Ethereum’s price has dropped 46% this year due to competition and poor sentiment. A major upgrade, Pectra, is set to commence on May 7 to address issues like gas fees and transaction speeds. While initial improvements may not be immediate, they could eventually attract capital back to Ethereum. However, the outcome remains uncertain until the second phase in 2025 or 2026.
Ethereum (ETH), currently in a bit of a pickle, has witnessed a dramatic price decline of 46% this year, largely due to stiff competition and a drop in investor sentiment. Yet there’s a glimmer of hope on the horizon with a pivotal catalyst poised to potentially revitalise its fortunes. However, don’t expect an instantaneous transformation; this catalyst could possibly signal a better future rather than an immediate boom in price.
Scheduled for May 7, the Ethereum network is all set to roll out the first phase of its much-anticipated upgrade called Pectra. A second phase is anticipated sometime in late 2025 or early 2026. This upgrade is particularly targeting long-standing issues like high gas fees and sluggish transaction times through various mechanisms intended to ramp up the chain’s throughput. Essentially, the upgrade aims to enhance the efficiency of Layer 2 networks, which exist as separate blockchains on the Ethereum framework. While improving these L2s may not directly spike Ethereum’s value, it could certainly attract more funds in the long run to these upstream networks, which could, in turn, benefit Ethereum.
Moreover, one of the functionalities introduced will allow users’ gas fees to be sponsored by distributed application providers. This could pave the way for some transactions to be processed at no cost to the users if developers choose to cover the expenses. Plus, there’s a new wallet upgrade coming that will incorporate smart contract capabilities, like transaction batching and enhanced security, making it a more appealing platform for developing automated distributed applications, including AI agents and real-world asset trading apps.
That said, don’t hold your breath for immediate results. It’s tricky to predict exactly how much Pectra will cut down gas fees or speed up transactions, and if it’ll even nudge Ethereum’s price upward right away. A more realistic expectation is that any price benefits from Pectra will take time to manifest—weeks, if not months. Developers and power users will need to experiment with the new features and create user-friendly applications before investors can be convinced to return in droves.
As for the competition, it’s crucial to remember that even with the upgrade, there’s no definite assurance that Ethereum will outpace its rival Solana in cost and speed. If it manages to at least mirror Solana’s performance, it would signify a substantial improvement for the network and likely provide a positive push for the price. However, most investors should tread carefully; the investment climate around Ethereum remains speculative until it can prove smoother sailing. Still, for those comfortable with a bit of risk, the prospect of an easing in Ethereum’s primary challenges could make it an interesting option, albeit it might be wise to wait for phase two of the upgrade before fully committing, given that’s when the benefits may truly start to show.
