Ethereum Reclaims $2,000 Support, Awaits Pectra Upgrade for Bullish Momentum

Ethereum (ETH) has seen a resurgence, reclaiming the $2,000 support level on March 24, but it remains 18% below the $2,500 mark observed three weeks prior. Over the past 30 days, Ether has underperformed the broader altcoin market by 14%, leading traders to question whether it can regain its bullish momentum and what factors might drive a trend reversal.

Ethereum is well-positioned to attract institutional demand and mitigate the fear, uncertainty, and doubt (FUD) that has limited its upside potential. Critics have long argued that the Ethereum ecosystem lags behind competitors in overall user experience and still offers limited base-layer scalability, which has negatively impacted network fees and transaction efficiency.

Many of the Ethereum network’s challenges are expected to be addressed in the upcoming Pectra network upgrade, scheduled for late April or early June. Among the proposed changes is a doubling of the data that can be included in each block, which should help lower fees for rollups and privacy-focused mechanisms. Additionally, the cost of call data will increase, encouraging developers to adopt blobs—a more efficient method for data storage.

Another notable improvement in the upcoming upgrade is the introduction of smart accounts, which allow wallets to function like smart contracts during transactions. This enables gas fee sponsorship, passkey authentication, and batch transactions. Additionally, several other enhancements focus on optimizing staking deposits and withdrawals, providing greater flexibility, and extending block history for smart contracts that rely on past data.

Arthur Hayes, co-founder of BitMEX, set a $5,000 price target for ETH on March 25, stating that it should significantly outperform competitor Solana (SOL). Regardless of the rationale behind Arthur’s price prediction, ETH options traders do not share the same bullish sentiment. The Sept. 26 call (buy) option with a $5,000 strike price costs only $35.40, implying extremely low odds. However, Ethereum remains the undisputed leader in smart contract deposits and is the only altcoin with a spot exchange-traded fund (ETF) in the US, currently holding $8.9 billion in assets under management.

Ethereum’s network boasts a total value locked (TVL) of $52.5 billion, significantly surpassing Solana’s $7 billion. More importantly, deposits on the Ethereum network grew 10% over the past 30 days, reaching 25.4 million ETH, while Solana saw an 8% decline over the same period. Notable highlights on Ethereum include Sky (formerly Maker), which saw a 17% increase in deposits, and Ethena, whose TVL surged by 38% in 30 days.

The Ether supply on exchanges stood at 16.9 million ETH on March 25, just 3.5% above its five-year low of 16.32 million ETH. This trend suggests that investors are withdrawing from exchanges, signaling a long-term capital commitment. Similarly, flows into spot Ether ETFs remained relatively muted on March 24 and March 25, in contrast to the $316 million in net outflows accumulated since March 10.

The Ethereum network is gaining momentum in the Real World Asset (RWA) industry, particularly after the BlackRock BUILD fund surpassed $1.5 billion in capitalization. The Ethereum ecosystem, including its layer-2 scalability solutions, accounts for over 80% of this market, underscoring Ethereum’s dominance in the decentralized finance (DeFi) space.

Ether’s price drop below $1,900 on March 10 likely reflected overly bearish expectations. However, the tide appears to have turned as the Ethereum network demonstrated resilience, and traders continued to withdraw from exchanges, setting the stage for a potential rally toward $2,500.

According to the analyst's forecast, the path back to $2,500 for Ethereum depends on three key factors: the successful implementation of the Pectra upgrade, continued institutional demand, and the network's resilience in the face of market volatility. The upcoming Pectra upgrade is expected to address many of the network's current challenges, including scalability and transaction efficiency. Additionally, the growing institutional interest in Ethereum, as evidenced by the increasing TVL and the launch of spot ETFs, suggests that the network is well-positioned to attract more institutional demand. Finally, the network's resilience in the face of market volatility, as demonstrated by its recent performance, indicates that it has the potential to regain its bullish momentum and reach the $2,500 mark.