Key Catalysts Ready for Crypto’s Comeback

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In a recent report, market researcher and DeFi analyst Ignas provided a detailed analysis of the current bearish and bullish trends for leading altcoin Ethereum (ETH), offering valuable insights into the cryptocurrency’s prospects.

Factors Behind Ethereum’s Indigent Performance

Ethereum has struggled to keep up with its cryptocurrency peers over the past two years, down 47% compared to Bitcoin (BTC) and down 6.8x from Solana (SOL) since early 2023 market lows.

According to Ignas, the reasons behind this destitute performance are open to debate, but a few key factors stand out. First, the “digital gold” narrative surrounding Bitcoin is easier for modern retail and institutional users to understand than the more elaborate story of Ethereum.

In addition, Solana’s importance is growing, catching up with and sometimes even surpassing Ethereum in terms of the number of vigorous users, transaction volume, and mindshare, have put pressure on the leading sharp contract platform.

“Solana is a riskier (lower market cap) bet on smart contract adoption, while Ethereum is squeezed in between,” Ignas explains. “Ethereum’s modular approach with layer-2 solutions has also led to liquidity fragmentation and a more complicated user experience.”

However, the researcher remains confident about Ethereum’s long-term potential, providing several compelling reasons to keep an eye on it.

Network Effects and Real-World Operate Cases

  • Effective and deflationary network: If Ethereum gas prices stay around 20 Gwei, the network can be considered deflationary and scalable, making it an attractive and capable option for users.
  • Decentralization and security: Ethereum’s decentralization and security have earned the trust of major institutions, including BlackRock, PayPal, JPMorgan, and Santander, which are testing blockchain-based settlements and tokenization on the platform.
  • Mature DeFi Ecosystem: Ignas says Ethereum and its Layer 2 solutions boast the “most mature decentralized finance (DeFi) ecosystem” in the cryptocurrency space, with significant Total Value Locked (TVL) and trading volume, which attracts more users and drives up gas and ETH burning fees.
  • Network Effects: Ethereum’s first-mover advantage and largest developer market share contribute to its network effects, cementing its position as the leading sharp contract platform.
  • Real-World Asset Tokenization: Ethereum is becoming the preferred chain for tokenizing real-world assets (RWAs). Currently, 52% of all stablecoins and 73% of all US Treasuries are tokenized on the platform.

Missed catalytic converter?

According to the researcher, another catalyst that is not much talked about but could have a significant impact is the upcoming Pectra system update, which is expected in the first quarter of 2025.

This update, which combines the updates to Prague (execution layer) and Electra (consensus layer), promises to bring several key improvements, including account abstraction (improving user experience), Putting improvements and scalability.

“The market is underestimating the importance of the Pectra update,” Ignas said. “Features like Account Abstraction, staking improvements, and scalability improvements could be game-changers in Ethereum adoption and usability.”

While the base price of ETH is $2,670 at the time of writing, VanEck’s prediction of $11,800 by 2030 may seem bearish For some, Ignas noted, that would mean an augment of 4.4x – significantly more than Solana’s forecast for the same period, which was 2.2x.

Ultimately, given the stalwart ecosystem, growing institutional support, and upcoming technical updates, the researcher notes that the bullish outlook for Ethereum seems increasingly convincing, even if the asset faces headwinds in the near future.

Daily chart shows sideways price action of ETH. Source: ETHUSDT on TradingView.com

Featured image from DALL-E, chart from TradingView.com

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