Author: The DeFi Investor
Compiled by: TechFlow
Ethereum’s Future Outlook
The spot Ethereum ETF is finally here.
Judging from the initial trading volumes, the launch has been quite successful.
However, as we can see, ETH started to fall after the launch.
In this article, I will discuss the reasons behind this, the future trend of ETH price, and two important catalysts that Ethereum is about to usher in.
My expectations for ETH price action
I think there are two main reasons why ETH is currently underperforming BTC:
The launch of the spot ETH ETF was a “sell the news” event: This phenomenon also occurred in the short term after the launch of the spot BTC ETF.
Since the spot ETH ETF was approved 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 the news” events.
The launch of the ETH ETF unlocks $9 billion of ETH in the Grayscale Ethereum Trust: these ETH have been locked up for years, and now 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 its launch. Afterwards, the price moved sideways for a few days before hitting a new all-time high.
If demand for spot Ethereum ETFs is high in the coming weeks, a similar situation could also occur with ETH. But for this to happen, net flows into the ETH ETF would need to turn positive.
For example, yesterday the ETH ETF saw $133 million in outflows due to selling pressure from the Grayscale Ethereum Trust.
There are also some legitimate concerns about ETH in the short term:
Ethereum’s Upcoming Catalyst
I also want to touch upon two important catalysts coming to Ethereum.
The first is the approval of Ethereum ETF staking. This could significantly increase demand for spot Ethereum ETFs. While an ETH staking yield of around 3.2% per year may not seem like much, the fact that ETH has a lower annual inflation rate and the benefits of staking may make ETH more attractive to some institutions than BTC.
According to the SEC commissioner, the Ethereum collateralized ETF “can always be reconsidered,” so its approval is only a matter of time.
The second catalyst is the release of Pectra, Ethereum’s next hard fork. This major upgrade is expected to take place in late Q4 of this year or Q1 of 2024. Pectra will introduce several major changes:
Making Ethereum account addresses more programmable
Increase the maximum stake for 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.
