Ethereum's rebound moment: Will its leading rally continue into next year?
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Ethereum's rebound moment: Will its leading rally continue into next year?
Historically, ETH always rises before major network upgrades.
Navigating Web3 tides with focused insightsAuthor: The DeFi Investor
Translation: TechFlow
As the cryptocurrency market continues to evolve, Ethereum, as one of the leading blockchain platforms, draws significant attention regarding its future trajectory. This article provides an in-depth analysis of the potential impact of Ethereum's upcoming Dencun (Cancun) upgrade on its ecosystem, offers insights into Metis for Q1 2024, and reviews on-chain funding trends and recent developments in DeFi over the past week.
Are we currently in an Ethereum-led bull run?
Over the past few months, Ethereum’s market share has been on a declining trend.
However, signs now suggest that this trend may be reversing—ETH/BTC ratio rose 5% within the last 24 hours.
Several factors could support the continuation of this upward momentum:
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Ethereum’s next major upgrade (Dencun) is just three months away, expected to significantly reduce transaction fees on Layer 2 networks
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Layer 2 platforms have seen continuous growth over recent months, reaching new all-time highs in TVL and user activity—a trend not yet reflected in price
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ETH supply on exchanges continues to hit record lows, indicating strong accumulation
The last point particularly strengthens my bullish outlook on ETH, as it reflects ongoing accumulation by large whales.
Historically, ETH tends to rise ahead of major network upgrades.
However, we still need to wait three months for the Dencun upgrade to go live (assuming no delays)—so is it too early to say we're entering an Ethereum-led rally?
Yet after the approval of spot Bitcoin ETFs (hopefully in January), I believe Ethereum’s time to shine will arrive.
In summary, I am optimistic about the Ethereum ecosystem in Q1 2024.
An L2 with a $400 million ecosystem fund
I haven’t heard much about Metis over the past few months. But it appears their team has been working diligently behind the scenes. Now, Metis has two major catalysts coming in Q1 2024:
Metis will become the first Ethereum L2 with a decentralized sequencer, theoretically making it more decentralized than other L2s. Additionally, a portion of network revenue will begin to be shared with $METIS holders through sequencer mining.
Currently, I have two main concerns about Metis:
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Relatively few innovative protocols exist on this L2; its DeFi ecosystem remains underdeveloped
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Metis launched a $100 million ecosystem fund back in July 2022, which had limited short-term impact on ecosystem growth
However, market conditions in July 2022 were far worse, with liquidity continuously exiting the crypto space—this may explain the limited effectiveness of the previous fund.
Nevertheless, taking everything into account, a major network upgrade (decentralized sequencer) combined with an upcoming large-scale ecosystem fund makes me optimistic about Metis.
From what I can see, both events are expected in Q1—but not in January—so Metis ecosystem tokens might pull back initially before rising again later in the quarter.
This tweet covers key projects in the Metis ecosystem—read here:
On-chain Funding
Currently,private investment in crypto has reached its highest level since May
A few months ago, I mentioned that we could confirm the start of a bull market if two things occurred:
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Increased venture capital funding flowing into crypto
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Growth in stablecoin market cap
Happily, both are now happening. Since October, the stablecoin market cap has increased by $6 billion.
While these metrics are still far from previous peaks, it’s encouraging to see fresh liquidity finally returning to the crypto space.
Other Recent Developments in DeFi
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MicroStrategy purchased $600 million worth of BTC. It now holds $6 billion in BTC
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PancakeSwap proposed reducing CAKE’s total supply from 750 million to 450 million. The proposal appears poised to pass
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Infinex, Synthetix perps’ CEX-style interface, launched on mainnet, offering one-click trading, cross-chain deposits, and many other features
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Curve DAO agreed to compensate victims of the July hack with $44 million in CRV tokens
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WINR Protocol announced expansion to Solana, a popular decentralized iGaming infrastructure project
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Solana set records for monthly new and active wallet addresses
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Arbitrum integrated NEAR DA for developers building Ethereum L2s
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Ethena, the protocol behind delta-neutral yield-bearing stablecoins, will launch in January 2024. Ethena aims to build the first scalable decentralized stablecoin
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Solidly Labs announced the launch of SolidSync, a high-security cross-chain message aggregator
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Aevo announced it will launch its incentive program in Q1
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Neon EVM introduced Neon Points, aiming to reward its most active community members
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zkSync experienced a 5-hour outage on Christmas Day
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Hokum, an L3 game built on Base, has launched on mainnet
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The DeFi Investor
