With the market starting to look at ETH after the BTC ETF I wanted to put my thoughts out on upcoming catalysts and where I rank their importance for ETH the asset. My own personal rankings are probably a lot different than others. The 4 most important catalysts to me, in order, are:
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ETH ETF Approval
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Based Rollups
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Restaking
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EIP-4844
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ETF Approval: this one should be fairly self-explanatory after the demand we’ve seen for the BTC ETFs thus far. BTC and ETH are both substantial market caps, and in order to really move those prices you need flows from a new buyer base. The ETFs have done just that, and the flows ETH would likely see from the ETF are the most material for driving its price higher. Without an ETF, it is hard for me to see significant outperformance of ETH vs other assets. FWIW, the ETF guys are not as bullish on an approval as I am (was?). I still think we get one in May but I’m a larp when it comes to predicting ETF approval odds.
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Based Rollups: This is a relatively older concept but it’s starting to gain more mindshare in recent months. If we look back to the infra year ahead report, we spoke about ETH’s role in this world where L2’s get execution from sequencing/MEV and alt-DA’s get DA income, leaving ETH as a pure “money” type asset. Based rollups use the L1 (Ethereum validators) for sequencing on rollups instead of an L2s own sequencer set, recouping the MEV and execution value accrual on these layers. We’ll have a report on this out in the next month or so, but if based rollups become a thing, I see this as a very positive development for ETH as value leakage to rollups will be reduced. One such rollup is Taiko.
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Restaking: The latest hot-trend, restaking is a weird one for me. Obviously, the supply side is easy to attract. Everyone wants more yield on their ETH and liquid restaking tokens (LRTs) can offer their new governance tokens as added incentives. Add points and now you have an entire market that is right now just parking ETH. The demand side is less clear, although there are numerous projects signalling intention to use EigenDA. The biggest challenge here (and similarly for Babylon) will be the social one. Restakers are likely to dump the token of whatever AVS they’re securing for more ETH, putting downward pressure on a project’s token who chooses to adopt Eigen restakers. With that being said, restaking has a lot of hype and with their recent $100M fundraise from a16z I’m not too concerned, I just think the former two are more important.
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4844: This goes live in less than 10 days. 4844 is a new fee market that will make rollups cheaper, ceteris paribus. I have seen numerous tweets suggesting that once 4844 goes live and rollups are cheaper that it will “kill” alt-L1s as their competitive advantage is gone. I disagree strongly for a few reasons. First, low fees is one aspect of UX. Even if you assume L2 fees will be as low as something like Solana (which they won’t), this still misses other factors like fractured liquidity and the subpar UX of EVM (most notably token approvals). Of course, fractured liquidity and EVM are not requirements for a rollup on Ethereum, it’s just that they all are. Second, induced demand is likely to drive fees back up anyways, which is not a bad thing per se. More capacity to facilitate more activity is good! It’s just that fees won’t be as low as people are imagining. And alt-DA layers like Celestia will still be cheaper. Overall I think 4844 will be great in that it will support more capacity but it is far down the list compared to the 3 catalysts above. It’s also possible that 4844 is more important for the rollup tokens themselves as with cheaper DA they can drive more execution/MEV fees.
If you’re asking why I suggested 4844 could be a bullish catalyst for SOL, it’s mostly around the overrating of the effect it will have on users. Of course, it’s kind of impossible to say what kind of “4844-effect” is priced into ETH at the moment. I just don’t think any Solana or Cosmos users are going to move to undifferentiated EVM rollups because fees got a bit lower.