Ether (Ethereum – ETH) last traded above $4,000 on March 14, more than two months before the spot Ether ETF was approved by the U.S. Securities and Exchange Commission (SEC) on May 23. Traders are questioning whether the bullish momentum has waned and, if not, what could drive a sustainable rise above $4,000.
The Spot Ether ETF Launch Disappointed Expectations
Part of the reason for investors’ lack of enthusiasm could stem from the underwhelming performance of the cryptocurrency market. The total market capitalization currently stands at $2.42 trillion, 16.5% lower than the 2024 peak of $2.82 trillion on March 14. Contributing factors include the Federal Reserve’s seemingly successful strategy to control inflation without causing a recession, reducing the appeal of alternative assets.
However, Ether seems to be facing its own issues. Its price against Bitcoin (BTC) has dropped 10% in the past two months. Net outflows of $406 million from U.S. spot Ether ETFs since their launch on July 23 are also partly to blame, although these outflows are concentrated in Grayscale’s product.
The total value locked (TVL) in the Ethereum network stands at 17.8 million ETH, unchanged from two months ago, indicating that ecosystem growth might have stalled. Some analysts argue that Ethereum’s gas fees, which have been over $1.8 for months, encourage layer 2 scaling solutions. However, the TVL of these solutions has remained relatively stable at 12.9 million ETH over the past two months, according to data from L2Beat.
In summary, for Ether to reclaim the critical $4,000 level, increased interest from institutional investors is needed. This could be reflected in the trend of net inflows into U.S. spot ETH ETFs or at least the cessation of withdrawals from Grayscale’s fund (ETHE). When institutional money flows into this space, traders will look for confirmation by measuring the ecosystem’s TVL.
However, some investors have become skeptical about the growth of decentralized applications (DApps). This skepticism stems from the involvement of venture capital funds or projects with substantial cash inflows before airdrops but failing to maintain initial hype. Therefore, TVL growth should align with improvements in other on-chain metrics, such as the number of active addresses.
Ethereum Needs to Increase TVL but Also Address the Roadmap
While Ethereum enthusiasts argue that the project’s decentralization surpasses competitors like Solana (SOL), BNB Chain (BNB), and Tron (TRX), this argument becomes less convincing when reputable investment firms choose to launch their projects elsewhere. The latest example occurred on July 23, when U.S. asset management firm Hamilton Lane chose Solana’s Libre to launch a tokenized project.
More concerningly, Ethereum’s dominance in the retail trading space has recently been challenged, with Solana leading in decentralized exchange (DEX) trading volume. Driven by meme coins launched on Pump.fun, Solana reached a 29.6% DEX market share in July, surpassing Ethereum’s 28.1%, according to DefiLlama data.
Ultimately, Ether’s sustainable price growth depends on clear timelines for proposed scalability improvements, including sharding (parallel processing) and strategies to mitigate miner-extractable value (MEV). Proposed changes, like Danksharding, aim to increase the current limit from one blob per block to 64, significantly improving data availability.
The next upgrade, known as Pectra, is expected to introduce Verkle trees, reducing storage requirements and improving data accessibility. Additionally, investors are eagerly awaiting the implementation of zero-knowledge SNARKs, predicted to enhance privacy and compress transaction data into succinct proofs, reducing blockchain storage demands.
Ether’s path to $4,000 in 2024 remains feasible, but only if issues related to institutional adoption, enhanced scalability, and the growth of the DApps ecosystem are addressed.
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