To the moon? Exploring the potential of Ethereum’s rally

It’s only early March and Ethereum is already up more than 40 percent year-to-date! Ether’s staggering rally has come on the backdrop of a 2023 that saw the coin close the year with an 80% gain. Even with the strong gains, 2023 was seen as a slow year for Ethereum, considering Bitcoin closed the year with a 151% gain. 

Despite Bitcoin’s dominance, analysts such as ETC group head of research Andre Dragosch believe that Ethereum could replicate its performance in 2021 and take the spotlight away from Bitcoin. 

So will Ethereum rally? 

Let’s look at some of the fundamentals that back a possible longer-term rally for the world’s second largest cryptocurrency by market capitalisation. 

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Potential Spot Ether ETFs on the horizon? 

The SEC’s approval of Spot Bitcoin ETFs back in January led to murmurs of a possible Spot Ether ETF. The murmurs manifested a new round of applications with Blackrock and Grayscale filing for the approval of Spot Ether ETFs. 

With some analysts predicting that the SEC will give the all clear in May, this could see increased interest in Ethereum from institutional players — just like we’ve seen with Bitcoin. 

The Ethereum ETF buzz coincides with the upcoming BTC halving event and this sets up an interesting scenario. Bitcoin prices tend to jump after a halving event and this up move has historically had a bullish effect on major altcoins. This plausible twin effect could see strong bullish sentiment for Ethereum. 

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NFT hype slowly returning

In the frenzy of the 2022 NFT boom, anonymous collectors, like “Seedphrase” who raked in a staggering $4.4 million for a single token, struck gold. However, the crypto winter’s icy grip swiftly brought the NFT market to a halt. During this period, sales on NFT marketplace OpenSea plummeted by a shocking 98%, and media coverage of NFTs dwindled significantly. Despite the downturn, a glimmer of hope emerges with the rise of BRC-20 NFTs, slowly reigniting excitement in the market.

Source: OpenSea

The BRC-20 — a Bitcoin standard created to rival Ethereum’s ERC-20 — can successfully deploy NFTs through an inscription method. With BRC-20 gaining traction, some analysts believe this excitement will trickle back to Ethereum since it still is the most robust blockchain for NFTs.

Ethereum also has upgrades of its own such as the ERC- 4883 and the EIP-6561, which mean advanced capabilities for NFTs beyond just multimedia representations of real-world assets. Such developments could see the Ethereum network retain market leadership in the NFT space despite competition from the Bitcoin standard, leading to potential positive implications for the price of ETH. 

The Ethereum dencun upgrade

The upcoming Ethereum upgrade on 13 March is the most talked about event in the ETH community. Improvements to the network are expected, including one anchored by Proto-Danksharding which will increase the network’s data throughput while reducing its storage burden. 

Other features will include the improvement of the EIP-4788 standard to improve smart contract security, and the EIP-7044 and EIP-7045 for a better staking experience. The most impactful upgrade proposal will probably be to the EIP-5656 and EIP-1153 standards, which will lead to cost efficiency and potentially lower gas fees for traders on the network. 

This upgrade will only mark the second era of “The Surge”, of the Ethereum road map as articulated by Ethereum Co-founder Vitalik Buterin. 

Source: Vitalik Buterin/X

By the end of this phase, the network could have the capacity to process 100,000 transactions per second for layer 2 rollups - and see an even more robust Ethereum network. Optimism around this upgrade could provide more impetus for a sustained Ethereum uptrend into the future.

Ethereum’s price analysis

The price looks poised to touch the 4,000 USD mark soon, with the 50-day Simple Moving Average (SMA) edging upwards above a 200 Simple Moving Average (SMA) that appears flat. This indicates an uptrend that could lose momentum in the longer term. The RSI supports the case for a possible slowdown in momentum as it has been oscillating around the 90 overbought region since early February. 

Source: Deriv

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