Ethereum’s Struggles Continue: Could ETF Launch Reverse the Trend?

In this report, we examine Ethereum’s performance in June 2024. Despite the complicated trends in ETH’s price, Cryptonews delves into network activities, breaks down important updates within the ecosystem, and explores what they could mean for Ethereum’s future.

What You’ll Find in This June Ethereum Analysis:

What is Ethereum?

Founded in 2013 by Vitalik Buterin, Ethereum serves as a distributed blockchain computing platform designed for the execution of smart contracts and decentralized applications (dApps). The network enables users to create and innovate extensively with smart contracts, catalyzing the emergence of various assets and industries such as decentralized finance (DeFi), non-fungible tokens (NFTs), decentralized autonomous organizations (DAOs), Web3 and beyond. At its core, Ethereum features an execution engine tailored for smart contract processing, known as the Ethereum Virtual Machine (EVM). In addition, Ethereum employs a proof-of-stake (PoS) consensus mechanism, which enhances its scalability and sustainability.

ETH Price Drops Despite Anticipated Spot ETF Boost

June 2024 saw Ethereum (ETH) price on a roller coaster, ultimately trending downwards.

Fear surrounding a potential Bitcoin (BTC) price dump and declining institutional investment in Ethereum funds put significant pressure on the price.

ETH started the month at $3,803, fell to $3,258 on June 24, and then rose slightly to $3,480 on June 28. On June 30, the price settled at $3,406, a 10,4% decline from the opening price on June 1.

Several factors contributed to the ETH price remaining below $3,600 in June. These factors include worsening macroeconomic conditions, lack of institutional demand suggesting waning interest from larger investors, and regulatory uncertainty surrounding the Ethereum ecosystem.

Ethereum’s exchange-traded products (ETPs) endured a tumultuous last week of June, recording their highest outflow since August 2022, according to CoinShares report from June 30. “Ethereum saw the largest outflows since August 2022, totaling US$61 million, bringing the last two weeks of outflows to US$119 million, making it the worst performing asset year-to-date in terms of net flows”, the report said.

The anticipated launch of spot Ethereum exchange-traded funds (ETFs) in the United States on July 2 was expected to fuel a price rise for ETH. However, the Securities and Exchange Commission (SEC) has delayed the process.

The SEC requested resubmissions of S-1 forms related to the ETFs by July 8. This development, according to Bloomberg Senior ETF analyst Eric Balchunas, pushes back the potential launch of these ETFs to mid-to-late July.

Unfort think we gonna have to push back our over/under till after holiday. Sounds like SEC took extra time to get back to ppl this wk (altho again very light tweaks) and from what I hear next wk is dead bc holiday = July 8th the process resumes and soon after that they’ll launch… https://t.co/0ZQR7yiBLt

— Eric Balchunas (@EricBalchunas) June 28, 2024

Ethereum ETFs: Greenlight Given, But When Will They Trade?

On May 23, the SEC approved eight 19b-4 filings to list spot Ethereum ETFs on various U.S. exchanges. However, these ETFs cannot begin trading until they receive the necessary S-1 registration statement approvals.

The exact timeline for the launch of spot Ethereum ETFs remains uncertain. The SEC has taken additional time to return S-1 forms submitted by prospective spot Ethereum ETF issuers, pushing the launch to mid-July or later.

Unlike 19b-4 forms, S-1 forms don’t have a set deadline for SEC approval. This means that issuers must wait for the SEC to complete its review and approval process, which can be unpredictable.

On June 17, asset management firm Bitwise submitted an amendment to their spot Ethereum ETF proposal, a move mirrored by other major asset managers like Fidelity and VanEck. On June 21, Fidelity disclosed a $4.7 million seed investment in its Ethereum ETF, as recorded in its recent SEC filing. VanEck also filed Form 8-A — a registration step that allows issuers to trade on an exchange once the product has been approved.

Meanwhile, Hashdex proposed a novel ETF combining spot Bitcoin and Ethereum in a filing on June 18, reflecting a strategic diversification in response to market demand. The proposed ETF would balance the crypto assets according to their market capitalizations, which, as of May 27, was 70.54% Bitcoin and 29.46% Ethereum.

Update: A dual Ethereum and #Bitcoin ETF filing from @hashdex just dropped. Will be market cap weighted. Shouldn’t be a surprise to anyone — makes a lot of sense.

Final deadline for SEC approval should be sometime around the first week of March 2025 pic.twitter.com/5wB7ucvbgM

— James Seyffart (@JSeyff) June 18, 2024

Spot ETFs expected to drive up ETH price

Following the success of spot Bitcoin ETFs, the introduction of spot Ethereum ETFs is expected to attract significant capital inflows, which will likely drive up the price of ETH. Galaxy Vice President of Research Charles Yu predicts up to $7.5 billion flowing into Ethereum ETFs within the first five months post-approval, highlighting a substantial demand from institutional and retail investors.

K33 analysts Vetle Lunde and David Zimmerman said in a July 2 report that the launch of spot Ethereum ETFs will outperform Bitcoin in the weeks after they go live in the U.S.

Analysts at VanEck, which has applied to list a spot Ethereum ETF, have raised their 2030 price prediction for ETH to $22,000. VanEck attributed this revised forecast to the impact of Ethereum ETF news, advancements in scaling technology, and an analysis of on-chain data.

We’ve raised our 2030 ETH price target to $22K, influenced by ether ETF news, scaling progress, and our read of onchain data. Additionally, we’ve analyzed how ETH and BTC perform in both traditional and crypto-only portfolios for optimal returns. @Matthew_Sigel @Patrick_Bush_VE…

— VanEck (@vaneck_us) June 5, 2024

Bitwise’s Chief Investment Officer Matt Hougan projects that spot Ethereum ETFs could attract as much as $15 billion by the end of 2025, suggesting a significant shift in capital towards Ethereum.

1/ Ethereum ETPs will attract $15 billion in net flows in their first 18 months on the market.

A thread on how I get to this estimate.

— Matt Hougan (@Matt_Hougan) June 26, 2024

Mads Eberhardt, a senior analyst at Steno Research, also predicts that spot Ethereum ETFs could see net inflows of $15 to $20 billion in the first 12 months, potentially pushing the ETH price to $6,500 by the end of 2024.

However, market sentiment remains divided. Andrew Kang, a founder of the venture capital firm Mechanism Capital, cautions that the launch of Ethereum ETFs could lead to a short-term price decline for ETH. According to Kang, Ethereum attracts less institutional interest than Bitcoin.

https://t.co/On2KWjAlLx

— Andrew Kang (@Rewkang) June 23, 2024

Despite these concerns, the long-term outlook remains bullish, with predictions that ETH price could outperform Bitcoin following the ETF’s launch.

Ethereum’s Network Activity

Ethereum has seen a slight increase in network activity over the past month.

Daily active addresses on Ethereum increased from 384.2k addresses on June 1 to 466.6k addresses on June 30. On June 22, the number of active Ethereum addresses jumped from approximately 372.8k to more than 610.8k. The number of active addresses grew by 64%.

Apart from the rumors about the spot Ethereum ETFs, there didn’t seem to be anything important happening on June 22. The only thing that could be relevant is the extremely low gas fees on the Ethereum blockchain on that day and during June (read about it below), and that could be a reason why the number of daily active addresses increased in June.

However, in contrast to the number of daily active addresses, the number of new addresses created on the Ethereum network in June decreased by 14,8% to 3,26 million.

The Ethereum network also saw a slight 2% decrease in daily transactions in June – from 35.84 million in May to 35.05 million in June. However, the number of transactions has generally remained stable over the last three months.

Despite starting June strong, there was also a significant decrease in Ethereum’s total value locked (TVL) during June. On June 6, Ethereum’s TVL reached $66.9 billion and since then has been steadily declining, reaching 58.3 billion on June 30 and marking a 13% decrease within 25 days.

Investors move ETH off exchanges

Data from CryptoQuant indicates a significant decline in the amount of ETH held on cryptocurrency exchanges. As of June 30, exchange balances reached a four-year low of 16.6 million ETH, surpassing the previous low recorded in July 2021.

This trend of ETH outflows coincides with a rise in the altcoin’s price, suggesting reduced selling pressure and a potential shift in investor behavior. It could indicate a preference for holding ETH for the long term, with users storing their tokens in private wallets or dApps.

CryptoQuant data further reveals a steady increase in staked ETH on the Ethereum Beacon Chain. By June 30, the total staked ETH reached 33.3 million, nearly double the amount held on exchanges.

This growth is significant, especially after the Ethereum Shanghai upgrade in March 2023. This update made it possible for users to withdraw their staked ETH if they wanted by removing the previous requirement that locked the tokens. Despite this, the data shows that most users have chosen not to withdraw their tokens. This likely reflects the advantages of staking—like earning rewards and helping to stabilize the network—which may be more valuable to them than the ability to sell immediately.

Ethereum supply continues to grow

One of the most notable developments over the past few months has been the continued inflation of Ethereum supply, with over 112,000 ETH added to the overall supply since April 14, according to ultrasound.money.

This extended inflationary activity is largely due to the Dencun upgrade that was implemented on March 13. This upgrade included a series of nine Ethereum Improvement Proposals (EIPs). Of these, EIP-4844 appears to be the primary driver of the current inflation.

While EIP-4844 has significantly reduced transaction costs on Layer 2 networks like Arbitrum and Optimism, it has come at a cost – the total amount of ETH burned on the Ethereum mainnet has decreased significantly.

Ethereum transaction fees drop to multi-year lows

The cost of conducting transactions on the Ethereum network has fallen to its lowest level in years. Gas prices, which determine transaction fees, have dipped below $3. On June 30, the average gas price on Ethereum was $2,41.

The decrease in gas fees is attributed to a shift in activity away from Ethereum’s mainnet to its Layer 2 networks, a consequence of the March Dencun upgrade. Layer-2 networks are designed to handle transactions more efficiently than the mainnet, potentially leading to lower fees.

1-2 gwei gas fee! I don’t think I’ve seen it before in my entire 7 years in this space. pic.twitter.com/9VFa86XOql

— unnawut (@unnawut) June 23, 2024

Ethereum Ecosystem Updates

June 2024 was a month of mixed signals for the Ethereum ecosystem. While advancements in scalability and user adoption were celebrated, concerns regarding governance and regulatory hurdles emerged.

EIP-7732 for faster Ethereum

Ethereum developers introduced a new Ethereum Improvement Proposal, EIP-7732, aimed at overhauling the block validation process to enhance blockchain speed. The proposal seeks to improve the blockchain’s security and performance by separating block validation into two distinct processes: consensus and execution.

EIP-7732 responds to the increasing demand for efficiency on the Ethereum blockchain and aligns with Ethereum co-founder Vitalik Buterin’s push for faster transaction confirmation times.

Governance concerns

A June 3 report by Galaxy Digital raised concerns about Ethereum’s decentralized governance. The report suggests that key stakeholders hold significant influence through off-chain voting channels. This raises questions about the true level of decentralization in Ethereum’s decision-making process.

According to the report, the groups collaborating on the off-chain processes include client teams, validator node operators, the Ethereum Foundation, and decentralized application developers.

SEC investigation closure

On June 18, Ethereum ecosystem developer Consensys announced that the SEC had closed its investigation into whether Ethereum could be classified as a security and Consensys’ role in ETH sales. This news followed a legal battle that Consensys initiated in April after receiving a Wells Notice from the SEC, indicating potential enforcement action against its MetaMask wallet for possible violations of securities laws.

ETHEREUM SURVIVES THE SEC.

Today we’re happy to announce a major win for Ethereum developers, technology providers, and industry participants: the Enforcement Division of the SEC has notified us that it is closing its investigation into Ethereum 2.0.

This means that the SEC…

— Consensys (@Consensys) June 19, 2024

Ethereum-Based Protocols and DEXs

June 2024 witnessed significant developments in the decentralized exchange (DEX) ecosystem, particularly on the Ethereum network.

Despite the emergence and growth of Layer 2 scaling solutions such as Optimism, Base, Arbitrum, and zkSync, Ethereum continues to face intense competition from alternative blockchain platforms with low transaction fees like Solana, BNB Chain, and THORChain.

Market dynamics and competitive pressures

According to DappRadar, the BNB chain overtook Ethereum and secured the first place among the top blockchains by analyzing smart contracts, number of dApps, DeFi TVL, transactions, NFT, and dApp volume over the last 30 days (data taken from July 3).

Ethereum saw a sharp decline in TVL and total UAW, indicating that the user base is shrinking while the remaining users are depositing more or seeing their portfolios increase in value. UAW decreased by 32% to 1.77 million for the month.

While Ethereum maintains its crown for TVL and DEX volume, a challenger is rising. In June, Ethereum held onto $48.7 billion in DEX trading volume (31.6% market share), but Solana surged to $38.4 billion (nearly 30% market share). This significant gain by Solana demonstrates a growing threat to Ethereum’s dominance in the DEX space.

Ethereum sees massive transaction surge on its scaling solutions

The Ethereum network achieved a new milestone for transaction processing. L2beat data reveals that on June 20, Ethereum’s scaling solutions, encompassing both Layer 2 and Layer 3 blockchains, collectively processed transactions at a record rate of 285.26 TPS.

Interestingly, the majority of transactions occurred on Xai, a new Ethereum Layer 3 scaling solution designed specifically for gaming applications. Xai is powered by Offchain Labs, the same team behind the well-established Arbitrum One blockchain.

Big boost for games on Arbitrum

The governance DAO of Ethereum Layer 2 network Arbitrum approved the Gaming Catalyst Program to allocate 225 million ARB ($215 million) to support gaming projects on the network.

This three-year program aims to make Arbitrum, Orbit, and Stylus (components of the Arbitrum ecosystem) household names in the gaming world. By fostering growth and engagement, the team hopes to build a thriving gaming community on their network.

The GCP has been approved by Arbitrum DAO

Arbitrum is the home of gaming – this includes all of the games, the gaming chains, and all of the builders within its orbit.

Let’s make some magic happen pic.twitter.com/QqWD1MmkdD

— Treasure (@Treasure_DAO) June 7, 2024

Uniswap Foundation postpones vote on incentives

The Uniswap Foundation, the governing body of the popular decentralized exchange Uniswap, postponed a crucial vote on UNI staking and delegation rewards. Originally scheduled for May 31, the vote was delayed due to a concern raised by a stakeholder.

Last week, we announced that the first proposal to activate Uniswap Protocol Governance would be deployed onchain today. Over the last week, a stakeholder raised a new issue relating to this work that requires additional diligence on our end to fully vet. Due to the immutable… https://t.co/g35pKG4UTA

— Uniswap Foundation (@UniswapFND) May 31, 2024

On June 1, Uniswap Labs partnered with Web3 payment infrastructure provider Transak to provide fiat on-ramping services. Uniswap Wallet users will be able to purchase crypto directly with fiat in the wallet.

Optimism takes big step toward decentralization

On June 10, Ethereum’s Layer 2 scaling solution, Optimism, achieved a critical milestone on its path to becoming a fully decentralized network. Their development team, OP Labs, integrated “fault proofs” into the platform’s smart contracts.

This advancement marks Optimism reaching “Stage 1” of a decentralization roadmap outlined by Ethereum co-founder Vitalik Buterin. At least four other networks built on the Optimism stack – Base, Metal, Mode, and Zora – are also expected to integrate fault proofs soon.

FAULT PROOFS & STAGE 1 HAVE ARRIVED

Open source, permissionless fault proofs are live on OP Mainnet, and with them the OP Stack arrives at Stage 1 decentralization.

This is a major step forward for the Superchain! pic.twitter.com/sEmfWkn2pf

— Optimism (@EthCC July 8 to July 13) (@Optimism) June 10, 2024

MetaMask introduces staking service with Consensys validators

On June 12, crypto wallet provider MetaMask launched its staking service, enabling users to pool their funds and stake their assets with enterprise-grade validators operated by blockchain software company Consensys.

With this service, MetaMask wallet users can stake their ETH without needing to meet Ethereum’s substantial minimum requirement of 32 ETH, approximately $97,500 at the current price.

MetaMask’s staking pool allows users to contribute less than the required ETH and still receive staking rewards for helping secure the network.

EigenLayer shields DApps from Sybil attacks

A major highlight for EigenLayer, a restaking protocol, in June was the enhancement of its EigenDA security on the Ethereum mainnet. This additional feature is designed to combat Sybil attacks and distributed denial-of-service (DoS) attacks, both major threats to the security of DApps and users.

1/ EigenDA usage is currently free for rollups on mainnet. We welcome all rollups to post blobs to EigenDA on Ethereum mainnet.

In order to prevent Sybil/DDoS attacks with a free tier, we have implemented a whitelist with either IP or ETH address ECDSA authentication.

— EigenDA (@eigen_da) June 22, 2024

The EigenLayer Foundation further bolstered its presence on June 12 by acquiring Rio Network, a restaking platform. Rio’s intellectual property, including its innovative liquid staking token (LRT) technology, will be open-sourced to benefit the EigenLayer ecosystem.

Blast rewards early users with airdrop

On June 26, Ethereum Layer 2 scaling network Blast distributed a significant airdrop to its early supporters. This airdrop released 17% of the total token supply, rewarding users who helped build the network’s ecosystem.

7% went to users who transferred funds (Ethereum or US Dollar Blast) onto the Blast network. Another 7% was distributed to those who actively participated in DApps built on Blast. The remaining 3% went to the Blur Foundation, earmarked for future airdrops within their community.

BLAST, a native token of Blast, rallied a little over 40% from $0.02 per token to $0.0281 following the airdrop.

Partnerships and fundraising news

1/ Today marks an important milestone in our mission to bring confidentiality to Ethereum through the first L2 powered by fully homomorphic encryption (#FHE).

We’re excited to announce we’ve raised $15M in Series A funding and released our initial testnet: Helium. pic.twitter.com/6de3EQeg1f

— Fhenix (@FhenixIO) June 4, 2024

Ethereum NFTs

Global NFT sales volume reached $462.1 million in June, a decrease of 25% from the previous month.

Ethereum once again led the ranking in NFT sales volume, but experienced a significant downtrend, like Solana and Bitcoin-based NFT collections.

According to CryptoSlam data, the sales volume of Ethereum-based NFTs reached $139,8 million in June, 17% less than in May ($163,9 million). The data further revealed that the Ethereum network has attracted around 51k buyers and 45k sellers of NFTs during last month. The number of NFT transactions on Ethereum reached more than 373k in June, 16,5% less than the previous month (447k).

The number of daily Ethereum NFT sellers has fallen below 4,000 for the first time since June 2021. The number peaked at over 80k in February 2022 and has been declining ever since.

According to The Block data, monthly NFT marketplace volumes on Ethereum have been declining since January 2024, and even in January, volumes paled in comparison to the billions of dollars traded each month during the 2021/2022 bull market. In June, volumes didn’t even exceed $300 million.

With a trading volume of $229.22 million, Blur held a commanding lead in June, capturing a significant portion (approximately 76.5%) of the total Ethereum NFT market share. This further solidifies Blur’s position as the dominant NFT marketplace.

OpenSea saw a significant drop in trading volume, reaching only $50.1 million in June. This represents a market share of roughly 16.7%.

Ethereum-based NFT collection CryptoPunks holds an interesting position. While typically not considered a traditional NFT marketplace, it managed to secure a trading volume of $15.77 million in June, accounting for approximately 5.3% of the total market share.

The June 2024 data reveals a potential power shift within the Ethereum NFT market. The emergence of cheaper alternative blockchains with lower transaction fees may be luring users away from Ethereum for NFT trading. While blue-chip NFT collections still largely reside on Ethereum, the overall decline in trading activity suggests a changing landscape.

Ethereum in June: A Mixed Bag with Uncertain Future

June 2024 presented a complicated outlook for the Ethereum ecosystem. Although there were signs of progress in network activity, scaling efforts, and adoption, the month ended with disappointing price performance, fewer NFT sales, and ongoing regulatory uncertainties.

Ethereum’s price dropped over 10% in June, influenced by several factors, including concerns over a possible Bitcoin price collapse and reduced interest from institutional investors. Delays by the SEC pushed the expected launch of Ethereum ETFs, which were supposed to boost the price, into late July, further souring investor mood.

Despite the price woes, some positive signs emerged on the network activity front. Daily active addresses on Ethereum saw a notable increase. However, this growth wasn’t uniform, with the number of new addresses created actually decreasing. Transaction activity remained steady, indicating some users were taking a cautious stance. A drop in the total value locked (TVL) in Ethereum’s DeFi protocols might suggest a shift of capital away from these investments.

The trend of investors moving ETH off exchanges continued in June, with exchange balances reaching a four-year low. This suggests a growing preference for holding ETH for the long term, with users opting for staking or storing their tokens in private wallets. The rise of staked ETH on the Ethereum Beacon Chain further underscores this trend. However, the recent EIP-4844 upgrade, while significantly reducing transaction costs on Layer 2 networks, also decreased the amount of ETH burned on the mainnet. This raises concerns about the long-term impact on inflation, particularly if network activity doesn’t pick up significantly.

The DeFi and NFT sectors within the Ethereum ecosystem also witnessed mixed results in June. The rise of alternative blockchains like BNB Chain, offering lower transaction fees, is posing a significant challenge to Ethereum’s dominance. While Ethereum still leads in DEX trading volume, Solana is making significant strides. The decline in global NFT sales volume and the slump in daily Ethereum NFT sellers further highlight the competitive pressure Ethereum faces.

The coming months will be crucial for Ethereum. The actual launch of spot Ethereum ETFs and their impact on price remain to be seen. Regulatory decisions and continued development of scaling solutions will also shape Ethereum’s future. Addressing concerns around governance and fostering a more inclusive decision-making process will be critical for maintaining user trust. Ethereum’s ability to adapt to the evolving blockchain landscape, navigate regulatory hurdles, and foster innovation will determine its success in the long run.

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