Ethereum’s Rally and the Potential for a Spot Ether ETF
Analysts at research and brokerage firm Bernstein have identified several catalysts behind Ethereum’s recent rally above the $3,000 mark. While spot Bitcoin exchange-traded funds (ETFs) have garnered attention in the crypto market, the prospect of a spot ether ETF in the U.S. has also gained traction. Big-name firms such as Fidelity, BlackRock, and Franklin Templeton have applied for a spot ether ETF. Bloomberg ETF analyst Eric Balchunas has suggested a 70% possibility of approval by May 23, with Standard Chartered predicting a potential $4,000 target for ether if it follows Bitcoin’s pre-spot ETF approval performance.
Catalysts behind Ethereum’s Price Rally
The analysts at Bernstein highlight several key factors that have contributed to Ethereum’s price rally:
- Ethereum’s deflationary supply: The transition to proof-of-stake consensus has made Ethereum more sustainable by offsetting emissions through a fee burn mechanism.
- Increased staking and locked supply: The amount of ether locked up via staking or in DeFi smart contracts has reached record highs, creating a reflexive feedback loop of increased demand.
- EigenLayer restaking: EigenLayer’s protocol allows users to re-stake validators’ ether stakes, attracting more staking demand and reducing the speed to market for other protocols.
- Dencun upgrade: The upcoming Dencun upgrade is expected to reduce data costs for Ethereum Layer 2 networks, driving higher volume to the Ethereum ecosystem.
- The return of DeFi: The Coinbase vs. SEC case and Uniswap’s fee-sharing mechanism for UNI token stakers have provided hope for improved token regulations and economic designs, driving activity and value accrual to ether.
Ether Outperforms Bitcoin in 2024
So far this year, ether has outperformed Bitcoin, with a 34% price increase compared to Bitcoin’s 21% gain. Ethereum is currently trading at $3,052. Bernstein’s digital asset portfolio, which includes Bitcoin, Ether, and other cryptocurrencies, is also outperforming Bitcoin alone for the first time since its inception in July 2023. The portfolio is up 94% compared to Bitcoin’s 77% gain over the same period.
Hot Take: The Future of Ethereum and the Crypto Bull Market
The recent rally in Ethereum’s price and its outperformance compared to Bitcoin indicate a widening crypto bull market. While the approval of a spot ether ETF may further boost Ethereum’s price, it remains uncertain whether such approvals will happen by mid-2024. Regardless, Ethereum’s supply dynamics, restaking protocols, upcoming upgrades, and the return of DeFi are all contributing to its current momentum. As a crypto enthusiast, it’s important to stay informed about these catalysts and their potential impact on the market.
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