Analysts are very bullish on Ethereum (ETH), and predict that the altcoin could potentially hit a new all-time high after the launch of the first spot Ether ETFs in the US. These ETFs ended up recording over $1 billion in trading volume on their very first day in the market. Despite a rise in Ethereum's inflation rate, the adoption of layer-2 platforms and restaking mechanisms also signal positive growth for the network. Additionally, Vitalik Buterin's introduction of Circle STARKs, a new cryptographic protocol, promises enhanced blockchain security and efficiency. This combination of market activity and technological developments perfectly positions Ethereum for impressive growth.
Analysts Believe Ethereum is Undervalued
Analysts are very optimistic that Ether's (ETHs) price could reach all-time highs in the coming months after the launch of the first spot Ether exchange-traded funds (ETFs) in the United States. Traders believe these ETFs are heavily undervalued.
The spot Ether ETFs started trading on July 23, a day after receiving final approval from the US Securities and Exchange Commission (SEC). The ETH ETF issuers include BlackRock, Fidelity, 21Shares, Bitwise, Franklin Templeton, VanEck, and Invesco Galaxy. In just 15 minutes, these ETFs recorded a trading volume of $120 million.
Michaël van de Poppe, the founder and CEO of MN Trading, shared the impressive initial numbers, and also pointed out that the first 15 minutes of trading reached 50% of Bitcoin's first-day volume. He also believes the Ethereum ETF launch is heavily undervalued and expects it to trade towards an all-time high within the next one to two months.
Fellow trader Daan Crypto Trades described the initial trading flows as decent and predicted increased market volatility. He shared an analysis showing that Ether bulls need to clear resistance in the supply zone between $2,672 and $3,730 to secure an uptrend, while still maintaining a firm hold above $3,350.
Crypto investor Alessa Mutto is also bullish on crypto and ETFs, and predicts a parabolic rise in the coming years, although she acknowledged that future spot Ether inflows would determine the direction of Ether's price.
The spot Ether ETFs saw $361 million in trading volume within the first 90 minutes, according to Bloomberg senior ETF analyst Eric Balchunas. He compared these volumes to the launch of spot Bitcoin ETFs in the US on Jan. 11, and stated that the $112 million traded in the first 15 minutes was impressive compared to a typical ETF launch.
Ethereum ETFs Hit $1B in Trading Volume on Day 1
Impressively, the Ethereum ETFs surpassed $1 billion in cumulative trading volume on their first day in the US. This volume represents roughly one-fifth of the first-day volumes recorded by Bitcoin ETFs during their debut in January.
Grayscale's ETHE is leading the volume chart with $355 million, followed by the Fidelity Ethereum Fund (FETH) at $292 million and BlackRock's ETHA at $187 million.
Despite the launch of Ethereum ETFs appearing as a sell-the-news event, analysts are using these first-day inflows to gauge the demand for these products. Coinbase researchers suggest that stronger-than-expected inflows could act as a bullish catalyst for the market, while weaker inflows might have the opposite effect.
James Seyffart and fellow analyst Eric Balchunas previously predicted that Ethereum ETFs could record around $6 billion in inflows during their first year. This optimistic outlook contrasts with JPMorgan's prediction that Ethereum ETFs might underperform because of the lack of staking rewards.
Galaxy Digital CEO Mike Novogratz described Ethereum ETFs as a "game-changer" for the crypto industry as they provide access to the second-largest cryptocurrency and deliver regulatory clarity by confirming that Ethereum is not a security.
Fidelity Reports Ethereum Inflation Surge in Q2
Meanwhile, the Ethereum blockchain experienced its highest period of inflation in the last quarter, adding approximately 110,000 ETH to the total supply, which corresponds to an annual inflation rate of 0.37%, according to a report by Fidelity Digital Assets.
Analysts Daniel Gray and Max Wadington believe that while dramatic fluctuations in ETH’s supply are unlikely in the short- to medium-term, the increasing preference for lower-fee layer 2 platforms and rising staking demand could lead to more frequent inflationary quarters. The network's validator count has increased by 5% since April, and the recent introduction of restaking could also increase staking demand. Ether spot ETFs will also broaden access to the cryptocurrency.
After the Dencun upgrade in the first quarter, Fidelity saw that the adoption of layer 2 platforms has been very impressive, with layer-2 transactions increasing by around 20%, which could positively impact the Ethereum network's future. Layer-2s are separate blockchains built on top of base blockchains, or layer-1s.
Currently, ETH is trading over 60% above its realized price, which was $2,050 towards the end of the second quarter. This is the highest since its inception, despite ETH being well below its 2021 highs.
The realized price measures the average cost basis of all current ETH holders. ETH was trading around $3,438 at press time, according to CoinMarketCap.
Despite a strong start to the year, the Ethereum base layer's fundamentals declined in the second quarter, with monthly new addresses dropping 16%, active addresses falling 14%, and transaction counts shrinking by 9%.
Nonetheless, as the layer-2 ecosystem continues to grow, the influence of layer-1 metrics on valuation is expected to diminish, according to the report.
Buterin Introduces Circle STARKs
There are some other catalysts that could push up the price of ETH as well. Ethereum co-founder Vitalik Buterin has introduced Circle STARKs, which is a new cryptographic protocol that is designed to enhance blockchain security and efficiency.
In his latest post, Buterin shared some details about how this protocol utilizes smaller fields, like Mersenne31, to improve proving speed without compromising security. According to Buterin, the biggest trend in STARK protocol design over the past two years has been the shift to working over small fields.
Traditional scalable transparent arguments of knowledge (STARKs) operate over 256-bit fields, which are secure but also often inefficient. Circle STARKs, however, usesmaller fields to reduce computational costs and increase proving speeds. This innovation allows for verifying 620,000 Poseidon2 hashes per second on an M3 laptop.
Buterin explains that previous STARK implementations naturally aligned with verifying elliptic curve-based signatures but faced inefficiencies because of the large numbers involved. Circle STARKs address this by performing multiple random checks and using extension fields, thus expanding the set of values attackers have to guess and creating a prohibitive barrier for potential attacks. This ensures the protocol's integrity by maintaining robust security measures.
A critical component of Circle STARKs is the Fast Reed-Solomon Interactive Oracle Proofs of Proximity (FRI), which proves that a function is a polynomial of a certain degree. The introduction of Circle FRI preserves the cryptographic process's integrity by ensuring that non-polynomial inputs fail the proof.
By employing small fields and this new mathematical structure, Circle STARKs offer improved flexibility and versatility for efficient computational performance.
