Whats Happening to Ethereum: A Comprehensive Update

Ethereum's transition to a proof-of-stake (PoS) consensus algorithm is underway, with the Beacon Chain launched in December 2020 to serve as a testing ground for this new system.

The Beacon Chain has been a key milestone in Ethereum's development, allowing for the testing of PoS in a real-world setting.

As a result of this transition, Ethereum is expected to become more energy-efficient and scalable, with the potential to process thousands of transactions per second.

However, this transition is also expected to be a complex process, requiring significant updates to the Ethereum network and its users.

Ethereum's price is expected to hit $10k as the scarcity narrative is "strong in practice", according to 1confirmation's Tomaino.

Ethereum's price will likely surge to $6K by Q1 2025 as multiple bullish patterns emerge.

A significant amount of Ethereum has been moved, with Blockchain Bandit moving $172m in Ethereum after 2 years of inactivity.

If this caught your attention, see: How Much Does 1 Ethereum Cost

The NFT market has slumped 50%, with Pudgy Penguins leading the market downturn.

Ethereum can speed up by running nearly 65% of its transactions in parallel, according to Sei.

Ethereum's price has dropped as MVRV and active addresses ratio rise.

A large Ethereum whale has dumped another $17m ETH.

A 200k Ethereum genesis whale has awoken, sending $11.37m to Kraken.

Binance will support the Optimism network upgrade and hard fork.

The Ethereum options market is on track for short-term volatility, according to a report.

Bitcoin perpetual swaps have stabilized amidst year-end.

Market sentiment is a crucial factor in determining the direction of the Ethereum price. Bullish indicators have sparked investor optimism, with a modest increase in Open Interest of 3.18% within 24 hours.

This uptick in Open Interest suggests a renewed interest in Ethereum derivatives, although it appears to be a short-term trend. The active liquidation of $6 million worth of short positions during the same period reduced selling pressure and countered the effects of heightened Open Interest.

Large Ethereum holders, or "whales", have been consistently positive, with a net flow of capital from whales being positive throughout the week. This reflects increased confidence in Ethereum's prospects and a shift towards accumulation and long-term investment.

The exchange supply ratio has dropped to 0.14 over the past week, suggesting that investors are withdrawing Ethereum from exchanges, signaling accumulation and long-term optimism.

Bullish indicators are sending a clear message: investors are optimistic about Ethereum's future. Open Interest, a measure of market activity, experienced a modest increase of 3.18% within 24 hours, signaling a renewed interest in Ethereum derivatives.

This uptick in Open Interest is a short-term trend, but it's accompanied by a significant reduction in selling pressure. $6 million worth of short positions were liquidated during the same period, which is a clear vote of confidence from investors.

Large Ethereum holders, also known as whales, are also sharing this positive outlook. The net flow of capital from whales has been consistently positive throughout the week, reflecting increased confidence in Ethereum's prospects.

In fact, over 78% of traders on BitMEX are bullish on Ethereum, holding open futures positions anticipating a price surge. This optimistic sentiment reflects growing confidence in Ethereum's market potential as its ecosystem continues to expand and innovate.

Here's a breakdown of the key bullish indicators:

These indicators suggest that investors are accumulating Ethereum and expecting its price to rise. If current conditions hold steady, Ethereum could reclaim $3,600, a level not seen in weeks.

Bitcoin's influence on other cryptocurrencies is undeniable. If the price of Bitcoin increases, the value of other cryptos tends to follow suit.

The dominance of Bitcoin in the market has been a consistent trend for years, with it holding the top spot in terms of market capitalization and active wallet addresses. However, in July 2021, Ethereum briefly flipped Bitcoin by the number of daily active addresses on its network.

The shift in dominance was a significant event, and it's possible that Ethereum's price could have benefited from it. By the end of 2022, Ethereum had seen a significant price increase, with one ETH being worth $1,377 USD.

Ethereum's price remained relatively stable in the months following its price decrease in January 2022, averaging around $2,600 USD. However, it's worth noting that the crypto market was experiencing volatility due to Russia's invasion of Ukraine at the time.

A different take: What Does the Blunt Look like When It's Dropped?

The Merge has been a game-changer for Ethereum's scalability. It laid the groundwork for a more scalable system, setting the stage for future upgrades like sharding.

Proof of stake, or PoS, is a key component of this new system. It allows for faster processing of transactions compared to proof of work, or PoW.

This means that Ethereum can handle more transactions simultaneously, reducing congestion and improving user experience. The network can process many more transactions in parallel, and Ethereum’s ability to scale and meet growing demand will be boosted like never before.

The price of Ethereum is influenced by the fundamental forces of supply and demand in the markets. The overall sentiment of the ether market is significantly affected by a few key factors.

One of these factors is the supply of Ethereum. The price of cryptocurrencies depends fundamentally on the supply and demand of the markets.

Ethereum has been undergoing a series of extensive upgrades since its creation, with the goal of improving its efficiency, speed, and scalability.

These upgrades were initially divided into four main stages: Frontier, Homestead, Metropolis, and Serenity. Serenity is the next stage, which will focus on enhancing the platform's performance.

Ethereum 2.0, also known as Eth2 or Serenity, aims to address the network's bottlenecks and increase the number of transactions, making it more suitable for financial institutions to use.

Ethereum's platform has undergone a series of extensive upgrades since its creation.

The upgrades were initially divided into four main stages: Frontier, Homestead, Metropolis, and Serenity. Serenity is the next stage, focusing on improving efficiency, speed, and scalability.

Ethereum 2.0, also known as Eth2 or Serenity, is a significant upgrade to the existing blockchain, aiming to address bottlenecks and increase transactions.

The shift to ETH2 involves a few hard forks, such as the Ethereum London Hard Fork in August 2021, which evens out network fees and limits ETH supply.

Ethereum estimates that the 2.0 network could go live by 2022 if development is successful and goes as planned.

The rise of NFTs has been a significant factor in the increase in Ethereum's price. Non-fungible tokens are a form of cryptocurrency that contain unique assets like art.

Their main feature is that they represent ownership of a specific item, unlike traditional cryptocurrencies that are interchangeable. The value of an NFT is distinct and can't be replicated.

The NFT market value tripled in 2020, reaching more than $250 million, which had a notable impact on Ethereum's value.

Slashing is a critical security mechanism within the PoS system of Ethereum 2.0 that acts as a deterrent against dishonest or malicious behavior by validators.

In the PoS context, validators are responsible for validating transactions and creating new blocks, and they must stake a certain amount of Ether as collateral. This makes it economically disadvantageous for them to act against the network's best interests.

Slashing ensures that validators have "skin in the game", and a portion of their staked Ether is removed as a penalty if they act maliciously. This mechanism protects the integrity and security of the Ethereum network.

Take a look at this: Ethereum a Security

By shifting to PoS, Ethereum strengthened its security framework, fostering a more trustworthy and stable blockchain ecosystem. This shift also made the network less vulnerable to certain types of attacks, such as the 51% attacks more feasible in PoW.

The introduction of mechanisms like slashing reinforces honest participation, making it more robust against threats and manipulations. The economic stake of validators in the ecosystem acts as a deterrent against malicious actions.

However, concerns about centralization persist, as the high entry threshold for validators raises the risk of power concentration in the hands of a few large stakeholders or "whales." The concentration of staking power among a few entities indeed poses security risks, challenging the decentralized nature of the blockchain.

Lido, a major decentralized staking pool, has amassed a substantial share of the total staked ETH, approaching the 33% mark—a point considered risky by many developers. This situation could potentially limit the diversity of validators and skew power towards those with significant financial resources and technical expertise.

The Ethereum Merge was a significant event in the cryptocurrency world, marking a transition from proof-of-work (PoW) to proof-of-stake (PoS). This change was designed to reduce energy consumption and increase scalability.

The Merge combined the Beacon Chain and the Ethereum mainnet, creating a new consensus layer and an execution layer. The consensus layer handles blocks, confirmation, and rewards, while the execution layer handles smart contracts and processes transactions.

The Beacon Chain became the consensus layer, handling tasks such as validator attestation, block choice, rewards, and penalties. The old Ethereum mainnet became the execution layer, which processes transactions and handles smart contracts.

The Merge was expected to reduce energy consumption by about 99.95%, making Ethereum a more sustainable and environmentally friendly option. This reduction in energy consumption was a major selling point for the Merge.

The transition to PoS removed the need for mining nodes to compete for block rewards, instead requiring node operators to stake 32 ether (ETH) as collateral to become network validators and earn rewards. This change was designed to promote decentralization and reduce the concentration of power among a few large stakeholders.

The Merge also reduced the issuance of Ethereum as block rewards, slowing the inflationary growth of ether. Prior to the Merge, about 13,000 ether were mined per day, but after the Merge, that number dropped to about 1,600 ether rewarded per day, a 90% reduction.

The Merge had no direct effect on lowering gas fees, but it was designed to lay the groundwork for subsequent upgrades, which are expected to progressively decrease transaction costs.