2025-02-06 10:05:01 by Voice of Crypto

Key InsightsThe hype around the incoming Pectra Upgrade on the Ethereum network has been building lately.Meanwhile, Ethereum, along with the rest of the crypto market, fell to the $2,800 zone and is attempting to regain its balance.Coinglass data shows that futures and retail traders are cautiously approaching the market.Institutional investors are highly interested in the cryptocurrency despite the pump.Analysts have predicted that the ongoing dip to $2,800 is necessary for a new all-time high of $6,000 or even higher. Ethereum is preparing to undergo its next major upgrade, which is called Pectra.This update is expected to boost the burn rate of $ETH and restart the network’s deflationary trend.According to researcher Justin Drake, here's what Pectra has to offer Ethereum in full and how this can affect the price of ETH. What is the ‘Ultra Sound Money’ Narrative?Before the previous Dencun upgrade, Ethereum underwent another called the London hard fork. This upgrade permanently removed a portion of the transaction fees collected on the network, helping reduce Ethereum's supply over time.However, this effect didn’t last long, especially after the Dencun Upgrade in March 2024. This new upgrade introduced a concept known as "blob space," which reduced the transaction fees collected on Layer-2s and, therefore, the total amount of ETH burned.In essence, Ethereum’s supply is back to increasing once again, and price increases are now as hard as ever. According to Ethereum Researcher Justin Drake, the Pectra Upgrade aims to fix all this as of March 2025, when the Ethereum network can double its "blob space."This will drive up overall Ethereum burns as demand for data availability catches up. Market Challenges—ETH Struggles Below $3,000Despite all of these positive developments, Ethereum’s price continues to struggle underneath the psychological $3,000 price level.According to data from CoinMarketCap, Ethereum currently trades at around $2,826, which means that it is down 24.5% over the past 30 days. This ETH underperformance comes amid a broader market decline over the last week when Bitcoin crashed below the $100,000 mark and pulled the rest of the market down.Despite the slump, Bitcoin's dominance continues to shoot up, leaving Ethereum with a relatively small 10% market dominance. Factors Weighing Ethereum DownOne of the biggest obstacles to an Ethereum price increase in recent times has been the sentiment in the futures market.For example, Coinglass data shows that Ethereum’s futures optimism has dropped to its lowest level in more than a month.Ethereum’s weighted funding rates | Source: CoinglassFunding rates crashed hard sometime on 3 February to a low of -0.0221% and are now attempting to get back up.The same thing happened with the futures open interest, which crashed from a high of $32 billion to a current low of $24 billion—a massive $8 billion decline.Decline in Ethereum open interest | Source: Coinglass Not only this, Coinglass data also shows that the long-to-short ratio for ETH traders stands at 3.3x on Binance:A level that is well below the 4.4x two-week average. Institutional Interest and ETH ETFs See a BoostDespite the future sentiment issues, the ETF market seems as healthy as ever. While the retail and futures traders are playing a cautious game, institutional investors are as confident as ever.For example, the Ethereum ETF market saw massive net inflows of $307.8 million in a single day on 4 February.This inflow rate stands as the highest the Ethereum ETF market has seen since December of last year.BlackRock's Ethereum Trust led the buying spree after buying $276.2 million worth of ETH amid zero inflows from all the others except Fidelity.Spot Ethereum ETF inflows | Source: Farside All of the above inflows have stood at nearly $500 million since 30 January.Amid all the inflows, Donald Trump-linked World Liberty Financial (WLFI) continues to increase its ETH holdings and now has around 66,239 ETH, worth around $182 million. Ethereum Faces Growing CompetitionStill, the struggles that Ethereum faces aren’t simply due to market conditions. The lack of price activity on $ETH has encouraged developers and investors to explore alternatives like Solana and Sui.DefiLlama data shows that despite these issues, Ethereum continues to lead in terms of Defi Total Value Locked (TVL).However, concerns about its scalability still abound.The ongoing issues with the Ethereum Foundation and its co-founder, Vitalik Buterin, have also not helped matters. Is $2,800 a Buying Opportunity?Despite its challenges, Ethereum is still one of the most prominent players in the Crypto space.The cryptocurrency can be compared to a loaded spring, gearing up for a price explosion to the upside.Ethereum’s current position around the $2,800 zone could be the prime opportunity for investors to get in on the action before a pump.Renowned analysts like Ali have repeatedly predicted that the current dip is a launchpad to a new all-time high of $6,000 or even higher.Still, Ethereum making a new all-time high will require a break above the psychological $3,500 zone anytime soon.Ethereum will depend on the benefits of the Pectra upgrade and a combination of other factors to find and maintain its footing.Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information but will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.