Ethereum buying starts, two catalysts to come in January

Ethereum (ETH) prices jumped 6% on Wednesday as investors bought into the cryptocurrency ahead of a key upside catalyst expected in January. Solana (SOL), one of the best performing cryptocurrencies this year, rose 2% yesterday. Needham analyst John Todaro said:

“We believe this is attributable to … flows back into the Ethereum ecosystem from other projects that have outperformed Ethereum so far. … Tokens like Solana and Avax have both outperformed ETH, and ETH is playing catch-up in the rotation.”

Ethereum has lagged behind SOL throughout 2023. So far this month, Ethereum is up about 15%, while SOL tokens are up 82%. So far this year, Ethereum is up 95%, while SOL has surged more than 980%.

Matt Maximo, senior research analyst at Grayscale Investments, said Ethereum’s rise on Wednesday showed that “the market is finally shifting to ETH-centric trading, although this may not fully manifest until a U.S. spot Bitcoin ETF receives proper regulatory approval.” He further added,

“Ethereum’s on-chain activity remains very strong, so I think it’s not a matter of ‘if’ but ‘when’ Ethereum will catch up.”

Investors are currently watching two key events in January, the first of which is Ethereum’s “Dencun Upgrade”, with January 17 being the tentative date for the first test network deployment of the “Dencun” upgrade. This highly anticipated development will revolutionize Ethereum by increasing data storage capabilities through a new process called “proto-danksharding”, while reducing the costs associated with Ethereum’s second-layer solutions.

The Dencun upgrade was originally scheduled for the last quarter of 2023 but was postponed to 2024 due to the engineering complexities involved.

Tim Beiko, head of protocol support at the Ethereum Foundation, noted that the date is not set in stone and could change if major issues arise. The team aims to publish a blog post detailing the fork during the week of January 8, 2024, giving stakeholders a week to prepare for the update.

Dencun will be ethereum’s first major upgrade since “Shapella” earlier this year, which was itself a major milestone that enabled staked ETH to be withdrawn from the blockchain.

In addition, investors have been closely watching the progress of the U.S. Securities and Exchange Commission (SEC)'s possible approval of a Bitcoin spot ETF, with the decision widely expected to be made in January.

Needham analyst Todaro said some investors are optimistic that if approved, it would also bode well for the potential of an Ethereum spot ETF.