Key Takeaways
- ETH price has underperformed its peers during the current bull market, but gas sponsorship could lure developers and traders back to the network.
- Ethereum’s upcoming Pectra upgrade promises to improve staking efficiency, potentially increasing demand for ETH.
- Data suggests ETH price has bottomed. Will the Pectra narrative reignite bullish momentum?
Since 2024, ETH has been more of a meme than a market mover. It has yet to reclaim its all-time high of $4,870 from November 2021 and continues to show relative underperformance. Currently trading at $1,813, ETH is down 56% from its local peak in December 2024.
Despite the discouraging price action, it would be premature to dismiss Ethereum as obsolete. The network continues to evolve, and the upcoming Pectra upgrade on May 7 could reawaken market interest. By improving long-standing user experience challenges and enhancing staking, Pectra may help Ethereum close the competitive gap with rivals such as Solana and BNB. More significantly, it could serve as the catalyst that brings ETH back into the spotlight.
What are Pectra’s Key Upgrades?
The Pectra upgrade introduces 11 Ethereum Improvement Proposals (EIPs) aimed at enhancing Ethereum in three key areas: scalability through layer-2 solutions, user experience (UX), and staking efficiency. Scalability has always been a primary concern for Ethereum, often seen as overshadowed by more streamlined alternatives. However, the UX and staking enhancements from Pectra can have meaningful implications for Ethereum’s market dynamics.
A standout feature is EIP-7702, allowing externally owned accounts to temporarily function as smart contracts. This will unlock various functionalities, such as fee sponsorship and gas payments in tokens other than ETH.
These improvements could dramatically enhance Ethereum’s user-friendliness, reducing entry barriers and allowing decentralized applications (DApps) to subsidize gas fees for new users. This enhancement could be especially beneficial when onboarding non-technical users in gaming and payments.
Additionally, the ability to pay gas fees in tokens other than ETH will not undermine ETH’s significance within the network. Validators will continue to receive fees in ETH, while payment processors will still need to convert other token fees into Ether.
Significant changes are also coming to staking with EIPs 7251, 6110, and 7002. These upgrades will enable validators to hold up to 2,048 ETH, simplifying the onboarding and exit processes. Such changes are particularly beneficial for institutional validators who have begun to offload their ETH holdings; the upgrade could stimulate renewed interest from these larger players.
Will the Pectra Upgrade Affect ETH Prices?
The price of Ether is a reflection of market expectations regarding future demand, primarily driven by its utility in paying gas fees and supply dynamics. The Pectra upgrade intends to strengthen both demand and supply curves.
On the demand side, an improved user experience may attract mainstream users and developers, speeding up adoption and increasing on-chain activity.
On the supply side, an efficient staking mechanism may lead to more ETH being locked in validator nodes, thereby constraining the circulating supply. Moreover, if enhanced wallet features fulfill their promise of fostering user adoption, this will likely increase transaction throughput and accelerate ETH burning, thereby further tightening supply.
Current data indicates that Ethereum is experiencing one of its lowest burning periods, around 70 ETH daily, in contrast to 2,000-4,000 ETH in 2024. An upswing in activity could raise the burn rate, adding deflationary pressure that could support ETH’s price.
Can Pectra Spark a Trend Reversal in ETH Prices?
The Pectra upgrade is set to introduce robust new features to Ethereum, though their effects may take time to manifest fully. In the interim, this upgrade could provide the narrative ETH requires to regain market momentum.
Technical analysis paints a favorable picture; ETH appears to have formed a local bottom, with the weekly RSI recently breaking out of its downtrend. This change marks the conclusion of a correction that has persisted since December 2024, which wiped out 66% of ETH’s value. A new upward trend may be on the horizon—could Pectra be the instigator?
Historically, Ethereum upgrades have been associated with brief price spikes that often lacked lasting momentum. For instance, the Merge in 2022 grappled with prevailing bear market sentiment, while the Shapella upgrade in 2023 faced difficulties in maintaining momentum. However, the market cycle is now in its third year, mirroring the environment of 2021, when significant upgrades helped catalyze a major bull run. If history is any guide, Pectra could coincide with broader market recovery and mark Ethereum’s resurgence.
Looking ahead, the Fusaka hard fork, slated for late 2025, could offer additional upside potential for Ether.
This article does not provide investment advice or recommendations. All investment and trading activities involve risk, and readers are encouraged to conduct their own research before making any decisions.
