The future of Ethereum (ETH): ecosystem growth, updates and price forecasts
The Ethereum ecosystem has long been at the core of blockchain technology innovation and has seen rapid growth throughout 2024. Ethereum's role in the development of smart contracts, the integration of Layer 2 solutions, and support for DeFi and NFT made the second half of the year a significant change for the platform.
Fundamental changes in the Ethereum ecosystem
Ethereum continues to face scalability challenges related to high network utilization and significant commission costs. To address these, Layer 2 technologies are being actively deployed. Layer 2 solutions such as Arbitrum, Optimism, and StarkNet have seen record performance in the second half of 2024. The volume of blocked funds (TVL) in these protocols exceeded $20 billion, marking a new milestone in the ecosystem. These solutions reduce the load on the Ethereum core network by offering users cheaper and faster transactions, making the network more attractive to the masses.
In addition, there has been rapid development of zkEVM (zero-knowledge Ethereum Virtual Machine). This technology allows smart contracts to run on Layer 2 while maintaining compatibility with the Ethereum core network. This opened up additional opportunities for developers, increasing the number of new decentralized applications (dApps).
Since Ethereum transitioned to Proof-of-Stake (PoS), the ecosystem has continued to develop architectural improvements. One of the key developments has been the introduction of Danksharding. This update aims to increase network throughput, enabling more transactions per second without sacrificing decentralization. Danksharding was introduced by splitting transaction data into fragments, which significantly improved scalability and lowered the barriers to entry for new users.
Danksharding allowed users to interact with the network more efficiently, especially for emerging areas such as GameFi and metaverses.
Ethereum remains the market leader in decentralized finance (DeFi). The amount of funds in DeFi protocols on the platform has exceeded $85 billion, representing over 60% of the total DeFi market. The increasing popularity of DeFi platforms such as Aave, MakerDAO, and Uniswap has played a significant role in strengthening Ethereum's position.
The non-fungible token (NFT) market has also seen a resurgence. Ethereum is the foundation for most major NFT platforms, including OpenSea, Blur, Rarible, Foundation, and Nifty Gateway. The influx of users and new projects related to art, games, and metaverses have ensured the steady growth of the ecosystem.
Ethereum (ETH) price dynamics
The Ethereum exchange rate showed high volatility in the year's second half. At the beginning of the year, ETH was trading at $1900-2000, but by November, its value rose to $3480 (according to CoinMarketCap data as of November 25). Several factors drove this growth in interest.
- Institutional interest. Significant investment funds and companies such as Grayscale Investments, BlackRock, and Andreessen Horowitz (a16z) have continued to increase their investments in Ethereum. More than 50 new ETH-focused crypto funds have been recorded since the beginning of the year.
- The impact of ETH upgrades and lower ETH inflation. After Ethereum transitioned to PoS, the network moved to a deflationary model state. This means that the number of destroyed tokens (via EIP-1559 mechanisms) exceeded the volume of new issuances. Thus, the value of ETH becomes more stable and attractive for long-term holdings.
- The role of DeFi and smart contracts. The increase in trading volumes on decentralized exchanges and the active use of smart contracts stimulated the growth of ETH exchange value. Moreover, Ethereum maintains leadership in developing new financial instruments such as staking and derivatives, which also positively impact demand.
- Ethereum-based CBDC development. In 2024, several central banks, including Banque de France and Swiss National Bank, started testing digital currencies (CBDC) based on the Ethereum blockchain. This underscores government agencies' confidence in the platform.
- Sustainable development of the DAO ecosystem. Decentralized Autonomous Organizations (DAOs) on the Ethereum platform have increased. The total blocked funds (TVL) in leading DAOs such as Uniswap, MakerDAO, Aave, Compound, and Curve increased from $30 billion to $43 billion, a 43% growth. Their popularity is attributed to the increased interest in democratic governance and the distribution of funds to participants.
- Global adoption of cryptocurrencies. Easier crypto market regulation in countries such as Hong Kong, UAE, Japan, South Korea, and Singapore drives new users and companies into the Ethereum ecosystem.
Ethereum: heading for a new record
CEO of crypto exchange Bitget, Gracie Chen, is confident that Ethereum will reach a new all-time high (ATH) before the end of 2024. In her opinion, the main growth drivers will be the consistently high interest in smart contracts and the weakening of Bitcoin (BTC), caused by profit-taking by large investors after Bitcoin broke the $100 000 mark. Chen emphasizes that a short-term "healthy correction" in the market will open up additional growth opportunities for Ethereum, especially against the slower development of competing blockchain platforms.
Analyst Benjamin Cowan of ITC Crypto notes that Ethereum is once again posting positive quarterly returns relative to bitcoin. According to his forecast, Ethereum will continue to grow in sync with Bitcoin, strengthening its leading position in the crypto ecosystem. Cowan also emphasizes that the introduction of Ethereum 2.0 plays a crucial role in maintaining price dynamics.
JPMorgan analysts predict that Ethereum will surpass Bitcoin and other cryptocurrencies in 2024 in terms of growth rate, increasing its market share. They attribute this to upcoming technical updates, such as EIP-4844, aimed at reducing transaction costs and improving the scalability of the network.
According to Changelly's forecasts, Ethereum's price is expected to be $4215-$4773 by the end of 2024, with an average value of around $4341.
These views emphasize the general optimism among experts regarding Ethereum's future growth. Given the positive outlook, Ethereum could be a critical asset that sets new records by the end of the year.