Ethereum Price Forecast: Pectra upgrade may spur ETH to regain ‘ultra sound money’ status

Ethereum price today: $2,760

• Ethereum researcher Justin Drake noted that the upcoming Pectra upgrade will improve the ETH burn mechanism by scaling its data availability capacity.
• QCP analysts warn that the crypto market may still be vulnerable to negative price shocks.
• Ethereum needs to recover the $3,000 psychological level to resume an uptrend.

Ethereum (ETH) is up 2% on Wednesday as researcher Justin Drake highlights that ETH will become "ultra sound money" again following potential improvements in the network's data availability capacity through the Pectra upgrade. He also shared how a change in the ETH's issuance model could help reduce supply growth.

Ethereum could be on the verge of reclaiming the "ultra sound money" narrative

In a recent post on social media platform X, Ethereum researcher Justin Drake said that Ethereum will regain its "ultra sound money" status as its supply is likely to reduce again.

"To become ultra sound again, either issuance has to decrease or the burn has to increase. I believe both will happen," wrote Drake.

Ethereum's burn mechanism, introduced in the London hard fork, ensures that ETH maintains a deflationary path by permanently removing a portion of ETH transaction fees from existence. However, ETH's supply started increasing again following the introduction of blobspace — which reduced the fees of Layer 2 networks — in the Ethereum Dencun upgrade of March 2024.

The upcoming Pectra upgrade, slated for March, will double the limit of blobspace in Ethereum blocks from three to six, further reducing fees for Layer 2 networks and affecting ETH burn.

However, Drake highlighted that scaling data availability — through the increase of blobs via the Pectra upgrade — will cause a surge in the total amount of burned ETH.

"Yes, the data availability supply shock from EIP-4844 that introduced blobs temporarily lowered total burn. This is the nature of supply and demand," stated Drake.

"When demand for DA catches up, expect the blobs to burn hard [...] It's much more lucrative to have 10M TPS with each transaction paying $0.001 in DA than it is to have 100 TPS at $100/tx."

On the issuance side, Drake stated that there's a consensus among Ethereum Foundation — the nonprofit that helps maintain the Ethereum blockchain — researchers that ETH's issuance curve is "broken and needs to change."

He suggested a "croissant issuance" model where ETH has a staking soft cap of 50% and a "theoretically-maximal issuance" of 1% borne by ETH holders.

"Navigating the social layer to change issuance won't be easy. This is an opportunity for a champion to rise to the occasion and coordinate change to mainnet over the next couple years," added Drake.

Meanwhile, Ethereum ETFs recorded a net inflow of $307.8 million on Tuesday — their highest single-day net inflow since December 5. BlackRock Ethereum Trust (ETHA) led the buying pressure with a 276.20 million ETH purchase, per Coinglass data.

Despite signs of recovery in the market after the sharp decline on Monday spurred by speculations of a global trade war, QCP analysts advise that investors tread with caution.

"The lack of near-term crypto-specific catalysts leaves the market vulnerable to negative price shocks. In this environment, a defensive approach and risk management are key, especially given the large liquidations observed on Monday," wrote QCP analysts in a Wednesday note to investors.

Ethereum Price Forecast: ETH needs to recover the $3,000 level to resume an uptrend

Ethereum saw $70.66 million in futures liquidations in the past 24 hours, per Coinglass data. The total amount of liquidated long and short positions accounted for $43.23 million and $27.34 million, respectively.

Ethereum has traded within a rectangular channel in the past year, consistently being limited by the $3,900 to $4,000 resistance and holding the $2,100 to $2,300 zone as support — a historically high-demand zone where investors purchased over 62 million ETH, per IntotheBlock's data.

ETH/USDT weekly chart

With the market bias slightly tilted toward the downside, ETH could find support near the rectangle's lower boundary support line if a downturn occurs.

On the upside, ETH could resume an uptrend if it reclaims and holds the $2,800 to $3,000 key zone as support. If ETH secures a firm move above the rectangle's resistance at $4,100 and holds it as a support, it could rally to a new all-time high at $6,000. The level is obtained by measuring the rectangle's height and projecting it upward.

The Relative Strength Index (RSI), Stochastic Oscillator (Stoch) and Moving Average Convergence Divergence (MACD) momentum indicators are below their neutral levels. This indicates that bearish momentum is dominant in the ETH market.

A daily candlestick close below the rectangle's lower boundary line will invalidate the thesis.