ETH, BTC’s Closest Rival, Records Largest Monthly Gain

Ethereum, Bitcoin’s closest competitor, has garnered widespread attention following a surge due to speculation over a U.S. ETF.

Ethereum (ETH) has achieved remarkable gains since the start of the new year, drawing attention in early April for its largest monthly increase. This significant rise is attributed to speculation regarding the token’s prospects for a U.S. exchange-traded fund application.

Ethereum Investors Rejoice on Tuesday

To date this year, Ethereum has seen a 62% increase, nearing the market leader Bitcoin’s 68% gain.

Edward Chin, co-founder of digital asset hedge fund Parataxis Capital, indicated that the U.S. Securities and Exchange Commission has had some discussions regarding ETH ETF issuers.

Following a court overturning a ruling last year, the skeptical SEC reluctantly allowed U.S. spot Bitcoin ETFs in January. Since then, these ETFs have accumulated $59 billion in assets, making them one of the most successful fund categories ever. This helped Bitcoin reach a new all-time high in mid-March.

Traders anticipate a rise in Ethereum if the U.S. Securities and Exchange Commission permits ETFs that hold the token directly. Investment giants like BlackRock Inc. and Fidelity Investments have submitted applications to launch such funds. However, there is doubt whether the regulatory body will give the green light.

SEC Still Claims Ethereum as Unregistered Security

While Bitcoin is considered a commodity, the U.S. Securities and Exchange Commission claims most other tokens are essentially unregistered securities. Hence, the SEC believes there is a substantial amount of non-compliance in the digital asset industry.

The SEC’s approval of spot Bitcoin portfolios also relies on the correlation between Chicago Mercantile Exchange Bitcoin futures and the digital asset’s price movements, deemed sufficient to detect fraud and manipulation.

Bloomberg Intelligence ETF analysts James Seyffart and Eric Balchunas believe there is a 75% chance the agency will reject ETH applications before May. They suggest the SEC may rely on data showing “a relatively weaker correlation between spot and futures markets.”

Challenges Faced by Ethereum

With its user base and application fields continuously growing, the Ethereum network has faced scaling challenges at its core layer.

Additionally, high gas fees and network congestion highlight the current infrastructure’s limitations. These constraints necessitate efficient L2 solutions.

Developers find L2 networks attractive as they alleviate the mainnet’s burden, offering faster transactions and lower fees, making them viable alternatives.

These promise to be hotbeds of innovation and the preferred space for new projects like DeFi and NFTs.

Vitalik Buterin’s New Roadmap

Vitalik Buterin’s new roadmap underscores this shift, with key updates including consolidating single-slot finality (SSF) in post-merge proof-of-stake (PoS) improvements, aimed at enhancing the network’s efficiency and security.

Buterin has emphasized the importance of developing cross-summarization standards and interoperability in the long run. This will facilitate seamless communication and transaction execution among various L2 solutions, thereby enhancing the ecosystem’s composability.

Ongoing improvements are evident in further developments, such as the redesign of calamities, preparations for incorporating Verkle trees, and the reduction of “state expiry” to reflect a broader consensus.

Summary

After a surge of over 6% at the start of the year, ETH is back in the headlines as its trading price approaches that of its closest rival, BTC. However, the SEC regards ETH as an unregistered speculative asset. Cryptocurrency enthusiasts are speculating on a U.S. ETF, leading to a significant rise in ETH prices.

Sentiment: Positive