Ethereum’s moment of recovery: Will the rally continue next year?

Historically, ETH has always risen before major network upgrades.

**Written by: **The DeFi Investor

Compiled by: Shenchao TechFlow

As the cryptocurrency market continues to change, the future direction of Ethereum, one of the major blockchain platforms, is attracting attention. This article provides an in-depth analysis of the potential impact of Ethereum’s upcoming Dencun (Cancun) upgrade on its ecosystem, as well as its views on Metis in the first quarter of 2024. In addition, it also reviews the on-chain funding situation and DeFi progress in the past week. .

Is Ethereum currently leading the rally?

Ethereum’s market share has been on a downward trend over the past few months.

But now, things seem to be slowly changing for Ethereum, with the ETH/BTC ratio rising by 5% in the past 24 hours.

Several reasons why this rally may continue include:

• The next major upgrade of Ethereum (Dencun) is only 3 months away, and the Dencun upgrade is expected to significantly reduce L2 transaction fees
• L2 platforms have continued to grow over the past few months, reaching all-time highs in new TVLs and activity, which does not appear to be reflected in prices yet
• ETH supply on exchanges continues to hit all-time lows

This last reason in particular makes me very bullish on ETH, as it shows on-chain whales continuing to accumulate ETH.

And historically, ETH has always risen before major network upgrades.

But we still need to wait 3 months until the Dencun upgrade goes live (assuming it won’t be delayed), so is it too early to discuss whether we are in the early stages of an Ethereum-led rally?

But after the Bitcoin spot ETF is approved (hopefully in January), I’m sure Ethereum’s time to shine will come.

All in all, I am optimistic about the Ethereum ecosystem in the first quarter of 2024.

L2 with an ecological fund of US$400 million

I haven’t heard much about Metis in the past few months. But it looks like its team has been keeping their heads down and building, and now Metis has two major catalysts for its upcoming launch in 2024Q1:

• Release decentralized sorter
• Launched USD 400 million ecological fund

Metis will be the first Ethereum L2 with a decentralized orderer, which will theoretically make it more decentralized than other L2s. Additionally, a portion of network revenue will begin to be shared with $METIS holders through sequencer mining.

Right now I have two main concerns about Metis:

• The number of innovative protocols on this L2 is relatively small, and its DeFi ecosystem has not yet developed well
• Metis also launched a $100 million ecosystem fund in July 2022, which will have less short-term impact on its ecosystem growth

But in July 2022, market conditions were worse and liquidity continued to exit the crypto field. This may be one of the reasons for the poor performance of the previous ecological fund.

However, all things considered, a major network upgrade (decentralized sorter) coupled with a huge upcoming ecosystem fund makes me optimistic about Metis.

From what I see, both of these will come in Q1, but not in January, so the Metis ecosystem token may pull back first and then rise again later in Q1.

This tweet covers major Metis ecosystem projects, click here to read:

On-chain funds

Private funding in the crypto space is currently at its highest level since May

A few months ago, I mentioned that we were in a bull market if these two things happened:

• Venture capitalists invest more in cryptocurrencies
• Stablecoin market value rises

Happily, both of these things are happening now. Since October, stablecoin market capitalization has increased by $6 billion.

While these indicators are still some way off from reaching their previous highs, it’s good to see new liquidity starting to finally flow back into cryptocurrencies.

Latest developments in other DeFi fields

• MicroStrategy purchased $600 million worth of BTC. He now owns $6 billion worth of BTC
• Pancakeswap proposes to reduce the total CAKE supply from 750 million to 450 million. It now appears that the proposal is about to be passed
• Synthetix perps’ CEX-style interface Infinex is online on the mainnet. Infinex provides one-click trading, supports cross-chain deposits and many other features
• Curve DAO agrees to pay $44 million to victims of July hack
• WINR protocol announces expansion to Solana, WINR is a popular decentralized iGaming infrastructure project
• Solana sets monthly records for new wallets and active wallet addresses
• Arbitrum integrates NEAR DA for developers working on Ethereum L2
• Ethena is the protocol behind the Delta-neutral yield stablecoin, due to launch in January 2024. Ethena aims to build the first scalable decentralized stablecoin *Solidly Labs announces SolidSync, a highly secure cross-chain message aggregator
• Aevo announces launch of its incentive program in Q1 *Neon EVM introduces Neon Points with the goal of rewarding its most active community members
• zkSync was down for 5 hours on Christmas Day
• Hokum, an L3 game built on Base, has been launched on the mainnet