Ether's 2024 Surge: Dencun Upgrade & ETF Narrative Analysis

• Ethereum: A Closer Look for Investors
• Ethereum's Potential in 2024
• Ethereum's Breakout Year
• About Spot ETFs
• Dencun Upgrade and Institutional Demand
• Understanding Data Blobs
• Implication of Dencun Upgrade
• Ethereum's Dominance and Additional Yield
• Ethereum's Strong Positioning

Ethereum: A Closer Look for Investors

Ethereum$2,315 -2.42%'s dominance in the DeFi and NFT sectors, alongside the increasing attraction of ether as a spot ETF, have prompted analysts to suggest that investors may reevaluate ether. Ethereum's native token, ether (ETH), did not perform as well as bitcoin (BTC) in 2023 due to bitcoin's narrative and investor interest in smart contracts, non-fungible tokens (NFTs), and spot ETFs.

Ethereum's Potential in 2024

This year, there is a high likelihood that investors will reexamine ether. Analysts suggest this is because Ethereum is still the leading smart contract blockchain in the world, and it has key updates in the works. Ether is also considered a strong contender for the next spot-based ETF in the U.S.

Ethereum's Breakout Year

The Nasdaq-listed crypto exchange Coinbase predicts a breakout for ETH. Noticeably, Ethereum received a boost from the recent bitcoin ETF news, and its price briefly surged to over $2,700, the highest since May 2022. Several firms that backed bitcoin ETFs, including BlackRock and VanEck, are planning spot ETFs based on ether.

About Spot ETFs

Spot ETFs invest in the actual cryptocurrency, which allows investors to gain exposure to the asset without owning it. This is viewed as a better alternative to futures-based ETFs, which are subjected to roll costs. Similar to spot BTC ETFs, the potential launch of spot ETH ETFs is expected to attract both institutional and retail money.

Dencun Upgrade and Institutional Demand

Ethereum's forthcoming Dencun upgrade, which aims to enhance the network's scalability by adding data blobs, could further stimulate investor interest in the cryptocurrency. This upgrade was recently launched on Ethereum's Goerli testnet.

Understanding Data Blobs

In the context of Ethereum, a blob is a temporary transaction data memory typically related to Layer 2 solutions that can be attached to Ethereum. After the upgrade to the mainnet, the network will only need to verify the accuracy of the blob data attached to the block rather than each transaction, thereby reducing network congestion and fees.

Implication of Dencun Upgrade

The Dencun upgrade is expected to implement EIP-4844, an Ethereum improvement proposal, which could potentially help reduce network fees by 90% or more, according to Coinbase.

Ethereum's Dominance and Additional Yield

Despite the boom in Bitcoin$42,260 -0.64%'s network activity in 2023, Ethereum remains the leading chain for building decentralized applications, NFTs, and tokenized assets. Due to this, ether investors can earn additional returns by staking or locking their coins in the network for rewards. Furthermore, Ethereum's mechanism of burning a portion of transaction fees paid in ETH has a deflationary effect on the token's supply, which could benefit investors.

Ethereum's Strong Positioning

ETC Group, an institutional crypto firm, suggests Ethereum's dominance in smart contract platforms and the ability to generate extra yield should cement its position as a core holding in a diversified crypto portfolio. They predict a likely reversal in the relative performance of ETH/BTC in 2024, given that the 12-month relative performance of the pair has historically shown a strong tendency to revert to the mean. So far this year, ether has outperformed bitcoin with the ETH/BTC ratio trading 10% higher, a significant reversal from last year's 25% drop.

Edited by Jonathan Stoker