What’s next for Ethereum after the ETF is approved?
The spot Ethereum ETF is finally here, and judging by the initial trading volume, the launch was quite successful. However, as we can see, ETH started to fall after the launch.
There are two main reasons why ETH is currently underperforming BTC: The launch of the spot ETH ETF is a “sell news” event: This phenomenon also happened in the short term after the launch of the spot BTC ETF.
Since the spot ETH ETF was approved a few months ago, everyone who wanted to buy ETH had plenty of time to do so. Therefore, catalysts that are known in advance tend to become “sell news” events. The launch of the ETH ETF unlocked $9 billion of ETH in the Grayscale Ethereum Trust:
These ETH have been locked up for many years, and now the holders can finally sell them, so many people are selling. So how long will it take for this decline to end? In the case of BTC, the spot BTC ETF bottomed out about two weeks after the launch of the ETF. After that, the price went sideways for a few days before hitting a new all-time high.
If demand for spot Ethereum ETFs is high in the coming weeks, ETH may also see a similar situation. But for this to happen, ETH's ETF net flow needs to turn positive.
Two catalysts coming for Ethereum
The first is the approval of Ethereum ETF staking. This could significantly increase demand for spot Ethereum ETFs. Although the annual ETH staking yield of about 3.2% does not seem much, due to ETH's low annual inflation rate and the fact that staking can earn returns, this may make ETH more attractive to some institutions than BTC.
The second catalyst is the release of Pectra, the next hard fork of Ethereum. This major upgrade is expected to take place at the end of the fourth quarter of this year or the first quarter of 2024. Pectra will introduce several major changes: Make Ethereum account addresses more programmable Increase the maximum stake of ETH validators from 32 to 2048 ETH By making Ethereum account addresses more programmable, Pectra will bring significant on-chain user experience improvements.
For example, it will support sending transactions in batches, develop social recovery features for wallets, and allow dApps to pay users’ gas fees. Such user experience upgrades are what cryptocurrencies need to achieve mass adoption.
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