GM Swifties DOers! 😎
Remember when $ETH was dead checks notes just before Christmas? 😅
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Yeah, it didn’t die. Quite the opposite. In less than 2 months, the perception towards Ethereum has done a complete 180. Ethereum became as beloved by degens as the Chiefs are by Swifties. 🫶
The Bitcoin ETF hype has now shifted towards Ethereum, and other smart contract blockchains *cough* Solana *cough* still face issues, leaving the door open for Ethereum to have its long awaited moment this cycle.
Today, I wanted to highlight the various things that have been happening on Ethereum, as well as what’s coming.
Spoiler: It’s EXTREMELY bullish. 🐂
From the app-layer perspective, we have:
Farcaster (onchain social) going nuts.
ERC-404 becoming the new craze in NFTs.
ENS partnering with GoDaddy.
Multiple L2s launching on Ethereum.
All of that means that more adoption and thus more transactions are occurring on Ethereum. We already talked about each innovation in past newsletters.
But what’s important to understand is that more transactions on Ethereum = more $ETH being burned. 🔥
At the moment, an average of 0.2% of the $ETH supply is being burned per year. 🤯
As more $ETH is being burned, we also have a significant amount of $ETH being removed from circulation (aka can’t be sold).
Here’s a TL;DR on the forces altering the supply dynamics of ETH (we’ll dive deeper into each point below):
25% of all $ETH is now staked.
EigenLayer re-staking just hit $5 billion TVL.
Final decision for ETH ETF set for July 2024.
The EIP-4844 upgrade is scheduled for mid-March.
All in all, Ethereum is becoming much more secure and scalable, while $ETH is becoming more scarce.
Friends, everything’s pointing to 1 thing: Nobody has enough $ETH.
Let’s dig deeper. ⏬
💪 Ethereum Fundamentals Have Never Looked Better
Out of all $ETH in existence, 25% of it is being staked at a 5% yearly APY.
Because validators earn while securing Ethereum, there’s no reason for staking to not continue to increase in popularity.
Especially considering that we now also have re-staking with EigenLayer.
Re-staking enables Ethereum validators to secure multiple applications by putting their already staked ETH to work, boosting Ethereum's scalability and efficiency.
We wrote extensively about EigenLayer & its airdrop here.
Almost 2.5 million $ETH ($6.2 billion) has already been locked in EigenLayer.
Demand for re-staking is very high. Keep in mind that EigenLayer limits the amount of $ETH that can be re-staked by frequently opening and closing pools, which fill up almost instantly.
EigenLayer Restaking Reloaded! From NOW until Feb 9th, 12 PM PT, dive back into the world of LST restaking! All pools are fully uncapped, featuring both the existing pools and welcoming new partners @fraxfinance, @liquid_col, & @0xMantle.
The hype around EigenLayer is very understandable – Ethereum stakers earn extra by re-staking $ETH, while also farming the EigenLayer airdrop simultaneously.
Okay, all of this is locking up a bunch of $ETH, which is bullish. But what’s even more bullish is the coming Ethereum ETF.
🚀 BlackRock & Ark Pushing for the Ethereum ETF
In November, BlackRock filed for an Ethereum Spot ETF. Ever since, the CEO, Larry Fink, has praised Ethereum over and over again.
With BlackRock having a 576-1 ETF approval rate there's a huge chance that their Ethereum ETF application will be approved.
Additionally, Ark Invest is also pushing for the Ethereum ETF, and they recently said they want to add staking to their ETF – imagine how much $ETH will be locked up if this happens.
ARK Invest and 21Shares address cash creation and redemption process in latest spot Ethereum ETF...
A spot ethereum ETF proposal from ARK Invest and 21Shares will only have a process to deliver cash in its creation/ redemption process.
Lastly, a final decision is coming in July 2024.
A final decision on the Ethereum ETF set for July 2024.
Now, before we get the green light for the ETH ETF, the SEC needs to officially classify Ethereum a non-security (which it clearly is). Ball’s in your court Gary.
As a reminder, here’s what the ETF did for Bitcoin.
First up, $2.2 billion (net) have gone into the Bitcoin ETF.
Secondly, outflows are slowing down.
GBTC Outflow $52m
Thirdly, the Bitcoin ETH has become the most popular ETF in the U.S.
Boomers clearly love the Bitcoin ETF and it’s likely that the Ethereum ETF will be as popular.
If $2.2 billion were invested in Ethereum ETFs at current prices, it would purchase 880,000 $ETH, representing 0.7% of the total Ethereum supply.
Not to mention all the other Ethereum ETFs all over the world.
Among them, 20 are spot ETFs, while 7 are futures ETFs.
Recap:
Staking’s on the rise
Re-staking’s on the rise
Ethereum spot ETFs are coming
These factors will reduce the supply of ETH that’s ‘sellable’.
Coupled with the fact that 0.2% of the total Ethereum supply is burned annually, we're witnessing a supply shock that is poised to drive up the price of $ETH. 🚀
As the bull market intensifies and more users engage with the Ethereum network, this effect is expected to amplify.
Fundamentally, Ethereum has never looked better.
⚙ EIP-4844 Scheduled for March 13th
Speaking of fundamentals, Ethereum’s coming upgrade (EIP-4844) has been set for March 13th.
EIP-4844 is coming!
This upgrade will lower the L2 gas fees exponentially. Initially, this will lead to less $ETH being burned (as gas is lower).
However, over time, lower gas fees should drive more activity and onchain adoption to make up for it.
Nobody should pay more than $1 in gas fees when using Ethereum!
GM back if you agree!
😨 You (and I) Don’t Have Enough $ETH
0.2% of $ETH supply burned annually, reducing available ETH.
25% of $ETH supply staked, further reducing availability.
Upcoming Ethereum ETFs expected to decrease available ETH.
EIP-4844 to lower L2 gas fees, increasing transactions significantly.
All indicators show a rising demand for $ETH, whose supply is shrinking considerably.
This is the most basic law of economics. If demand is increasing, and supply is decreasing, then the price has no choice but to pump.
Nobody’s bullish enough! 🐂
Thanks for reading. And remember, you're strong, you’re powerful, you’re alpha! ❤
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Disclaimer: This article is for informational purposes only and not financial advice. Conduct your own research and consult a financial advisor before making investment decisions or taking any action based on the content.
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