As the second largest cryptocurrency, Ether (ETH) has had a dismal performance in the ongoing bull run so far, despite multiple market predictions backing it up.
Market analysts had predicted a boost in ETH after it was announced that the spot ETH Exchange Traded Funds (ETFs) were approved by the Securities and Exchange Commission (SEC) in the U.S. While the ETFs are still dealing with the bureaucracy before going live for trading, the approval announcement did not push ETH price as high as expected.
In the ongoing bull run, several blockchains have outdone Ethereum in their market performance while the latter seems to be lagging behind due to technical complications. The metrics from blockchain data aggregators show that on-chain activity on Ethereum has also fallen short compared to its competitors like Solana.
All these major issues have led to speculations in the market as to whether Ethereum is dead. The question is bound to make investors jittery and nervous even as other blockchain networks seemed to have gained significant traction in a short period.
In this article, we will find out Ethereum’s current standing and the problems that are holding this blockchain network on a tight leash even during the ongoing bullrun.
We will also discuss what role the recently approved spot Ethereum ETFs will play in enhancing ETH price in the upcoming time.
What is the Current State of Ethereum?
Ethereum currently remains a leading platform in the blockchain and cryptocurrency space with several notable developments and a robust ecosystem. It currently hosts over 4,000 decentralized applications (dApps) and more than 53 million smart contracts. While remaining the biggest platform for blockchain development, Ethereum has the largest developer community among all other blockchain networks with it providing extensive tools and APIs.
After the Merge upgrade, Ethereum has adopted a more deflationary economic model which helped it control the excessive supply of ETH. The introduction of burning via EIP-1559 and decreased issuance of new ETH create supply scarcity that is crucial for long-term sustainability.
What are the challenges with Ethereum?
Despite the astonishing success for over a decade, Ethereum is facing several challenges that stand in the past of its growth. One of these major issues is scalability as the network currently processes only about 15-30 transactions per second (TPS). Whereas other latest-generation blockchain networks like Solana have capabilities to encompass over 5000+ TPS in the meantime.
This limitation has also led to a rapid increase in transaction fees – especially during high on-chain activity – making it less accessible for average users. Moreover, its shift to Proof-of-Stake (PoS) consensus has also raised concerns about centralization because a substantial amount of ETH is controlled by a few large entities. All these issues highlight the need for robust development and critical approaches that could help Ethereum reclaim its position of a leading smart contract development platform.
Upgrades in Ethereum
With the completion of Merge upgrade – which transitioned Ethereum from Proof-of-Work (PoW) to Proof-of-Stake (PoS) – Ethereum has seen a major turn towards reaching scalability and efficiency. The recent upgrade (EIP-4844), has also brought reduction in transaction costs for Layer 2 solutions, with full danksharding (upgrade of Ethereum) expected in a few years. The core developer community of Ethereum is continuously exploring newer developments to make the network adaptable over time.
The upcoming Pectra upgrade is also a significant milestone for Ethereum as it will introduce numerous alterations to wallets and lay ground for upcoming developments. With all these amendments, Ethereum is steadily reaching towards its goal of achieving scalability, efficiency and managing to lower the transaction cost which sky highs when the network is at its full capacity.
Spot Ethereum ETF – A Game-Changing Factor!
The SEC recently gave the green flag to spot Ethereum ETFs after years of tussle. While ETFs are awaiting the final stage of compliance, it’s only a matter of time now before they go live for trading. Several analysts have predicted that Ethereum ETFs will manage to accumulate a significantly higher amount of inflows than that of Bitcoin.
Spot Bitcoin ETFs have accumulated over $58 billion worth of inflow since its launch in January 2024, while over $10 billion was acquired in the first month alone. Given that Ethereum’s market capitalization is roughly one-third (33%) of Bitcoin, it could be accounted to bring over $18 billion into the Ethereum ecosystem.
While this is a reasonable assumption, the estimates may vary on the market condition with potentials for both higher and lower net inflows into ETFs. As the Ethereum ETF trading start date approaches, market participants are keenly observing how these products will influence ETH’s price and overall market dynamics.
ETH Price
Combining all the factors, it is expected that ETH price ought to have an uptrend in near time with approaching a much awaited rally. As of 4th June, ETH price is trading near $3,800 – up over 10% since past month. Data from Coinmarketcap shows that ETH price has been hovering around this level since the ETF approval news.
The bullish catalyst of Ethereum ETF is expected to lead ETH price to record highs with major predictions suggesting as high as $10,000 by 2025. The potential price surge could be drive by ETF inflows from traditional markets as well as the ongoing bullrun.
Is Ethereum Dead?
As of June 2024, it’s not fair to say that Ethereum is dead but it is certainly lacking fundamental aspects that could lead to a massive breakout from the network. The upcoming upgrades will surely try to give a push to Ethereum while also coinciding the optimistic results from the spot Ethereum ETF launch.
The future of Ethereum currently appears promising as it continues to evolve and address the challenges. It is also nearing some key developments which are significant for its scalability and infrastructure improvements. These upgrades are expected to dramatically increase transaction throughput while reducing transaction fees and making it more efficient and accessible.
