Approvals Increase ETH Price: Ethereum, created in 2013 by Vitalik Buterin, is a blockchain platform for smart contracts and decentralized applications. The network allows users to build and innovate with intelligent contracts, fostering the growth of DeFi, NFTs, DAOs, Web3, and other assets and sectors. Ethereum’s Ethereum Virtual Machine executes smart contracts. Ethereum’s proof-of-stake (PoS) consensus mechanism improves scalability and sustainability.
Ethereum Price Rises and Falls in May After ETF Approval
The price of Ethereum (ETH) was very unpredictable throughout May, indicating both market optimism and fundamental difficulties. ETH’s price was below $3,000 at the start of the month. Even though there were multiple rallies, ETH had a hard time maintaining gains above this level until mid-month.
Much of the market’s optimism was driven by the expected and approved spot Ethereum exchange-traded funds (ETFs). Optimism among investors regarding the possible inflow of institutional investment through these ETFs propelled ETH’s price above the $3,000 mark on May 17 and nearly reached $4,000 on May 23. At one point, Ethereum’s value surged by about 27% due to the renewed optimism for a bullish market that came with the SEC’s approval of the ETFs.
Nevertheless, ETH’s price encountered obstacles and couldn’t maintain levels above $3,900 for an extended duration, even though it made gains. The fact that ETH has repeatedly fallen below $3,800 shows that the announcement of the ETFs was insufficient to push the price above the $4,000 barrier.
Green Light for Spot Ethereum ETFs
The SEC approved Ethereum ETFs on May 23, potentially increasing access to cryptocurrency investing. Although excited, individual ETF applications (S-1 filings) require approval, delaying trading for weeks or months, as Bloomberg ETF analyst James Seyffart noted. Ethereum may have struggled to reach $4,000 due to uncertainty. Industry leaders VanEck, Grayscale, iShares, Fidelity, ARK 21Shares, Bitwise, Franklin Templeton, and Invesco provided approved applications. These ETFs will let investors buy Ether-tracking shares through their brokerage accounts, making it easier than buying the cryptocurrency.
A New Gateway for Investors and Potential Market Impact
These new Ethereum products, like the spot Bitcoin ETFs launched in January, can potentially attract a broader audience of investors interested in the cryptocurrency market. Despite sharing an everyday use of blockchain technology, Bitcoin and Ethereum are not interchangeable. Many regard Bitcoin, like digital gold, as a way to keep their wealth safe. Contrarily, Ethereum serves as a decentralized application store—a platform for decentralized computing that hosts numerous apps.
Research firm K33 predicts a massive increase in investing money with the introduction of spot Ether ETFs. Their estimations show net inflows of $3.1 billion to $4.8 billion in the first five months of trade. This investment boom could drain Ethereum from the market. Analysts expect 800,000 to 1.26 million ETH to be taken from circulation at current rates, reducing supply by 0.7% to 1.05%.
Limited ETH Supply May Boost Price Volatility
Ethereum investment products (ETPs) hold 3.3% of the supply, entities like the Ethereum Foundation and blockchain projects (Mantle, Golem) collectively hold another 0.7%, and there might be some overlap here with ETH held by protocol treasuries that are staked (locked for rewards). Over half of Ethereum’s circulating supply is likely relatively illiquid and not tradeable. Smart contracts hold 38% of the supply, and about 11% are in dormant accounts that haven’t shown any activity for at least five years.
Staking has been eliminated from public filings by several issuers of spot Ethereum ETF applications, Grayscale included. This modification suggests the SEC may approve these products for U.S. trading without staked ETH, which might further restrict ETF supply. Moreover, at its current price point, 2.8 billion ETH—the gas for network transactions—represents an extra 0.6% of the supply. Despite considerable overlap, these categories account for around 52% of the ETH supply, as reported by AMINA Bank.
Bitcoin, on the other hand, has a substantially larger illiquid supply (around 72%). The remaining, more actively traded fraction of the supply is where future U.S.-listed spot Ethereum ETFs are anticipated to acquire ETH. “Any increase in demand could have a significant impact on price,” the author writes, “because there is a limited supply of the new spot ETF products due to existing uses.”
Hong Kong’s Progressive Stance on Ethereum ETFs
Investors in exchange-traded funds (ETFs) may soon be able to stake Ethereum at the Hong Kong Securities and Futures Commission (SFC). If this proposal were accepted, investors might see a rise in their profits through staking incentives, as it would enable ETFs to participate in Ethereum’s staking system.
Ethereum ETPs Debut on the London Stock Exchange
The London Stock Exchange (LSE) welcomed Ethereum and Bitcoin-based exchange-traded products (ETPs) after they had been approved by the UK Financial Conduct Authority (FCA). Among the earliest crypto ETPs listed in the UK were the WisdomTree Physical Bitcoin ETP and the WisdomTree Physical Ethereum ETP. Institutional and professional investors will be the only ones able to purchase these ETPs.
Ethereum On-Chain Data Analysis
According to crypto data tracker Coinglass, Ether saw $91.79 million in long liquidations after approving eight spot Ether ETF listings on May 23. Taking a long position is buying something with the hope of selling it for more money. At the same time, May saw a six-year low of 13.62 million ETH, according to data from on-chain metrics provider CryptoQuant, which reveals that exchange ETH balances have been declining over the last 12 months.
More information shows that Ethereum’s network activity (in some metrics) has decreased for the past month. From 474k on May 1 to 384k on May 31, the number of daily active addresses on Ethereum decreased. Daily transactions on Ethereum likewise fell in May, falling from 1.3 million on May 1 to 1 million on May 19. However, by the end of the month, they had climbed back up to 1.1k.
May saw a significant increase in the number of people joining the Ethereum network. New wallet addresses climbed from 3.26 million to 3.83 million, according to data from The Block, suggesting that both retail and institutional investors are showing more interest.
Ethereum Supply No Longer Deflationary After Dencun Upgrade
Because of the Dencun update, ETH is now inflationary, which might risk the “ultrasound” money story. This change is brought about by a decrease in the amount of burned transaction fees, which stops the overall supply of Ethereum from being reduced, ensuring that it remains deflationary.
According to CryptoQuant data, Ethereum’s transaction costs have dropped dramatically after the Dencun update. The median charge is now up to four times cheaper for the same level of network activity. As a result, the daily pace of supply growth has accelerated to its highest level since the Merge, and the quantity of ETH being burned has decreased to one of the lowest.
Ethereum Ecosystem Updates
Approvals Increase ETH Price: There have been several significant upgrades and changes to the Ethereum ecosystem recently, aiming to improve its functionality, decrease costs, and fix governance problems.
Ethereum Name Service Layer 2 Migration
The Ethereum Name Service (ENS) is preparing to move to Layer 2 to fix the main net’s sluggish transaction processing and high gas prices, a noteworthy development. Despite its widespread use, ENS is struggling to compete with Ethereum’s high transaction fees, which make it difficult for users to give human-readable names to their Ethereum addresses. Moving to Layer 2, we can cut petrol fees in half and speed up transactions, giving users more control over the service and making it more efficient overall.
Conflict of Interest Policy by Ethereum Foundation
Concerned about potential overlap with EigenLayer, the Ethereum Foundation implemented a policy regarding conflicts of interest. For Ethereum validators, EigenLayer offers a way to reuse their assets on several platforms. The policy’s introduction follows community outcry about possible conflicts of interest caused by Ethereum researcher Dankrad Feist’s joining EigenLayer.
Some community members worry that Feist’s two jobs may lead him to favor EigenLayer over Ethereum due to competing interests. The new policy outlines detailed procedures for handling and disclosing conflicts of interest to reduce their likelihood and enhance community confidence and openness.
Vitalik Buterin’s Proposals: Gas Model Overhaul and EIP-7702
Vitalik Buterin, one of Ethereum’s co-founders, proposed EIP-776, a new gas model for transaction call data. Although it works, the gas system is inefficient and expensive during peak demand. Buterin suggests a more predictable and cheaper petrol strategy to increase network accessibility and lower transaction fees.
Upcoming Pectra Upgrade
By the first quarter of 2025, Ethereum core developers want to release the Pectra update. With this release, we intend to improve transaction processing and network latency, building on Dencun’s accomplishments. With the Dencun upgrade, Ethereum’s transaction throughput and gas prices have already improved considerably. We expect Pectra to keep going in this direction, fixing Ethereum’s most serious performance issues and further establishing Ethereum as the top innovative contract platform.
Ethereum-Based Protocols and DEXs
Approvals Increase ETH Price: With an 81% share and $66.7 billion TVL, Ethereum is the most dominant Layer 1 chain, while Arbitrum One is the most dominant Layer 2 chain with a 29.5% share and $3.1 billion TVL. With new incentive programs, regulatory hurdles, technical advancements, and significant breakthroughs in multiple Layer 2 solutions, May 2024 was a watershed month for the Ethereum DEX ecosystem.
Starknet’s Initiatives: Incentives and AI Integration
Starknet, a popular Ethereum Layer 2 scaling solution, recently announced several ecosystem improvements. The Starknet Foundation began rewarding 21 top-performing projects with $25 million in Starknet tokens. The goal is to encourage innovation and adoption on the Starknet platform. The Starknet Foundation has introduced a Seed Grants Programme with a budget of $5 million to promote the development of the ecosystem. This program will be given to developers and initiatives that help the platform expand.
Polygon’s ZK-Rollup and Taiko’s Mainnet Launch
The alpha testnet phase for Miden, Polygon’s ZK-rollup scaler, began on May 6. Miden uses zero-knowledge (ZK) proofs, essential for Ethereum’s scalability and privacy, to boost transaction throughput and reduce gas costs. Approvals Increase ETH Price: This breakthrough boosts performance and security, making Polygon a competitive Layer 2 scaling opponent. Taiko, a Layer 2 solution for Ethereum, was also launched on the Ethereum mainnet. A genesis airdrop was also part of Taiko’s debut to reward developers and early adopters. To solve Ethereum’s scalability issues, these developments show that Layer 2 alternatives are becoming more popular.
EigenLayer and the Controversies
The notorious liquid staking services provider EigenLayer had a tumultuous month. The EIGEN token, which the platform introduced, is not yet transferable and will be so until September. Approvals Increase ETH Price: Nevertheless, there was pushback during the first EIGEN token airdrop. (The Eigen Foundation had to issue holders extra tokens because the airdrop wasn’t available in the US, Canada, and other African and Asian countries). Despite these measures, the TVL experienced over 12,000 queued withdrawals daily, raising concerns about its stability.
Uniswap’s Legal and Technical Developments
In May, regulators looked closely at Uniswap, the top Ethereum-based DEX. Uniswap Labs strongly reacted to the SEC’s Wells notice by pledging to defend DeFi and describing the SEC’s argument as “weak” and incorrect. This legal dispute highlights the continuous difficulties that DeFi systems encounter regarding regulations. Regarding the technical side, Uniswap and Across Protocol collaborated to create a new token standard called ERC-7683. The developing multi-chain DeFi ecosystem relies on improved cross-chain interoperability, which is the goal of this standard.
Regulatory and Market Dynamics
The regulatory environment surrounding the Ethereum DEX ecosystem is still intricate. The DeFi domain needs strong protection after two brothers stole $25 million by exploiting Ethereum protocols. Layer 3 network Degen Chain production concerns and Uniswap regulatory requirements show operational stability and legal compliance challenges in a changing sector.
New Investments
The Ethereum DEX ecosystem constantly innovates, as shown by multiple new initiatives and investment rounds. Plume Network, a Layer 2 RWA service, received $10 million in seed funding from Haun Ventures. The liquid restaking platform Kelp also raised $9 million in its token sale. These investments demonstrate the increasing diversity of the Ethereum ecosystem and the rising demand for specialized Layer 2 solutions.
Ethereum Meme Coins
Ethereum-based meme coins like Pepe (PEPE) skyrocketed in popularity and trading volume in May. On May 27, traders saw Ethereum-based meme currencies as a high-risk, high-reward investment because the US accepted Ethereum ETF applications. PEPE rose to a new all-time high. Approvals Increase ETH Price: With the return of the GameStop stock trader, meme coin values, like PEPEs, rose in 2021’s retail trading frenzy. In one month, a PEPE whale’s investment gained $5 million. A Binance wallet holds all of the whale’s PEPE.
Ethereum NFTs
With a steep decline in sales of digital collectibles built on Ethereum, NFT sales plummeted from $1 billion in April to $624 million in May. CryptoSlam data shows that Ethereum-based NFT sales were $164,2 million in May, down 46% from April’s $244.6 million. Ethereum has seen 56,000 NFT buyers and 52,000 sellers in the past month. Solana NFT transactions dropped 13.8% to 447k in May.
Bitcoin-based “Uncategorized Ordinals” were the most traded NFTs last month, followed by Fantasy Top (Blast), DMarket (Mythos), and NodeMonkes. Ethereum-based NFTs CryptoPunks and Bored Ape Yacht Club rank 6 and 7, respectively. In May, NFT sales fell, but some collections grew. More than 450%), Fantasy Top from SocialFi propelled Blast into the top NFT blockchains. The Immutable-based game Guild of Guardians had a 69% sales volume increase, contributing to Immutable’s 23% gain, according to CryptoSlam.
Ethereum’s Future: Opportunities and Challenges Ahead in 2024
Ethereum has excellent prospects, but substantial difficulties could define its destiny. The recent approval of spot Ethereum ETFs may make Ethereum more accessible to investors. These ETFs immediately raised Ethereum’s price, but their long-term impact depends on their implementation and investor response. Institutional money, estimated at $3.1 billion to $4.8 billion, may stabilize and enhance Ethereum’s price. However, trade delays and regulatory hurdles warrant caution. If practical, these ETFs could gradually improve Ethereum’s price, but their impact on market liquidity and volatility will be clear.
The recent Dencun upgrade reduced transaction fees and Ethereum burn rate, complicating Ethereum’s supply dynamics and perhaps increasing price swings. The future of the Ethereum ecosystem depends on technological advances. Vitalik Buterin’s gas model and Pectra update attempt to improve network efficiency, lowering costs and increasing scalability. These enhancements may make Ethereum more appealing to developers and users, boosting dApps and Layer 2 solutions.
