Ethereum’s upside potential ─ boosted by Denkun Upgrade and ETF potential: Analyst | CoinDesk JAPAN

• Analysts believe that Ethereum will once again gain attention. This is because there is a lot of talk about physical ETFs, and they remain the dominant chain in DeFi and NFTs.
• One analyst says that Ethereum deserves to be the centerpiece when considering diversified investments in crypto assets (virtual currencies).

Expectations for Ethereum spot ETF

Ethereum (ETH) underperformed Bitcoin in 2023 as Bitcoin (BTC) attracted investor capital due to optimism surrounding new smart contract features, NFTs, and physical ETFs.

Analysts say Ethereum remains the No. 1 smart contract blockchain, is set for major upgrades, and is widely expected to be the next spot-based ETF in the U.S., making it an investment destination. The company is likely to review Ethereum this year.

Coinbase, a major US cryptocurrency exchange, analyzed in its weekly newsletter that “Ethereum has the potential to break out this year.”

“The news of the Bitcoin ETF approval was a positive sign for Ethereum, which at one point exceeded $2,700 (approximately 399,000 yen, equivalent to 148 yen to the dollar), its highest price since May 2022. There are factors that make us more optimistic about Ethereum’s near-term development.One is that several Bitcoin ETF companies, including BlackRock and VanEck, are also planning an Ethereum spot ETF. “That’s what I’m doing.”

Spot ETFs invest in actual crypto assets, allowing investors to gain exposure without owning the crypto assets, which is considered an advantage over futures-based ETFs, which are more susceptible to roll costs. ing.

Therefore, similar to the Bitcoin spot ETF, if an Ethereum spot ETF becomes a reality, it is expected that funds from institutional and individual investors will flood into it.

In the United States, 11 Bitcoin spot ETFs began trading on January 11th, with trading volume exceeding $10 billion so far. BlackRock’s Bitcoin Spot ETF has attracted $1 billion.

“Denkun (Dencun)” Upgrades and Institutional Investor Demand

Furthermore, according to Coinbase, Ethereum’s planned upgrade “Denkun” will be “datablobThe aim is to improve the scalability of the mainnet by introducing “, which may stimulate investor interest in Ethereum. The upgrade was performed on Ethereum’s testnet Goerli last week.

blobis a temporary transactional data memory that can be attached to Ethereum and acts like a layer 2 solution.

Once Denkun is in place, the network will only need to check the blob of data attached to a block instead of validating each transaction, leading to less congestion and lower fees.

“Ethereum’s Denkun Upgrade began initial testing on January 17th and is expected to implement EIP-4844 (Ethereum improvement proposal) in the coming months, with some observers predicting that fees will increase. We predict a reduction of over 90%.” (Coinbase)

In its annual report, institutional crypto firm ETC Group outlines a bullish outlook for the Ethereum/Bitcoin ratio, predicting an increase in Bitcoin network activity led by inscription (so-called Bitcoin NFTs) in 2023. Nevertheless, it noted that Ethereum remains the dominant chain for developing decentralized applications, NFTs, and tokenized assets.

For example, the top 10 ERC-20 tokens have a total market capitalization of $21 billion, according to data tracked by ETC Group, which is 13 times the total market cap of the BRC-20 tokens, of which there are more than 37,000, at $1.6 billion. corresponds to

ERC-20 is the token standard for the Ethereum blockchain, and BRC-20 is the token standard for the Bitcoin blockchain.

Additionally, Ethereum investors can earn additional returns on their coin holdings by staking their Ethereum onto the network. The current annualized reward rate is approximately 3.84%, and has averaged approximately 4% to 5% since Ethereum completed its major upgrade “Merge” in September 2022.

Finally, the Ethereum blockchain’s process of burning a portion of Ethereum paid in transaction fees has a deflationary effect on supply, which has a positive impact on investors.

“Ethereum’s strong advantages as a smart contract platform and the potential for additional yield mean that it deserves to be at the center when considering diversified investments in crypto assets,” ETC Group said. pointed out.

“Therefore, we believe there is a fair chance that Ethereum/Bitcoin’s relative performance will reverse in 2024. In fact, Ethereum/Bitcoin’s 12-month relative performance has historically had a strong mean-reverting It shows a trend.”

Ether has outperformed Bitcoin so far in 2024, with the Ethereum/Bitcoin ratio up 10%. The ratio fell by more than 25% in 2023.

｜Translation and editing: Akiko Yamaguchi, Takayuki Masuda
｜Image: Shutterstock
｜Original text: Ether Could Soar in 2024 on the Back of Dencun Upgrade, ETF Narrative: Analysts