Ethereum’s Potential Price Boost with ETF Approvals in May 2024
Veronika Rinecker
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Verified by Elena Bozhkova
Last updated: June 10, 2024 05:17 EDT
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16 min read
This article delves into Ethereum’s ecosystem growth and the price movements of ETH in May 2024.
Key Points:
– ETH price showed volatility in May, with spot Ethereum ETF approvals initially driving prices up but struggling to maintain gains above $4,000.
– Research firm K33 predicts a significant influx of investment capital, ranging from $3.1 billion to $4.8 billion within the first five months of trading for new Ethereum ETFs.
– On-chain data indicates a decrease in Ethereum network activity in May, despite an increase in new users joining the network.
– The Petra upgrade, set for release in Q1 2025, aims to enhance transaction processing and reduce latency on the Ethereum network.
– Ethereum Name Service (ENS) plans to migrate to Layer 2 to reduce gas fees and improve transaction speed.
– Ethereum’s NFT market saw a decline in sales volume in May, dropping from $1 billion in April to $624 million, particularly affecting Ethereum-based digital collectibles.
What to Expect in This Ethereum Analysis for May:
– What is Ethereum?
– Impact of Ethereum ETF Approvals on ETH Price
– Updates in the Ethereum Ecosystem
– Ethereum’s Future: Challenges and Opportunities in 2024
What is Ethereum?
Founded by Vitalik Buterin in 2013, Ethereum serves as a distributed blockchain computing platform designed for smart contracts and decentralized applications (dApps). The network facilitates extensive innovation with smart contracts, leading to the emergence of various assets and industries such as DeFi, NFTs, DAOs, Web3, and more. Ethereum features the Ethereum Virtual Machine (EVM) for smart contract processing and utilizes a proof-of-stake (PoS) consensus mechanism for scalability and sustainability.
Boost and Struggles of ETH Price Amid ETF Approvals in May
ETH’s price displayed volatility in May, starting below $3,000 and struggling to sustain gains above this level despite multiple rallies. The approval and anticipation of spot Ethereum ETFs played a significant role in market sentiment. ETH surged above $3,000 on May 17 and almost reached $4,000 on May 23, driven by optimism for institutional investment through these ETFs. The SEC’s approval of the ETFs boosted ETH by approximately 27% at one point. However, sustaining levels above $3,900 proved challenging, with repeated pullbacks below $3,800.
Spot Ethereum ETF Approvals: Market Impact and Potential Investments
The SEC’s approval of spot Ethereum ETFs on May 23 could expand cryptocurrency investing access significantly. However, individual ETF applications still require approval, delaying actual trading. Major industry players like VanEck, Grayscale, Fidelity, and others have submitted applications. These ETFs would enable investors to track Ether’s price through brokerage accounts, potentially attracting substantial investment capital. Research indicates net inflows between $3.1 billion and $4.8 billion within the initial five months of trading, translating to the withdrawal of 800,000 to 1.26 million ETH from circulation, reducing supply by 0.7% to 1.05%.
Limited ETH Supply and Price Volatility
Over half of Ethereum’s circulating supply is relatively illiquid. Categories like locked smart contracts, dormant accounts, and ETPs hold a significant portion of ETH, limiting supply for new spot ETF products. The illiquid supply challenges could lead to significant price impacts due to increased demand.
Hong Kong’s Progressive Stance on Ethereum ETFs
The Hong Kong SFC considers allowing ETH staking for ETF issuers, potentially enhancing returns for investors through staking rewards.
Ethereum Ecosystem Updates
ENS plans to migrate to Layer 2 to address high gas fees and slow transaction speeds. The Ethereum Foundation introduced a conflict of interest policy to manage potential conflicts like researcher Dankrad Feist’s role at EigenLayer. Vitalik Buterin proposed a new gas model and the upcoming Pectra upgrade aims to optimize transaction processing and reduce latency across the network.
Ethereum-Based Protocols and DEXs
Ethereum leads Layer 1 chains with 81% dominance and $66.7 billion TVL, while Arbitrum One leads Layer 2 chains. The Ethereum DEX ecosystem saw significant developments in May with Starknet’s incentives, Polygon’s ZK-rollup, and Taiko’s mainnet launch.
Ethereum Meme Coins and NFTs
May saw a surge in Ethereum-based meme coins like PEPE and a decline in NFT sales volume. Notable NFT launches included Fuzzies, Mercedes-Benz’s NXT Icons, and The Boobls.
Ethereum’s Future Challenges and Opportunities in 2024
The recent ETF approvals and technological upgrades pose both opportunities and challenges for Ethereum’s future. The Dencun upgrade’s impact on supply dynamics and Buterin’s proposals for a new gas model indicate potential price fluctuations. Continued developments in the Ethereum ecosystem will be crucial for sustaining its position in the cryptocurrency market.
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