.jpg)
How could the first Ethereum spot ETF approval push its price to $10K? Discover the key factors driving this bullish outlook.
Ethereum (Ethereum) is in the spotlight as the crypto world eagerly awaits the launch of the first ETH spot exchange-traded fund. As of July 2, ETH is priced at $3,447, representing a 0.33% decrease in the last 24 hours.
Ethereum hit a monthly low of $3,244 on June 24. Since then, it has rebounded sharply, rising about 6% since its low. This stronger price action for Ethereum indicates bullish sentiment as the market anticipates the upcoming ETF launch.
However, the US Securities and Exchange Commission (Securities and Exchange Commission) has decided to postpone the long-awaited launch of ETFs on the Ethereum exchange.
It was originally scheduled to launch in early July, but was delayed after additional comments from the SEC on S-1 forms filed by potential issuers. Those issuers now have until July 8 to resubmit their revised forms, potentially pushing the launch to mid-July or later.
This launch is part of a two-step approval process. The first step, approval of Form 19b-4, was complete In May. However, the S-1 forms, which are the second step, lack a fixed deadline, leaving issuers at the mercy of the SEC’s review timeline.
Let us now understand the Ethereum ecosystem and market updates to know what we can expect from the upcoming ETF.
Ethereum Ecosystem Updates
Ethereum is buzzing with activity as it prepares to launch its first exchange-traded fund. Ethereum co-founder Vitalik Buterin recently announced subscriber A blog post explaining the latest developments and goals within the Ethereum ecosystem.
One of the main focuses of Ethereum is improving transaction confirmation times. Currently, transactions on the Ethereum Layer 1 (L1) network are confirmed within 5 to 20 seconds, thanks to the implementation of EIP-1559 and fixed block times after merges.
While that speed rivals credit card processing, some applications require faster confirmation times, measured in milliseconds. Buterin suggested possible changes.
Ethereum’s current consensus mechanism, Jasper, is based on a slot-and-epoch structure. In this system, validators vote on the chain head every 12 seconds, and it takes 32 slots (about 6.4 minutes) for all validators to cast their votes. Finality, which provides strong economic guarantee, is achieved after two epochs (12.8 minutes). However, this process is complex and slow.
Buterin’s proposed single-slot filtering aims to simplify and speed up this process. Instead of waiting for multiple slots and epochs, single-slot filtering will filter each block before moving on to the next. This approach is similar to Tendermint consensus but retains Ethereum’s “idle leak” mechanism, which helps restore the chain if validators become inactive.
However, SSF requires investigators to post two messages every 12 seconds, which is challenging. Recent proposals such as Orbit SSF suggest ways to alleviate this workload.
At the same time, Ethereum is moving towards a roadmap focused on staking. This means that while the L1 layer emphasizes security and data availability, L2 solutions like staking handle the majority of transactions.
Staking operations offer the same security as Ethereum operations but at a larger scale and faster speed. However, users are looking for faster confirmations than the current 5-20 second period.
To address this problem, pre-confirmations have been proposed. This method involves a smaller group of validators who quickly validate blocks, providing faster assurances to users. These pre-confirmations are eventually propagated to L1 to ensure security and finality.
The proposed pre-confirmation approach relies on Ethereum proposers offering pre-confirmations as a service. Users can pay an additional fee to ensure their transaction is included in the next block. If the proposer fails to fulfill their commitment, they face penalties. This mechanism could also apply to L2s, facilitating faster transaction confirmations.
Faster transaction confirmations and simplified consensus mechanisms could attract more users and developers, thus increasing demand for ETH. With the ETH ETF launching imminent, these improvements could boost market confidence and drive the price of ETH higher.
Ethereum Gas Fees and Total Value Locked (TVL) Levels
As Ethereum prepares to launch its first ETH ETF, two important aspects of its ecosystem stand out: Gas fees Total locked value (dregs).
Gas fees are an integral part of the operation of Ethereum, covering transactions and Smart Contract Implementation costs while incentivizing network security through verifier rewards.
Recently, there has been a significant decline in Gas feesAccording to Dune Analytics, the average gas fee on June 30 fell to just 3 Gwei, or $0.14. This is in stark contrast to last year, when average gas prices ranged between 15 and 20 Gwei, with a peak of 83 Gwei on March 5 of this year.
Several factors have contributed to this decline. Analysts attribute this to increased efficiency in the Layer 1 (L1) market, driven by expanded Layer 2 (L2) activity and the introduction of “block transactions” via EIP-4844, which enhances Ethereum’s scalability.
Lower gas fees make Ethereum more accessible, which could boost wider adoption. Furthermore, reasonable gas fees could stimulate activity in sectors such as decentralized finance (Decentralized Finance) And Non-Fungible Tokenswhich was previously hampered by high transaction costs.
Meanwhile, TVL represents the total capital held within Ethereum’s DeFi ecosystem, which serves as a key measure of the network’s health and usage. However, ETH’s TVL has recently been reduced decreasedAfter peaking at $67 billion on June 6, it has since fallen to $59.45 billion according to the latest data, a decline of about 11.3%.
This decline comes after earlier growth in the year, but remains well below its peak of $106 billion in November 2021, which coincided with the all-time high price of ETH.
There are several factors contributing to this trend. First, the volatility of the broader cryptocurrency market has affected investor confidence across the board.
Second, lower gas fees could reverse the trend of declining TVL by attracting more users and developers to Ethereum-based applications, thereby boosting the network’s overall utility and value proposition.
What to expect next?
Matt Hogan, a leading cryptocurrency and ETF expert, expects Ethereum ETFs (exchange-traded products) to attract $15 billion in net inflows in the first 18 months.
This estimate is based on the relative market sizes of Bitcoin and Ethereum, along with current investment trends in cryptocurrency ETFs across Europe and Canada.
In these regions, Bitcoin ETFs have a larger share of assets than Ethereum ETFs, roughly in line with their market cap weights. Hogan expects a similar trend in the United States, where Ethereum has about 22% market share, slightly below its 26% market weight.
Hogan also points out that US investors currently have $56 billion invested in Bitcoin ETFs, and that this amount is expected to grow to $100 billion by the end of 2025.
Applying a similar growth pattern to Ethereum, it is estimated that spot Ethereum ETFs would need $35 billion in assets under management to reach parity with Bitcoin. Given that Ethereum will launch with $10 billion in assets, the net inflow required is around $25 billion.
Comparing these numbers to the European and Canadian markets, where Ethereum ETPs account for around 22-23% of the total ETH crypto market — slightly less than the market cap weight of ETH — Hogan finds consistency across geographies, which bolsters his confidence in the estimate.
After adjusting for expected relative demand and excluding trading assets that impact Bitcoin ETFs but not Ethereum ETFs, Hogan revised net inflow estimates to $18 billion, then to $15 billion.
Meanwhile, market sentiment surrounding the launch of Ethereum ETFs is positive. Andrey Stoychev, head of prime brokerage at Nexo, says: Believes ETH could hit $10,000 by the end of the year, suggesting that ETH ETFs in the US and Asia could push ETH to that level, matching Bitcoin’s performance after ETFs.
If the expected capital inflows materialize, the market cap of Ethereum could see significant growth, which could lead to an increase in its price.
However, as always, it is essential to remain vigilant, taking into account the opportunities and risks associated with the cryptocurrency market. Trade wisely and never invest more than you can afford to lose.
