Summary Ethereum has not had any significant catalysts since the 2021 NFT hype cycle, and the liquid staking narrative during the transition to proof-of-stake consensus. The approval of spot Bitcoin ETFs has created anticipation for a spot Ethereum ETF, which could happen sometime this year. ETH's upcoming Dencun Upgrade synergetically aligns with the potential approval of a spot Ether ETF, setting the stage for better throughput. ETH, SOL, AVAX Six Month Price Return (July 1, 2023 - January 10, 2024) (Seeking Alpha) Ethereum USD ( ETH-USD ), the second-largest crypto by market cap, has not had any significant catalyst since the NFT hype of the last bull run and when the liquid staking narrative gained some traction during the network's transition from proof-of-work (PoW) to proof-of-stake (PoS) consensus. Leading up to the approval of the spot Bitcoin USD (BTC-USD) ETFs, the crypto market witnessed bullish momentum, at least 6 months prior to the spot Bitcoin ETF approval. Since the start of Q3 up until January 10th (the day the spot Bitcoin ETFs were approved), Solana USD ( SOL-USD ) surged over 400%, Avalanche ( AVAX-USD ) gained more than 190%, and Ethereum gained around 30%. Upcoming Catalysts for Ethereum For the past few years, Ethereum has led the altcoin market into bull rallies. In the 2017 bull run, it was the initial coin offering narrative on ETH that propelled other altcoins to huge price gains. In 2021, the NFT hype led by Ethereum was a main catalyst for altcoins. Looking forward, what are some probable catalysts for Ethereum? Spot Ether ETF The spot Bitcoin ETF approval created a buzz in the crypto space and has put crypto on the path to mass adoption, and Bitcoin as an asset class that can exist side by side with traditional assets. Now that spot Bitcoin ETFs have been approved, there is anticipation building up for the approval of a spot Ethereum ETF. Both BlackRock, Inc. (BLK) and Grayscale, major players in the spot Bitcoin ETF approval process, have filed a spot Ether ETF application with the SEC. Grayscale seeks to convert its existing Ether ETP, Grayscale Ethereum Trust ( OTCQX:ETHE ) into a spot Ether ETF. Latest speculation suggests that spot Ethereum ETFs will likely get an SEC greenlight in May. In September last year, the SEC approved nine Ethereum futures ETFs. I think there is a good chance that ETH, which currently has futures ETPs just like BTC did before the spot Bitcoin ETFs were approved, will receive a spot ETF approval soon. I believe that the spot ETF approval for Bitcoin has paved the way for digital assets ETFs, and Ethereum could be next in line for approval. Also, considering that the SEC has never categorized ETH as a security improves the hopes for such approval. The likelihood of the April Bitcoin halving event and a spot Ether ETF happening back-to-back presents a very bullish scenario for ETH in the coming months. What does the Bitcoin halving event have to do with Ethereum? The crypto market momentum is somewhat coupled, and when Bitcoin enters a bull trajectory, other top cryptocurrencies follow. A spot Ether ETF following the Bitcoin halving will be a "chain of events" that would provide "the right momentum at the right time" for ETH. These two events happening together (just a month apart if spot Ether ETF gets approved by the anticipated date) can synergistically drive demand for ETH as institutional investors pour in. The NFT Hype Could Return OpenSea Monthly Volume (Dune Analytics) OpenSea Monthly Active Users (Dune Analytics) Since the 2021 crypto bull run, the value of non-fungible tokens (NFTs) has taken a beating. NFT arts in PFP collections have declined over 90% in value. Floor prices have dropped drastically for top collections like Bored Apes and Crypto Punks. NFT marketplaces have also recorded lower volume and active users over the past two years. OpenSea, the largest NFT marketplace, has suffered declining trade volume. Boasting an average monthly trade volume of ~$3 billion during the 2021 bull run, OpenSea saw a paltry ~$171 million in monthly volume in December and that number has dropped by ~24% this month to ~$138 million. New excitement around NFTs has been driven by the Bitcoin network's capability to deploy NFTs through an inscription method. BRC-20 NFTs, or Bitcoin Ordinals as they are sometimes called, gained a lot of traction last year and snatched up a good amount of the total NFT trade volume. Because Bitcoin is the largest crypto and with a very strong community, the surge in popularity and volume of BRC-20 NFTs doesn't come as a surprise. However, I believe that there is a possibility of the BRC-20 NFT excitement spreading to the ETH network when ETH gains momentum from a potential spot Ether ETF approval sometime this year. The Ethereum network is a more robust blockchain for NFTs than the Bitcoin network. Ethereum was designed as a decentralized operating system or platform that inherently supports decentralized applications (DApps) and the creation and deployment of tokens. The Bitcoin network is intentionally designed to have limited programmability; therefore, BRC-20s are also constrained in design. Ethereum's inherent programmability has given devs the flexibility to pursue upgrades and innovation in NFTs. New Ethereum token standards like the ERC-4883 , and proposed standards like the EIP-6561 bring advanced capabilities to NFTs which push NFTs beyond just representing a multimedia or other asset on the blockchain. With these upgrades and improved NFT capabilities, Ethereum could easily maintain its NFT market lead when the NFT hype returns. Play-to-earn (P2E) gaming is one of the narratives in which NFTs have found a lasting use case. Though the excitement surrounding P2E has waned since 2021, traditional game studios are actively exploring the concept of P2E and the possibility of incorporating NFTs into titles. I won't rule out the possibility of NFTs being incorporated into AAA titles soon. Sega Sammy Holdings Inc. ( OTCPK:SGAMY ) is reported to be actively pursuing Web3 games initiatives. Ubisoft Entertainment SA's ( OTCPK:UBSFY ) upcoming tactical RPG game, Champion Tactics, will incorporate NFTs minted on the Ethereum network. The NFTs, called Warlords NFTs , were up for mint last month and sold out within minutes, generating over $4.5 million in sales within a few hours of trading on NFT secondary markets. NFTs currently appear "static," as they do not do much besides referencing metadata of a digital object on a blockchain. But as developers on the Ethereum network actively contribute to new standards and upgrades that introduce dynamism to NFTs, traditional game studios may recognize this progression, leading them to integrate NFTs into games, and Ethereum potentially becoming their preferred blockchain network for the deployment of in-game NFTs. I'm not ruling out competition from other layer-1 blockchains, but Ethereum's existing dominance gives it an easy edge. Upgrades to the ETH Network Ethereum Roadmap (VitalikButerin/X) High network free and slow transaction confirmation has plagued the Ethereum network during periods of peak activities. Lower fees and faster transactions have been the main selling points of ETH's rival layer-1 blockchains like Solana and Polygon. For ETH to maintain market dominance, maintain a competitive edge among layer-1s, and be a go-to blockchain platform for DApps, tokens, and NFTs creation and deployment, these drawbacks have to be actively addressed. A new upgrade that will potentially address these drawbacks is coming to Ethereum. Already live on the test network (testnet), this vital upgrade, known as the Dencun Upgrade, aims to scale the Ethereum network throughput. Significant progress has been made in the testnet phase of the Dencun Upgrade and the prospects of the network upgrade getting activated on Ethereum mainnet inches closer. The Dencun Upgrade is part of "The Surge" development phase in the Ethereum roadmap . The Surge is coming after The Merge, which successfully transitioned the Ethereum Network from PoW to PoS and introduced liquid staking The main goal of The Surge is to scale the network to reach 100,000 transactions per second for Ethereum layer-2 rollups, along with implementing tech to cut down network fees. This important scalability upgrade is coming at the right time for Ethereum and bodes well; especially if the spot Ether ETF gets an SEC green light soon. When this Dencun goes live on the mainnet, Ethereum layer-2s will be able to do more heavy lifting for the Ethereum network. Risk As we already know, cryptocurrencies, including ETH possess an inherent risk of volatility. The catalysts highlighted in this article are speculative. Though analysis shows the likelihood of a spot Ether getting approved; there is, however, still no guarantee that a spot Ether ETF will be approved by the anticipated date or approved at all. The onus and discretion for such approval lies with the SEC. Takeaway The potential approval of a spot Ether ETF, the possibility of seeing a resurgence of interest in NFTs, and the coming Dencun scalability upgrade to the Ethereum network form what I'd like to refer to as "tripod catalysts" for Ethereum. In my Ethereum article seven months ago, covering the liquid staking narrative on the Ethereum network, I recommended a "hold." With the current catalysts in plain sight, ETH is currently a "buy" for me. There could be volatility in the near term, but the diamond hands will prevail.
