2024 has been described as a year that will see considerable growth for the entire cryptocurrency environment after the difficult situation and bear markets of the past couple of years. 2021 was one of the best years in the market’s history, with the prices reaching previously unseen prices. As of 2024, the same trend is expected to appear again, and some market participants believe it has already arrived right at the beginning of Q1. As a result, many have begun looking into how to buy crypto in order to diversify their portfolios and increase revenue. Bitcoin has already surpassed its all-time high of three years ago, and Ethereum has recently reclaimed it.
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The highest Ethereum has ever been was just shy of $5,000, at $4,481. After the losses of 2022 and the stagnation of 2023, the market has recovered quite swiftly at the beginning of the new year. As of March 8th, Ethereum conquered the $4,000 level again, hitting a new multi year high that has not been recorded in three years. Some investors believe that if the market can withstand it and the gains remain consistent, the price could reach $26,500 by 2030. This is not entirely out of the question, given that the markets are clearly more mature and better equipped to handle fluctuations.
Ether climbed by roughly 4% in the span of twenty-four hours in order to reach the $4,000 level, with the performance apparently boosted by the incoming Dencun upgrade. The event will bring scaling solutions to the blockchain, making the transaction costs, known as gas fees on the Ethereum blockchain, much more accessible to the general public. In 2023, the blockchain struggled with becoming financially unsustainable as the costs continued to grow.
Another important factor is the possibility that the Securities and Exchange Commission could issue an official ruling on the subject of the Ethereum-based ETFs later this year. These products would make the environment much more attractive to institutional investors, as well as easier to access. Since the risk of major fluctuations is averted, retail and corporate investors are more likely to join the traders, and the considerable amount of capital they bring to the blockchain would undoubtedly help the market grow.
The upgrades
The Dencun upgrade will implement several EIPs, among them being the EIP-4844, also known as proto danksharding. This part of the upgrade will introduce blob transactions as an alternative to calldata in order to make the system more accessible and financially sound. The blob transactions are temporary and specifically designed to address the data availability Ethereum needs for its rollup solutions. Developers have also discussed how the 4844 will also create data availability on the lower levels without compromising on the need for rollups.
Blob pricing is specifically designed so that the moment usage becomes very high, fees climb as well. The same situation applies the other way around, so prices go down when usage is low. At the moment, it is difficult to estimate precisely how far the prices will decrease as a result of the proto-danksharding, and investors might have to wait a little after the launch to get the whole scope of the change. However, it’s important to remember that demand levels are also very important.
If transactions become incredibly cheap, the demand for data posting will climb, and that will naturally result in a demand for more blob space and steeper prices. The effect of the rollups is also not well understood at the moment. Developers believe the rollups must consider how long they should wait before the data goes live on Ethereum. Waiting longer means that more data can be posted in the blobs, but it can also make user transactions slower. Many might not feel comfortable with reaching finality later, but exactly how the entire situation will unfold remains to be seen.
The future of L2
Some market analysts believe that only the blockchains that use modular systems will still be around in five years, and that all those that haven’t adapted yet should start making the necessary preparations. Research shows that there are now forty-four active Ethereum layer 2 networks. Their combined TBL is around $36.92 billion. Arbitrum occupies the first place with $14.5 in total value locked. According to the view that only the modular models will survive, the influx of L2 on the network is similar to the forks that appeared on both Bitcoin and Ethereum. None of them remains on their respective networks.
Some of the most notable examples for both ecosystems are Bitcoin Cash, BSV, NEO and EOS for Ethereum in 2016. The last two were set to be Ethereum killers at that time, as they offered alternative environments by making slight modifications to the ETH blockchain. According to the latest research, the fact that they were built as monoliths may have contributed to their eventual downfall. However, some investors believe that seeing the situation as a fight between the modular and monolithic models is too simplistic and even erroneous.
In fact, some believe the entire debate might be the result of a marketing stunt created and fostered by a network in charge of modular data availability. And some reject slipping networks into two separate architecture models altogether. The reason is that the distinction is not at all organic, and so it cannot be used to make sweeping generalizations about the cryptocurrency environment. This view proposes the idea that no system is inherently modular or monolithic. The former is a blockchain that uses several layers, while the latter is more classic and integrated.
However, neither of these mediums is more likely to be successful, and whether a network prevails or not is the result of a wide array of factors and not just the design of the networks.
The bottom line
Investors must remain mindful of the price movements that will happen throughout 2024 as market volatility has reached a new peak. Although it is always exciting to see how the environment changes, recording gains and keeping your holdings safe will mostly depend on your trading strategy. Make yours solid and straightforward, but leave room for flexibility as well. You need it in a volatile ecosystem.
