Exploring Ethereum’s Performance in May 2024: Can ETF Approvals Impact ETH Price?
Veronika Rinecker
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Verified by Elena Bozhkova
Last updated: June 10, 2024 05:17 EDT
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Reading time: 16 min
Delving into Ethereum’s ecosystem surge and ETH price action in May 2024, we uncover some key insights:
ETH price displayed volatility in May. The approval of spot Ethereum ETFs initially boosted the price, but it struggled to maintain levels above $4,000.
Research from K33 suggests that these new Ethereum ETFs could attract a substantial influx of investment capital, ranging from $3.1 billion to $4.8 billion within the first five months of trading.
On-chain data indicates a decrease in Ethereum network activity (daily transactions and addresses) in May. However, there was a noticeable increase in new users joining the network, hinting at sustained interest.
The Petra upgrade, set to enhance transaction processing efficiency and reduce latency across the Ethereum network, is slated for release in Q1 2025.
Ethereum Name Service (ENS) is planning to transition to Layer 2, a scaling solution that can significantly reduce gas fees and enhance transaction speed.
The Ethereum NFT market witnessed a decline in sales volume in May, dropping from $1 billion in April to $624 million. Ethereum-based digital collectibles were particularly affected, with sales volume plummeting to $164.2 million (a 46% decrease from April).
A Closer Look at Ethereum in May:
What is Ethereum?
Amid Approval of Ethereum ETFs, ETH Price Surges and Stumbles
Updates on Ethereum Ecosystem
Protocols and DEXs on Ethereum
Ethereum Meme Coins
Ethereum NFTs
The Road Ahead for Ethereum in 2024
Understanding Ethereum:
Established in 2013 by Vitalik Buterin, Ethereum serves as a distributed blockchain computing platform designed for smart contracts and decentralized applications (dApps). The network fosters extensive creativity with smart contracts, facilitating the emergence of assets and industries like DeFi, NFTs, DAOs, Web3, and more. Ethereum’s core features an execution engine tailored for smart contract processing, known as the Ethereum Virtual Machine (EVM). Additionally, Ethereum utilizes a proof-of-stake (PoS) consensus mechanism, enhancing its scalability and sustainability.
Navigating Ethereum’s Price Action in May:
In May, Ethereum’s (ETH) price journeyed through volatility, reflecting a mix of market optimism and underlying challenges. Starting the month below $3,000, ETH struggled to maintain significant gains above this level despite intermittent rallies.
The approval and anticipation of spot Ethereum ETFs played a crucial role in shaping market sentiment. As ETH surpassed the $3,000 mark on May 17 and nearly touched $4,000 on May 23, driven by optimism about institutional investment through these ETFs. The SEC’s approval of the ETFs reignited hopes for a bullish market, propelling ETH by approximately 27% at one point.
However, ETH encountered resistance and could not sustain levels above $3,900 for an extended period. The ETF approval alone was insufficient to breach the $4,000 resistance level, as evident from ETH’s repeated pullbacks below $3,800.
Green Light for Spot Ethereum ETFs:
On May 23, the SEC greenlit spot Ethereum ETFs, potentially broadening access to cryptocurrency investing. While this move sparked excitement, individual ETF applications (S-1 filings) still await approval, delaying actual trading for weeks or even months. This uncertainty may have contributed to Ethereum’s struggle to reach $4,000.
Industry giants like VanEck, Grayscale, iShares, Fidelity, ARK 21Shares, Bitwise, Franklin Templeton, and Invesco received approval for these ETF applications. These ETFs will enable investors to track Ether’s price through their brokerage accounts, offering a more accessible investment avenue compared to directly purchasing the cryptocurrency.
A Glimpse into Ethereum’s ETPs on London Stock Exchange:
Ethereum and Bitcoin-based exchange-traded products (ETPs) debuted on the London Stock Exchange (LSE) in May following approval by the UK Financial Conduct Authority (FCA) on May 22. The WisdomTree Physical Bitcoin ETP and the WisdomTree Physical Ethereum ETP were among the initial crypto ETPs listed in the UK, exclusively available to professional and institutional investors.
Analyzing Ethereum’s On-Chain Data:
Post the approval of eight spot Ether ETF listings on May 23, Ethereum experienced $91.79 million in long liquidations, according to crypto data tracker Coinglass. A long position involves buying an asset with the expectation of selling it at a higher price in the future.
Additionally, data from CryptoQuant shows a declining ETH balance on exchanges over the last 12 months, reaching a six-year low of 13.62 million ETH in May. Further data reveals a decrease in Ethereum’s network activity in specific metrics over the past month.
Exploring Ethereum’s Supply Dynamics:
Following the Dencun upgrade, Ethereum’s supply dynamics have become more intricate, potentially leading to increased price fluctuations. The shift towards an inflationary trend post the upgrade has impacted the overall supply dynamics of ETH.
Ethereum Ecosystem Updates:
The Ethereum ecosystem continues to evolve rapidly with proposals and upgrades aimed at enhancing functionality, reducing costs, and addressing governance issues. The Ethereum Name Service (ENS) planning a migration to Layer 2 is a notable development to tackle high gas fees and slow transaction speeds on the Ethereum mainnet.
Challenges in the Ethereum NFT Market:
The Ethereum NFT market faced challenges in May, with phishing scams emerging as a significant issue. The Bored Ape Yacht Club (BAYC) incident on May 8, resulting in the loss of high-value NFTs, highlighted vulnerabilities in the market.
In conclusion, Ethereum’s journey in May 2024 showcased a mix of optimism, challenges, and developments that could shape its future trajectory. From ETF approvals to network upgrades, Ethereum continues to navigate a rapidly evolving landscape, preparing for opportunities and overcoming hurdles in the dynamic crypto market.