Ethereum is the second-largest cryptocurrency in the world, but that hasn’t protected it against the effects of the major crypto losses and stagnation of the past few years. However, 2024 has renewed hope in the coin’s ability to recover and reach consistent growth levels. The possibility of exchange-traded funds has rejuvenated the marketplace and caused investors to look into stronger strategies of how to buy crypto currency since having a solid plan also means that you are more confident in your ability to maximize growth and minimize losses. The arrival of these assets could potentially change the entire crypto landscape, not just Ethereum, which is why the investor community is so excited about their arrival in the market.
Image source: https://unsplash.com/photos/gold-and-black-star-print-round-ornament-7cmA9ZL5dDk
An overview
Bitcoin remains the most popular crypto coin, and its appeal often means that the altcoins usually don’t get to enjoy their time in the sun. Competing with BTC is pretty much an impossible endeavor at the moment, even for bigger coins such as Ether. Its market capitalization is simply too strong, and the engagement it gets from both individual investors and institutions means that it has, over time, earned a reputation for better stability and reliability. These are essential characteristics for investors and are often in short supply in the crypto environment. This means that the moment they are discovered to exist in an asset, investors are more likely to stick with it.
The arrival of the exchange-traded funds could legitimize Ether in a similar manner but also provide further reassurance for those trading in other altcoins. Many users might even begin to regard ETH as a potential institutional asset, elevating it from the status of tech novelty and allowing it to enter traditional finance markets more rapidly.
L2
Layer-2 solutions are networks built on top of the Ethereum layer-1, which is typically referred to as the mainnet. Their primary purpose is to improve scalability, a factor that influences the fees as well as the number of transactions that can be completed every second. With the rise of ETFs, Ethereum layer-2s such as Arbitrum and Optimism are very likely to benefit just as much as Ethereum itself. The tokens recently recorded record-high price increases similar to that of the native coin. This is spectacular news because these solutions are directly linked to the blockchain and inherently tied to its success.
EVM
Decentralized finance will most likely enjoy a boost as well, mainly because of its connection to the EVM. The Ethereum Virtual Machine is a type of software that can execute smart contracts and compute the entire network in the aftermath of a block formation. It is located on top of the node network and hardware layers. All EVM-compatible projects are expected to perform well in the future, while those who don’t operate using the technology could face some challenges.
It’s also likely that this approval will increase the conversation surrounding EVM compatibility and make it a more pressing issue in the future. Another reason for this is that the approval of the exchange-traded funds will create better regulatory clarity; however, the importance of the hype surrounding one of the largest blockchains in the world will definitely be significant as well.
Lending protocols
Mainstream adoption has been one of the most critical aspects of the cryptocurrency market over the last few years. This is although the two ecosystems have never seemed able to merge comfortably, but because their potential to work together has been quite elevated. However, the regulators have never been keen on cryptocurrencies, even the more successful ones. They cite their potential risks and volatility as the main reasons, with the chief advice being for investors to avoid the space altogether in order to protect their capital. There’s also the fact that making sense of the blockchain is no easy task.
In fact, many of those who are not particularly tech-savvy might feel intimidated by the user interface and, therefore, abstain from dealing with cryptocurrencies altogether due to fears of major errors that might put their portfolios in jeopardy. However, exchange-traded funds could change all of that because of their ability to allow investors to dabble in the marketplace without owning the coins themselves. Investing and decentralized finance, therefore, become simpler and much more accessible for members of the general public.
Institutional investors are also more likely to approach Ethereum if they deem it to be safer and more secure, and the higher engagement rates and elevated quantities of capital will most likely give the market a boost and allow it to become more profitable. This means that the Ethereum space will steadily become associated with outsized returns, creating a cycle of price development and growth. Lending and borrowing protocols such as Aave and Compound will benefit the most from this feature, while decentralized exchanges like Balancer and SushiSwap might reap the benefits as well.
Zk-rollups
Zk-rollups are scaling solutions located on layer-2 networks that let validators prove the authenticity of the transaction without revealing any extra details. This functionality assumes all of the transactions are false until they are proven valid by the ZKPs, the Zero-Knowledge Proofs. These are methods through which one party can cryptographically prove to another that they are knowledgeable about a piece of info without divulging it as well.
RWA tokens, Real World Assets, will most likely enjoy a period of growth in the aftermath of the full Ethereum ETF approval. These assets are the tokenization of tangible products that exist in the physical world and are given a digital token after being brought on the chain. If this sounds unlikely to believe, you must remember that the BlackRock tokenized Treasury Fund is built on the Ethereum blockchain.
After the approval, more projects could arrive on the network, a development that is likely to create fresh token launches as well.
When you’re a crypto trader, you know that it can be difficult to make sense of the changes and be prepared at all times. Make sure your strategy is strong enough to withstand the fluctuations but also flexible enough to make the best of them.
