Bitcoin ETFs Approved: Is Ethereum Next?

Introduction

The US Securities and Exchange Commission's (SEC) recent nod to Bitcoin Exchange-Traded Funds (ETFs) marks a watershed moment in the crypto sphere. Despite this, Bitcoin's value hovers around the $46,000 mark, showing no significant movement post-approval. Meanwhile, Ethereum's Ether (ETH) is on a roll, hitting a new peak of $2,600 for the first time since May 2022. Amidst the buzz around Bitcoin ETFs, the Ethereum community is on tenterhooks for the impending Ethereum Dencun upgrade. This upgrade is poised to introduce proto-danksharding, a breakthrough in scaling that could drastically slash the cost of using L2 rollups by up to 100 times. The Dencun upgrade is not just a technical leap but is also expected to unlock fresh investment avenues and potentially rewarding airdrops for Ethereum enthusiasts.

 

Is Ethereum ETF Approval on the Horizon?

The green light for Bitcoin ETFs by the SEC has undeniably laid the groundwork for Ethereum ETFs. Market experts are optimistic, pegging the odds of Ethereum ETF approval at 70% by May 2024. This step will not only bolster the Ethereum ecosystem but also open up new channels for investor participation. The buzz intensified when BlackRock filed an S-1 with the SEC for its iShares Ethereum Trust, a spot Ethereum ETF. Following these developments, ETH prices soared, fueling investor enthusiasm. While optimism runs high, the SEC is expected to navigate these approvals with precision, ensuring a balance of market freedom and regulatory oversight. The approval of Ethereum ETFs is seen not just as a matter of time but as a pivotal stride towards mainstream crypto integration, signalling thrilling times for Ethereum stakeholders.

 

Why is Ethereum Outperforming Bitcoin Post Bitcoin ETF Approval?

Despite the approval of Bitcoin ETFs, Ethereum's price trajectory has outpaced Bitcoin's in recent times. Let's delve into the reasons:

 

Ethereum Dencun Upgrade

The much-anticipated Ethereum Dencun upgrade, amalgamating the Deneb and Cancun upgrades, is a game-changer in enhancing Ethereum's scalability, efficiency, and security. The spotlight is on proto-danksharding (EIP-4844), a cutting-edge scaling solution that promises to dramatically reduce fees on Ethereum rollups. The upgrade, set to commence testing on January 17, 2024, is a leap forward in reinforcing Ethereum's position as a leading blockchain platform, potentially ushering in new investment opportunities and airdrop prospects for its holders.

 

The Broad Ethereum Ecosystem

Ethereum's ecosystem, far more extensive than Bitcoin's, is a bustling hub of technology that drives ETH and countless decentralized applications (DApps). It's a cradle for digital finance, global payments, and innovative applications. The ecosystem thrives on its robust components – self-executing smart contracts, a decentralized ledger (blockchain), consensus mechanisms for transaction validation, and the Ethereum Virtual Machine (EVM). ETH, as the native cryptocurrency, plays a pivotal role, fueling a variety of financial services like lending, investments, stablecoins, staking, asset management, and decentralized trading. The sheer breadth of applications – including Layer 2, DeFi, and Staking – underlines Ethereum's high demand, reflected in its surging price.

 

Highly-Anticipated Airdrop Projects

Ethereum's allure is further bolstered by several high-profile airdrop projects awaiting ETH holders. These initiatives have significantly spiked demand for ETH, contributing to its stellar performance against Bitcoin.

 

Investment Opportunities and Potential Airdrops to Watch

Restaking

Restaking has emerged as a prominent strategy in the crypto investment landscape. It involves maintaining holdings in a cryptocurrency and leveraging it to earn rewards. A project that has particularly piqued investor interest is EigenLayer. This middleware, integrated into the Ethereum network, enables protocols to utilize Ethereum's robust trust network without the need to set up their own validator set. EigenLayer presents an innovative off-chain data option for Layer 2 solutions, significantly cutting down data management costs while maintaining comparable security levels.

EigenLayer has recently made waves in the market with a substantial $50 million Series A fundraising, led by Blockchain Capital and drawing attention from key investors such as Polychain Capital, Electric Capital, Coinbase Ventures, and Ethereal Ventures. By commoditizing decentralized trust on the Ethereum network, EigenLayer allows protocols to tap into Ethereum's security features at a reduced startup cost, bypassing the need to incentivize a full validator set. This not only lowers the entry barrier for new protocols but also spurs potential innovations by freeing up capital for development.

The platform introduces a restaking marketplace, where validators can offer pooled security to protocols, and vice versa. This unique model enhances the utility of ETH by allowing users to restake their holdings, thereby earning additional staking rewards. EigenLayer recently expanded its Liquid Staking Token (LST) staking limits to 100k for supported tokens, reflecting its rising popularity.

Starting January 29th, 2024, EigenLayer plans to increase its staking caps and incorporate new LSTs like sfrxETH, mETH, and LsETH. This presents a lucrative opportunity for ETH holders looking to leverage their assets further.

 

Layer 2 Blockchains

Layer 2 scaling solutions are gaining momentum in the cryptocurrency domain due to their capacity to boost transaction throughput, decrease confirmation times, and lower transaction costs. Although these solutions are not directly linked to the Ethereum Denver upgrade, they complement it by enhancing scalability and reducing costs for the Ethereum network. Prominent among these solutions are:

 

Optimism (OP): Optimism is a Layer 2 blockchain solution aiming at addressing Ethereum’s scalability challenges, employs Optimistic rollups to bundle transactions into manageable batches. The use of OP-rollups result in faster and cheaper transactions than Ethereum’s mainnet. Optimism Foundation has executed the Bedrock Upgrade, enhancing functionality by reducing deposit confirmation times and cutting gas fees. The blockchain gained significant attention in 2023 for surpassing Arbitrum in daily transactions, spurred by the Worldcoin (WLD) hype.

 

Arbitrum (ARB): Developed by Offchain Labs, Arbitrum is another Layer 2 solution that bolsters Ethereum's network by speeding up transactions and enhancing scalability and privacy. Utilizing optimistic rollup technology, Arbitrum supports a diverse ecosystem of dApps and complex smart contracts, offering quicker and more cost-effective transactions. The ARB token, central to the Arbitrum DAO, plays a key role in governance within its ecosystem.

Arbitrum's recent announcement of integrating new “Layer 3” networks, created via their Orbit program, into the Arbitrum mainnet marks a significant technological leap. This program allows blockchain developers to establish their own Layer 2 or Layer 3 networks, leveraging Arbitrum’s advanced technology. This move exemplifies Arbitrum's commitment to fostering a more scalable and efficient blockchain ecosystem, demonstrating its leadership in driving future blockchain innovations.

 

zkSync: zkSync stands out as a Layer 2 protocol that scales Ethereum using groundbreaking Zero-Knowledge (ZK) technology. It's a trustless platform for scalable, low-cost payments on Ethereum, powered by zkRollup technology. zkSync significantly increases Ethereum’s transaction capacity by consolidating multiple transactions into a single cryptographic proof and processing them off-chain. With a focus on preserving Ethereum's core values - freedom, self-sovereignty, decentralization - zkSync employs zero-knowledge proofs and on-chain data availability to safeguard user funds as securely as on the mainnet. zkSync's mainnet, known as zkSync Era, has been operational since March 2023, processing over 1.5 million daily transactions. The anticipated release of its native token positions zkSync Era as a potentially major airdrop event in 2024.

 

TVL-Based Projects

Total Value Locked (TVL) is an essential metric in blockchain, reflecting the total value of assets secured in a specific blockchain protocol. Recent projects have shifted towards requiring users to deposit their ETH for participation, in return offering promising airdrop rewards. This approach differs from traditional methods that rely on user interaction and transactional activity on blockchain.

 

Manta Pacific: As a leading Layer 2 solution on the OP Stack L2 network, Manta Pacific has rapidly risen in the industry with a TVL of over 900 million. This impressive growth has catapulted Manta Pacific into the top ranks of Ethereum’s Layer 2 networks. The project's "New Paradigm" airdrop event has been a driving force behind this surge. This event rewards investors who lock a minimum of 0.25 Ether or an equivalent amount in stablecoins with blockchain tokens. An allocation of 50 million MANTA tokens and various NFT rewards are set aside for participants in this airdrop event.

 

Blast: Positioned as the market’s only Ethereum L2 offering native yield for ETH and stablecoins, Blast has been gaining significant traction. With a TVL exceeding $1.33 billion and a community of over 98,000 members, Blast ranks among the top Ethereum validators through the Lido DAO. Supported by Paradigm venture capital, Standard Crypto, and various influencers, Blast offers a unique proposition. Its network provides early access members with a 4% yield on Ether and a 5% yield on stablecoins. The planned redemption of these staked assets is set for February 2024, with expectations of expanded yield farming on Ethereum and top-tier stablecoins following the mainnet launch.

 

Conclusion

The evolving landscape of cryptocurrency investment opportunities, particularly in the Ethereum ecosystem, presents a diverse array of options for investors. From restaking platforms like EigenLayer to innovative Layer 2 solutions like Optimism, Arbitrum, and zkSync, and TVL-based projects like Manta Pacific and Blast, each offers unique avenues for investment and potential airdrops. These developments not only reflect the dynamic nature of the crypto market but also underscore the growing integration of Ethereum-based technologies into broader financial systems.