The Bull Case

Sassano outlines a number of scenarios that could fuel an increase in Ethereum’s price in the future, one of which is a new development known as “Restaking”.

“Restaking unlocks a brand new primitive for Ethereum and extends ETH’s strong market cap and liquidity profile to secure services such as data availability networks, oracles, shared sequencers and much more,” Sassano says.

Investor excitement surrounding restaking has been profound, with many new restaking protocols emerging over the past few months, with billions worth of Ethereum deposited by investors.  “EigenLayer, the current top restaking protocol, has already gathered more than $2 billion worth of staked ETH tokens (commonly referred to as LST’s or LRT’s),” Sassano says.

Just like the spot BTC ETF applications created a positive narrative for Bitcoin, driving Bitcoin’s price upwards into the approval date, Sassano believes the same situation could play out for Ethereum.

“With the approval of spot BTC ETFs in January and the change in attitude from the SEC towards Ethereum over the last six months, there is good reason to believe that the SEC will approve spot ETH ETFs for trading sometime in 2024.”

The earliest date of approval is expected to be May 23, but it could happen any time this year.

Ethereum has a host of significant upgrades scheduled for 2024, just as it did last year, driven by the developers working behind the scenes to improve the network.

“Dencun, the long-awaited Ethereum network upgrade, will be going live sometime in March and will bring with it a host of improvements. The biggest improvement, called ‘proto-danksharding’ or ‘EIP-4844’, will lower transaction fees for Ethereum-based layer 2 networks,” Sassano says. 

This is especially significant because a large amount of transaction activity has shifted from Ethereum onto Ethereum-based Layer-2 networks over the past 12 months. These Layer-2 networks, which are essentially blockchains that exist on top of Ethereum, leverage Ethereum’s decentralisation and security while offering faster and cheaper transactions for users. The Dencun upgrade will make these networks even more economical, dropping transaction fees to a few cents or potentially lower in some cases.

“Petra, another Ethereum upgrade slated to go live by the end of this year, is still in development, but it looks like the main improvement will be the hardening of Ethereum’s censorship-resistance properties,” Sassano says. This improvement ensures that all users have equal access to the network’s services, safeguarding the platform’s core principle of providing a decentralised and open ecosystem for digital transactions and applications.

Finally, Ethereum’s fee-burning mechanism, introduced in The Merge upgrade, continues to operate, reducing the overall supply of Ethereum. “This steady burning of Ethereum continues, further supporting a potential rise in value,” Sassano adds.

The Bear Case

Although Sassano is optimistic about Ethereum’s potential, he acknowledges the possibility of downturns. He argues, however, that a bearish scenario for Ethereum seems explicitly less likely given the positive catalysts on the horizon. Instead, a bear case would likely be tied to broader market conditions or increased regulatory scrutiny.

“I don’t think there’s really a bear case for Ethereum or ETH right now, given all the positive catalysts to come,” Sassano says. “The bear case for all of crypto would be more about a shock in the macro environment or a worsening of the regulatory pressure we’ve already seen on crypto.”

In the long term, Sassano identifies potential factors that could suppress Ethereum’s growth. “If we think about a bear case for Ethereum over the next five to 10 years, it would be Ethereum failing to continue growing; its product-market fit turning out to be just a niche; and being hampered by regulation, particularly at the ports of entry,” he says. This could involve stricter regulation of fiat on/off ramps, application frontends, or even harsh stablecoin regulation.

However, Sassano emphasises that this scenario seems relatively unlikely. “I obviously give this a very low chance of happening,” he adds. Even though it’s essential to consider all possibilities in the unpredictable world of cryptocurrencies, the current landscape suggests a more positive outlook for Ethereum.