The Ethereum (ETH-USD) rebound has mirrored Bitcoin’s (BTC-USD) success, surging from $1,460 to over $4,000. The blockchain boasts recent updates, including “The Merge”, an eco-friendly upgrade tackling environmental concerns. Ethereum’s performance has improved, surging 12% since last week.
Momentum investors and traders are now showing more interest in this token. That said, I think there are other fundamental factors that are worth considering for growth investors looking to diversify into crypto. Here’s why I think Ethereum has to be on the buy list right now for those looking to invest in this volatile space.
Progress on Spot Ethereum ETF
The United States Securities and Exchange Commission’s silence on Ethereum exchange-traded funds has dimmed hopes for approvals by May.
Bloomberg ETF analyst Eric Balchunas recently downgraded spot Ethereum ETF approval chances to 35%, citing the lack of Securities and Exchange Commission communication with issuers. Balchunas suggests the SEC’s silent treatment may signal deliberate delay, influenced by Chair Gary Gensler’s cautious stance on Ether.
Now, receiving the silent treatment from regulators isn’t a good thing. One might think that market sentiment surrounding Ethernet may turn bearish. That’s not the case at all.
The market appears to be taking the view that spot ETF approvals may simply take more time to materialize than previously thought. Regulators have taken a positive stance toward Ethereum in the past, and I expect this will be the case.
We’ll ultimately have to see what regulators decide in Ethereum’s case. But if the capital we saw go into Bitcoin is directed toward Ethereum, this token which has recently turned disinflationary could see big upside on the horizon.
Impacts on Starknet from Dencun
Starknet, a layer-2 scaling solution, plans to leverage cost reductions from Ethereum’s Dencun hard fork, effective March 13. The Starknet Foundation announces additional fee-saving measures in sync with the upgrade. The Dencun upgrade, otherwise known as EIP-4844, alters data storage for Ethereum rollups, potentially lowering layer-2 transaction fees by a significant amount.
EIP-4844 introduces blob space, replacing costly call data for roll-up data storage. This “proto-dank sharding” method allows data attachment to blocks that are inaccessible to the Ethereum Virtual Machine. Polygon Labs’ David Silverman recently highlighted its effects on costs, efficiency and security.
Developers foresee a potential delay in seeing fees reduced on layer-2 networks as they undergo governance and upgrade processes.
However, a more efficient and cost-effective Ethereum over time could bode well for transaction volumes and activity on the network. Ethereum’s core moat could be getting larger, which is great for long-term investors.
Ethereum Remains a Buy
In my books, Ethereum is on a glide path toward new all-time highs. The megacap cryptocurrency simply has too many bullish catalysts right now for investors to ignore. And given the momentum of the crypto market, such a move seems like a matter of time.
Of course, plenty of risk is likely to persist in the coming months and years. Ethereum should be viewed as a long-term play. But for those willing to be patient, this is a great token to hide out in right now, as volatility picks up in the digital asset space.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
