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News/Ethereum Erupts on ETF Hopes: Could a Green Wave Wash Over Crypto?

Ethereum Erupts on ETF Hopes: Could a Green Wave Wash Over Crypto?

Van Thanh Le

Jan 12 2024

2 months ago4 minutes read
Chibi cubic robot showing Ethereum price rise on its screen

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Ethereum ETF Anticipation Fuels Market Optimism

Ethereum's recent market performance has captured the spotlight. Over the past week, Ethereum (ETH) has seen a remarkable 18% climb, peaking at an impressive $2,682. This surge in value is largely fueled by the growing anticipation of a spot Ethereum ETF, a sentiment echoing the excitement previously seen with the introduction of multiple Bitcoin ETFs.

chart.webp

The U.S. Securities and Exchange Commission (SEC), known for its stringent regulatory stance, has been a key player in this scenario. Its nod to a Bitcoin ETF has paved the way for Ethereum, sparking widespread speculation and hope among investors and enthusiasts alike.

The institutional interest in Ethereum has been particularly noteworthy. Financial giants such as Ark 21Shares, BlackRock, Fidelity, and Grayscale are not just spectators but active participants, showing a keen interest in Ethereum ETFs. BlackRock's move to file a prospectus for its iShares Ethereum Trust underscores the seriousness of this interest.

The ripple effect of a potential Ethereum ETF approval extends far beyond mere price fluctuations. It's poised to inject a new vigor into Ethereum-based projects and Layer 2 networks, potentially catalyzing innovation and growth within the broader Ethereum ecosystem.

However, Ethereum's journey hasn't been without its challenges. In 2023, its performance, though impressive, lagged behind Bitcoin's meteoric rise. While Bitcoin soared over 150%, Ethereum's gains hovered around 90%.

Ethereum ETFs: Poised for Launch in 2024?

2024 could be a pivotal year for Ethereum ETFs, with analysts forecasting a high probability of SEC approval, potentially as soon as the second quarter. This optimism follows the SEC's green light for 11 Bitcoin ETFs on January 10, 2024. Eric Balchunas, a Bloomberg ETF analyst, pegs the chances of Ethereum ETFs getting the nod by May 2024 at 70%, linking their fate to that of Bitcoin ETFs.

The race to launch Ethereum ETFs has attracted industry heavyweights like BlackRock, VanEck, ARK 21Shares, Fidelity, Invesco Galaxy, Grayscale, and Hashdex. The SEC's previous approval of Ethereum futures ETFs in September is seen by analysts like James Seyffart from Bloomberg as an implicit nod to Ethereum's commodity status.

Digital marketplace buzzing with Ethereum ETF anticipation.webp

BlackRock, the titan of asset management, threw its hat into the ring with a spot Ether ETF filing in November 2023, buoyed by an impressive ETF approval track record (576-1). The decision is expected by May 2024. Ethereum's market reacted positively to the Bitcoin ETF approval, with a 15.79% price surge in the preceding week, signaling market anticipation.

The market landscape could evolve with the introduction of Ethereum ETFs. Leo Mizuhara, CEO of Hashnote, envisions a bifurcation between private market ETH-staking and public market offerings. Steven McClurg of Valkyrie Funds and Brian D. Evans of BDE Ventures also anticipate the debut of Ethereum ETFs, with Evans citing the existing ETH futures product as a harbinger.

Larry Fink, CEO of BlackRock, has expressed a strong interest in Ethereum ETFs, a significant endorsement for Ethereum in digital finance. Fink's view of cryptocurrency as an asset class, combined with BlackRock's pivot towards Ethereum ETFs, could sway other major financial institutions. Post-Bitcoin ETF approval, smart money inflows into Ethereum have been noted by Nansent analyst Martin Lee.

However, the launch of nine Ethereum Futures ETFs by firms like ProShares, VanEck, and Bitwise had a lukewarm reception, garnering less than $2 million in the first week. The crypto community views Bitcoin's ETF approval as a bellwether for Ethereum's prospects. Bitcoin's ETF journey also offers a cautionary tale for Ethereum speculators, with a notable drop in Bitcoin's implied volatility post-ETF approval.

Looking ahead, the SEC faces key decisions on various Ethereum ETF applications, with VanEck's ETF decision due in May, followed by BlackRock's in August, marking critical junctures in the evolving narrative of Ethereum in the investment world.

Ethereum's Gas Limit Debate: Balancing Throughput and Blockchain Health

Ethereum's co-founder, Vitalik Buterin, ignited a firestorm of debate with a seemingly simple proposal. During a Reddit AMA, Buterin suggested a significant shift in the Ethereum landscape: increasing the gas limit from 30 million to 40 million, marking a 33% rise. This proposal, the first of its kind in nearly three years, aims to amplify network throughput, addressing a period of stagnation in gas limit adjustments – the longest in Ethereum's history.

Ethereum developer's workspace at night, featuring a monitor with code and Ethereum blockchain model.webp

Since its inception in 2015, Ethereum has witnessed a steady climb in its average gas limit, beginning at around 3 million post-genesis. This limit, essentially the maximum gas expenditure per block, serves as a balancing act between transaction throughput and block size, ensuring the network's performance remains optimal. 

Ethereum average gas limit over time.jpeg
Source: Etherscan

Buterin's proposal, while potentially elevating the network's capacity through more transactions per block, also brings to light risks such as increased network spam and attacks. At present, the average gas prices linger around 35 gwei, approximately $1.89, with notable spikes like the 150 gwei peak in May 2023 during the inscriptions craze.

The debate intensifies as Ethereum developer Marius van der Wijden weighs in, voicing concerns over the burgeoning blockchain state size, currently at 267 GB for the state and 900GB for the full history. An increased gas limit could hasten state growth, posing challenges in data access and modification. 

This growth also raises questions about synchronization times and the development of diverse clients. Co-founder of Gnosis underscores the potential bandwidth implications of a higher gas limit.

Adding to the chorus of caution, Ethereum team lead echoes worries about accelerated state growth and heightened risks of DoS attacks. In the face of these challenges, potential solutions like EIP-4444, focusing on chain history expiration, and EIP-4844, aimed at rollup data availability, are under consideration to manage long-term growth.

Amidst these technical deliberations, Micah Zoltu emphasizes a crucial aspect: the importance of enabling everyday users to run Ethereum nodes on standard machines. This goal becomes increasingly challenging as state and blockchain sizes expand. As Ethereum stands at this crossroads, the community contemplates a path that balances innovation with the health of its blockchain ecosystem.

REDDIT SCREENSHOT.png
Source: Reddit

Conclusion

Ethereum stands at a pivotal juncture, with its value buoyed by ETF hopes and technical debates shaping its future. The anticipation of Ethereum ETFs signals a potential paradigm shift in crypto finance, while the gas limit debate underscores the delicate balance between innovation and blockchain health.

FAQs

1. What is driving the recent surge in Ethereum's value?

Ethereum's value has recently spiked by 18%, primarily due to the growing anticipation of a potential spot Ethereum ETF. This optimism mirrors the excitement seen with Bitcoin ETFs and is bolstered by significant institutional interest from financial giants.

2. How might the approval of an Ethereum ETF impact the broader Ethereum ecosystem?

The approval of an Ethereum ETF could significantly boost Ethereum-based projects and Layer 2 networks, potentially spurring innovation and growth within the Ethereum ecosystem. It represents a major step in mainstream financial adoption of Ethereum.

3. What are the challenges and concerns associated with Ethereum's proposed increase in gas limit?

Increasing the gas limit from 30 million to 40 million raises concerns about accelerated blockchain state growth, potential network spam, and DoS attacks. It aims to improve transaction throughput but could impact synchronization times and the overall health of the Ethereum network.

4. What are the key upcoming decisions regarding Ethereum ETFs?

Critical decisions on Ethereum ETFs are expected in 2024, with the SEC set to rule on VanEck's ETF application in May and BlackRock's in August. These decisions are pivotal for Ethereum's role in the investment world and could significantly influence its market dynamics.

This article has been refined and enhanced by ChatGPT.

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