot ETF also provides a positive market signal, allowing these projects to step out of the haze of accusations. Although the currency price will not immediately reflect this in the short term, in the long run these projects will also be affected by the positive impact of the approval.
The approval of the Ethereum spot ETF is not only good for Ethereum itself, but also provides new guidance for the maturity and regulatory environment of the entire crypto market. For retail investors, I think this is a great time to observe market trends and re-evaluate investment strategies.
ETH spot ETF approval completed, ETH trend forecast?
As long as the ETF is not officially listed, the popularity of Ethereum will not fade. There is currently no selling pressure from Grayscale. On the contrary, the positive news continues to be realized, giving the main players the opportunity to make the market.
The following pullbacks will be opportunities for layout. Once the ETF is officially listed, that will be when all the good news has been exhausted. The market may start to correct for two weeks and then start to take off again, and larger traditional institutions will enter the market.
Just like Bitcoin did at that time, it pulled back for 2 weeks and then started a months-long rise. On January 11, 2024, the price of ETH was listed at 48,600 and then pulled back to 38,500, and then soared from 38,000 to 7.3. When ETH plummets, don't be afraid, this may be a good time to buy the bottom. The journey of Ethereum has just begun, and the current 3700 is just a starting point. In the next two or three months, Ethereum will soar to 7k-8k US dollars. The Prague upgrade at the end of the year will make the price soar to 10,000 US dollars.
Ideas for copycat trading:
1. When the market starts, buy first: For currencies launched in 2021, it is best to buy the leading ones, because they are hot enough and have enough time to wash the market. Once the market starts, it will be very violent.
2. Follow the hot spots of the track and buy projects in its ecosystem, such as: If SOl is popular, buy bonk/wif. If ETH is popular, buy PEPE/PENDLE
3. The investment logic is the same not only in bull markets but also in bear markets. Just follow the trend and take whatever comes. Then understand the logic of the project and buy it.
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