Ethereum has underperformed recently, especially when compared to Bitcoin and Solana. The first US spot exchange-traded funds for the asset were launched last month, and the underlying asset’s price has tanked almost 30% since then.
However, the upcoming Pectra (Prague-Electra) upgrade scheduled for the first quarter of 2025 could change the bearish outlook for Ethereum.
Big Upgrades for Ethereum
On Aug. 20, DeFi researcher “Ignas” said that it was easy to be bearish about Ethereum considering its recent performance but added that, unlike previous upgrades, “Pectra seems to get no FOMO at all.”
There have been three major Ethereum upgrades over the past few years, and each has brought major improvements, such as the transition to proof-of-stake, enabling the burning of network fees, and reducing fees for layer-2s.
1/ Easy to be bearish on ETH:
It underperformed SOL and BTC, and bearish sentiment dominates the feed.
But there’s a catalyst to get bullish about: Pectra upgrade: 🧵 pic.twitter.com/6oGh8qK7p8
— Ignas | DeFi (@DefiIgnas) August 20, 2024
However, Pectra has a few gems up its sleeve, including Account Abstraction. This will allow Externally Owned Accounts to act as smart contract wallets during transactions temporarily.
This will enable features like batching transactions, sponsoring transaction fees, and privilege management, making dApps more user-friendly.
The validator staking limit will also be increased from 32 ETH to 2,048 ETH. This will allow for larger validators, reduce costs, and enable smaller validators to benefit from compounding rewards.
There will also be a Peer Data Availability Sampling (PeerDAS) feature that will reduce costs for layer-2 solutions by allowing nodes to verify large data availability without downloading it all.
Finally, sweeping changes to the Ethereum Virtual Machine (EVM) will make it easier to write and deploy smart contracts, reducing gas costs and improving efficiency for developers.
Overall, the Pectra upgrade could be seen as a significant catalyst that will improve the user experience for both developers and end-users while making Ethereum more scalable, efficient, and user-friendly, which could drive increased adoption and bullish sentiment.
Slow and Steady Wins The Race
Etherean Anthony Sassano suggested that not rushing upgrades was more important for the long-term prospects of the network.
I’m quite glad that Ethereum core developers aren’t short-sighted and understand that things take time to build and ship
The rollup-centric roadmap began in earnest in 2020 and is at least a decade-long & very ambitious roadmap
Stay focused on the long-term, frens 🙏
— sassal.eth/acc 🦇🔊 (@sassal0x) August 20, 2024
There has also been concern that falling gas fees could have a longer-term impact on Ethereum issuance, which has turned inflationary again.
However, Coinbase researchers were not concerned, noting that Ethereum will be in higher demand for its utilization in other protocols.
“In the long term, we believe that ETH’s utilization in protocols may become a larger component of ETH demand than transaction fees, the latter of which we think may trend towards zero.”
