How could the first approval of an ethereum spot ETF boost its price to $10,000? Discover the key elements influencing this bullish outlook.
ethereum (eth) is in the spotlight as the crypto world eagerly awaits the launch of the first eth spot ETF. As of July 2, eth is priced at $3,447, marking a 0.33% drop over the past 24 hours.
On June 24, eth hit a monthly low of $3,244. Since then, it has recovered strongly and gained around 6% from the low. This increased eth price action suggests bullish sentiments as the market anticipates the upcoming ETF launch.
However, the US Securities and Exchange Commission (SEC) has decided to delay the long-awaited launch of ethereum ETFs.
The launch, originally scheduled for early July, has been postponed following additional comments from the SEC on the S-1 forms filed by potential issuers. These issuers now have until July 8 to refile their revised forms, which could postpone the launch until mid-July or even later.
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This launch is part of a two-step approval process. The first step, approval of Form 19b-4, was completed in May. However, Form S-1s, which represent the second step, lack a fixed deadline, leaving issuers at the mercy of the SEC’s review timeline.
Now let’s understand the ethereum ecosystem and market updates to see what we can expect from the upcoming ETF.
<h2 class="wp-block-heading" id="ethereum-ecosystem-updates”>ethereum Ecosystem Updates
ethereum is abuzz with activity as it prepares for the launch of its first eth spot ETF. Vitalik Buterin, co-founder of ethereum, recently announced eth.limo/general/2024/06/30/epochslot.html” target=”_blank” rel=””>shared a blog post detailing the latest developments and goals within the ethereum ecosystem.
A key goal of ethereum is to improve transaction confirmation times. Currently, transactions on ethereum’s Layer 1 (L1) network are confirmed within 5-20 seconds, thanks to the implementation of EIP-1559 and consistent block times post-merge.
While this speed is competitive with credit card payment processing, certain applications require even faster confirmation times, measured in milliseconds. Buterin has suggested possible changes.
ethereum’s current consensus mechanism, Gasper, employs a slot-epoch architecture. In this system, validators vote at the head of the chain every 12 seconds, and it takes 32 slots (approximately 6.4 minutes) for all validators to cast their votes. Finality, which provides strong economic assurance, is achieved after two epochs (12.8 minutes). However, this process is complex and slow.
Buterin’s proposed Single Slot Finality (SSF) aims to simplify and speed up this process. Instead of waiting for multiple slots and epochs, SSF would finalize each block before moving on to the next. This approach resembles Tendermint consensus, but retains ethereum’s “sleep-on-leak” mechanism, which aids chain recovery if validators become inactive.
However, SSF requires validators to publish two messages every 12 seconds, which is a challenge. Recent proposals such as Orbit SSF suggest methods to mitigate this workload.
Meanwhile, ethereum is transitioning to a rollup-centric roadmap. This means that while the base layer (L1) emphasizes data security and availability, layer 2 (L2) solutions, such as rollups, handle the majority of transactions.
Rollups offer the same security as ethereum, but at a higher scale and speed. However, users are looking for even faster confirmations than the current 5-20 seconds.
To address this issue, cumulative pre-confirmations have been proposed. This method involves a smaller group of validators quickly approving blocks, providing faster assurances to users. These pre-confirmations are eventually published on L1 to ensure security and finality.
The proposed pre-confirmation approach leverages ethereum’s advanced proposers to offer pre-confirmations as a service. Users can pay an additional fee to ensure their transaction is included in the next block. If a proposer fails to honor their commitment, they face penalties. This mechanism can also be applied to L2s, facilitating faster transaction confirmations.
Faster transaction confirmations and simplified consensus mechanisms could attract more users and developers, increasing demand for eth. As the launch of the eth spot ETF approaches, these improvements could bolster market confidence and push up the price of eth.
<h2 class="wp-block-heading" id="ethereum-gas-fees-and-total-value-locked-tvl-levels”>ethereum Gas Fees and Total Value Locked (TVL) Levels
As ethereum prepares to launch its first eth spot ETF, two critical aspects of its ecosystem come into focus: gas fees and total value locked (TVL).
Gas fees are integral to how ethereum works, covering transaction and smart contract execution costs while incentivizing network security through validator rewards.
Recently, there has been a significant drop in gas fees. According to Dune Analytics, the average gas fee on June 30 plummeted to just 3 Gwei, equivalent to $0.14. This marks a stark contrast to last year, when average gas prices ranged between 15 and 20 Gwei, with a peak of 83 Gwei recorded on March 5 of this year.
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Several factors contributed to this drop. Analysts attribute it to increased efficiency in the Layer 1 (L1) market, driven by increased Layer 2 (L2) activity and the introduction of “blob transactions” via EIP-4844, improving ethereum’s scalability.
Lower gas fees make ethereum more accessible, which could encourage wider adoption. Additionally, affordable gas fees can spur activity in sectors like decentralized finance (DeFi) and nfts, which were previously hampered by high transaction costs.
Meanwhile, TVL represents the total capital held within ethereum’s DeFi ecosystem, and serves as a critical metric for the network’s health and usage. However, eth’s TVL has been increasing recently. ethereum?fees=false&tvl=true” target=”_blank” rel=””>refusedAfter peaking at $67 billion on June 6, it has since fallen to $59.45 billion according to the latest data, marking a decline of approximately 11.3%.
This drop follows growth earlier in the year but remains well below its peak of $106 billion in November 2021, coinciding with eth’s all-time high price.
Several factors contribute to this trend. Firstly, the volatility of the cryptocurrency market in general has affected investor confidence in general.
Secondly, lower gas fees could potentially reverse the decline in TVL by attracting more users and developers to ethereum-based applications, thereby improving the overall utility and value proposition of the network.
What to expect next?
Matt Hougan, a leading cryptocurrency and ETF expert, predicts that ethereum ETPs (exchange-traded products) will attract $15 billion in net flows during their first 18 months.
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It bases this estimate on the relative market sizes of bitcoin and ethereum, along with existing investment trends in cryptocurrency ETPs in Europe and Canada.
In these regions, bitcoin ETPs have a higher share of the asset compared to ethereum ETPs, in line with their market cap weight. Hougan anticipates a similar trend in the US, with eth capturing roughly 22% of the market share, slightly below its market cap weight of 26%.
Hougan further explains that US investors currently have $56 billion invested in bitcoin spot ETPs, and this is projected to grow to $100 billion by the end of 2025.
Applying a similar growth pattern to ethereum, it estimates that ethereum spot ETPs will need $35 billion in assets under management (AUM) to reach parity with bitcoin. Given that ETHE will launch with $10 billion in assets, the net flow required is approximately $25 billion.
Comparing these figures to the European and Canadian markets, where ethereum ETPs account for around 22-23% of the total cryptocurrency ETP market (slightly less than eth’s market cap weight), Hougan finds consistency across geographies, reinforcing his confidence in the estimate.
After adjusting for expected lower relative demand and excluding carry trade assets that affect bitcoin ETFs but not ethereum ETFs, Hougan revised his net flow estimate to $18 billion, then to $15 billion.
Meanwhile, market sentiment around the launch of ethereum ETFs is bullish. Andrey Stoychev, Head of Prime Brokerage at Nexo, eth-price-10k-approval-2025″ target=”_blank” rel=””>believe eth could hit $10,000 by the end of the year, suggesting that eth ETFs in the US and Asia could push eth to this level, matching bitcoin’s post-ETF performance.
If the anticipated capital inflows materialize, ethereum’s market cap could experience substantial growth, potentially driving its price higher.
However, as always, it is crucial to remain vigilant, taking into account both the opportunities and risks associated with the cryptocurrency market. Trade prudently and never invest more than you can afford to lose.
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