Does This 1 Desperately Needed Catalyst For Ethereum Make It a Buy?

Ethereum (CRYPTO: ETH) is in a state of crisis. Amidst powerful competitors stealing its capital share, and with unprecedented poor sentiment among cryptocurrency investors, its price is down by 46% so far this year.

Thankfully for holders, there is one significant catalyst that's now on the map. The odds of the catalyst turning around the chain's entire run of poor fortune overnight is very unlikely, but it could be a step toward a better future. Could it make the coin a buy once more?

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This upgrade might mark the start of a genuine turnaround

On May 7, the Ethereum network is scheduled to go live with the first phase of its latest major upgrade, which is called Pectra. The second phase will be rolled out in late 2025 or early 2026.

Both phases of Pectra aim to further tackle the chain's long-standing problems of high gas fees and slow transaction times via several different mechanisms, boosting its total throughput of transactions per second and introducing a couple of new features that could mitigate the same issues. Layer 2 networks, which run as separate blockchains hosted on Ethereum, will now be even more efficient at processing transactions. They'll also be more efficient at processing cryptographic proofs when hosting cross-chain applications. Though making L2s more efficient does not directly increase the price of Ethereum, it could attract more capital to the L2s it is upstream of, which might have some positive effects on its price in the long run.

Additionally, on the main Ethereum network, there will now be a way for a user's gas fees to be sponsored by the provider of a distributed application, which means some services could offer essentially free transactions if they're willing to front the cost.

Furthermore, there's a new wallet upgrade that will enable wallets to incorporate smart contract features like batching transactions and stronger authentication-based security. That upgrade in particular will make the chain a significantly more attractive place to develop highly automated distributed applications like artificial intelligence agents, as well as potentially a better place to develop apps to handle and trade real-world assets.

Any comeback story is going to take plenty of time to play out

It's not reasonable to predict in advance precisely how much the first phase of Pectra is going to slash gas costs or speed up transactions, or how much it'll make Ethereum's price go up upon or in the immediate aftermath of release, if it does at all. But one thing is certain: Even a very smooth and powerful new set of features for the chain will not be quick to entice recently departed capital to return in large volumes. That means the price-related benefits of Pectra are going to accrue over the course of weeks and months at the fastest.

Think about it. First, developers and power users will need to try out the new features and incorporate them into new applications that couldn't have been made previously. In other words, they'll need to provide superior user experiences in advance of users having a chance to believe that the chain's main problems are in the past. Only after that process happens successfully could newly minted evangelists (or reinvigorated former evangelists) for the chain start to convince investors to return in larger numbers with their capital.

Beyond that, there is no guarantee that the Pectra upgrade will actually make Ethereum cheaper and faster to use than its biggest competitor, Solana. But if its performance can at least get into the same ballpark as Solana's, it'll be a tremendous improvement to the chain's vitality, and, in all probability, the coin's price as well.

For most investors, it's too early to invest in the hopes of that outcome happening. This is still a very risky coin to buy until proven otherwise. However, given the high chance of Ethereum's biggest bugbears easing a bit in the near term, it could be a worthwhile bet for investors who are very tolerant of risk. Just be aware that it's very possible that Pectra's benefits will only become obviously visible after the phase 2 update is implemented, which won't be for a while yet.

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Alex Carchidi has positions in Ethereum and Solana. The Motley Fool has positions in and recommends Ethereum and Solana. The Motley Fool has a disclosure policy.