If you're looking into cryptocurrency, you'll undoubtedly notice the terms "bull" and "bear" are used to describe the markets. A bull market is a period during which prices are expected to rise, while a bear market represents a declining market, defined by prolonged price declines. It's anticipated that a significant bull run will replace the latest crypto winter, but investors must have patience. Investments in cryptocurrency can generate profits, so if you want to diversify your portfolio and maintain a balance when it comes to lifestyle, market capitalization, and fundamental quality, that's the way to go.
Digital assets aren't all the same, and the cryptocurrency market knows it. As Bitcoin surged to $51,442.21, it's poised for a bull run, presenting multiple opportunities in novel projects. Ethereum is becoming a safe haven asset like Bitcoin, showing very strong potential lately. At the time of writing, the Ethereum price in the U.S. is $2,936.02. According to Lark Davis, cryptocurrency investor, influencer, YouTuber, and founder of Wealth Mastery, Ethereum will outperform Bitcoin in the next bull market. Its fundamentals remain solid, and several other stimuli could propel Ethereum to execute a strong bullish swing.
Spot Ethereum ETFs Could Be More Compelling for Investors Than Spot Bitcoin ETFs
On January 10, 2024, the SEC approved spot Bitcoin ETFs, offering ordinary investors a simple and affordable way to amplify their purchasing power. Institutional investors, on the other hand, can use ETFs to hedge risk. Spot Bitcoin ETFs offer those interested in cryptocurrency the chance to test the waters—in other words, to see whether going ahead with their efforts is worthwhile. When an investor acquires a quantity of an ETF, they're purchasing a share of that portfolio that contains the underlying asset. Thus, they can take bullish or bearish positions in the cryptocurrency markets.
While discussing the significance of Bitcoin ETF approval, one can't help but think about the possibility of Ethereum ETF approval. May 23 is the first deadline for the first wave of applications. A spot Ethereum ETF is a compelling offering in the income space that allows investors to engage in ETH price action without worrying about the risks associated with self-custody (ownership). Spot Ethereum ETFs could drive the growth of the ecosystem, incentivizing users with accessibility and ease of investment, regulatory oversight, and diversification. Nevertheless, spot Ethereum ETFs will look different than spot Bitcoin ETFs, ETH having utility outside its investment potential.
Ethereum Could Outperform Bitcoin and Other Cryptos Due to EIP-4844
It's expected Ethereum will be at the peak of the next bull run in 2024, as it's set to undergo the Dencun upgrade in the first quarter of the year, which represents an important milestone in its ongoing evolution. Dencun will introduce EIP-4844, which will fortify Ethereum's position as a settlement layer, which was formerly challenged by the emergence of solutions like Celestia. EIP-4844, also referred to as proto-danksharding, is an upgrade to the Ethereum protocol that will reduce the cost of posting data batches of Layer 2 rollup chains on the base layer. The idea is to break down the Ethereum network into smaller, more manageable parts.
Each shard operates independently, meaning it has its own set of validators and states, enabling the corresponding processing of transactions and data. Layer 2 solutions are meant to improve scalability and lessen costs by processing transactions off-chain, but the costs associated with posting through calldata are a big expenditure for Layer 2s. EIP-4844 creates a space for large pieces of data, which are attached to Ethereum blocks; they can be used for settlement instead of calldata. Not only will it free up space on the Ethereum main chain, but it also allows transactions to be processed more swiftly at a lower cost.
Chain Development Kits Come Amidst Great Shift in the Ethereum Layer 2 Space
Rather than having one blockchain for all applications and a regional business team, Polygon has multiple sidechains dedicated to specific use cases. All chains are interoperable, with automatic access to the liquidity of Polygon chains, not to mention the liquidity of Ethereum. The Chain Development Kit (CDK) is an open-source and modular codebase that allows anyone to create Layer 2 chains for Ethereum powered by zero-knowledge (ZK) proofs. The same path is being followed by other blockchains. What Polygon calls "CDK" Optimism calls "OP Stack." Many specialized subchains will be competing in 2024. For example, Polygon has announced the launch of B2, a CDK, to boost the Bitcoin Layer 2 landscape.
Driven by its scalability enhancements, Ethereum offers robust support for the Web3 ecosystem, allowing anyone to create, exchange, and program value. Simply put, it democratizes access to the global economy. The aim is to build the value layer of the Internet, and at the core of this endeavor is ZK architecture, which provides boundless scalability and seamless interconnectivity without forfeiting security. 2024 might be the year when Web2 apps emerge in Web3, creating equality between users by changing the concept of ownership. Many functions of Web3 apps are executed on blockchains, usually Ethereum.
The Merge Network Update Has Made Ethereum a Deflationary Currency
Ethereum finalized the Merge on September 15, 2022, transitioning from an energy-intensive Proof of Work system to a more sustainable Proof of Stake system. It's made ETH deflationary, increasing scarcity with the help of the consensus mechanism and the burning of transaction fees. The explosion of network activity has put pressure on gas fees. As a deflationary cryptocurrency, Ethereum is suited as an inflation hedge, preserving value with time. Indeed, there have been several market crashes over the years, but ETH has managed to retain value better than inflationary digital assets.
Ethereum had an inflationary supply in the beginning, but following the Merge, it's a non-inflationary asset on account of burn rates. To be more exact, the number of tokens burnt in maintaining network activity is more than the amount entering circulation. Therefore, it's more valuable but not necessarily a better investment. The underlying fundamentals must remain strong for Ethereum to thrive as an investment.