What’s next for Ethereum after ETF approval?

Author: The DeFi Investor Source: thedefinvestor Translation: Shan Ouba, Golden Finance

What's next for Ethereum?

The spot Ethereum ETF is finally here.

Judging from its initial trading volume, their launch was quite successful.

However, as we can see, ETH began to fall after its launch.

In this episode, I’ll discuss why this is happening, where I think ETH price is headed next, and two major catalysts on the horizon for Ethereum.

My Expectations for ETH Price Action

In my opinion, ETH is currently underperforming BTC for two main reasons:

• The launch of the spot ETH ETF was a sell-off news event – The same thing happened to BTC in the short term after the spot BTC ETF launched.

Since the spot ETH ETFs were approved a few months ago, everyone who wanted to buy ETH through them has had plenty of time to do it. This is why catalysts that are known in advance often end up becoming news events.

• The launch of the ETH ETF unlocked $9 billion worth of ETH from Grayscale's Ethereum Trust -  All of this ETH has been locked up for several years, and now its holders can finally sell them, and apparently many people are doing so

So how long will it take for this downturn to end?

Take BTC as an example. About two weeks after the launch of the BTC spot ETF in January this year, the BTC price bottomed out, then consolidated for several days, and then rushed all the way to a record high.

If the demand for Ethereum ETF spot is high in the coming weeks, the same situation may occur with ETH. But for this to happen, ETH ETF net flows first need to turn positive.

For example, the ETH ETF saw $133 million in outflows due to selling pressure from Grayscale's Ethereum Trust.

There are also some legitimate concerns about ETH in the short term:

Ethereum's Upcoming Catalysts

I also want to talk about two major catalysts that are coming for Ethereum.

The first is the approval of Ethereum ETF staking. This could significantly increase demand for spot Ethereum ETFs.

While the annual yield of about 3.2% on ETH staking doesn’t seem like much, the staking feature of the ETH ETF may make ETH more attractive than BTC to some institutions, given that ETH’s annual inflation rate is low and staking can earn returns.

According to the Commissioner of the U.S. Securities and Exchange Commission (SEC), Ethereum ETF staking is “always under reconsideration,” so its approval is only a matter of when rather than if.

The second catalyst is the release of Ethereum’s next hard fork, Pectra.

This is Ethereum’s next major upgrade, which is expected to be launched at the end of the fourth quarter of this year or the first quarter of 2024. Pectra will introduce several major changes:

• Making Ethereum account addresses more programmable

• Increasing the ETH validator stake limit from 32 ETH to 2,048 ETH

By making Ethereum account addresses more programmable, Pectra will bring some major on-chain UX improvements.

For example, it will support sending batched transactions, develop social recovery features for wallets, and allow dApps to pay users' gas fees.

UX upgrades like this are exactly what cryptocurrencies need to achieve mass adoption.