In 2014, Vitalik Buterin, the creator of Ethereum, established the roadmap for the blockchain's development. It started with the "Frontier" in 2015 and ended with the "Serenity" stage, which Ethereum entered in 2022, when the consensus mechanism shifted from PoW to PoS.

This transition, known as the Merge, triggered trading activity according to the "buy the rumor, sell the news" pattern. Expectations started rising two months prior to the Merge, and ETH gained over 70%, only to lose half of it afterward. In contrast, BTC gained 19% during the same period but lost all its gains later on.

The recent Shanghai upgrade, which went live on April 12, was much expected as well, for it allowed Ethereum validators to withdraw their ethers locked in its staking contract.

The Shanghai upgrade had initially caused concern among investors, worrying that it would trigger a significant un-staking and sale of ethers, creating excessive selling pressure. However, the opposite happened.

Since the upgrade, validators have indeed withdrawn 960k ETH of rewards ($1.8 billion), as there’s no practical reason to keep them in the validator nodes (source: Dune). They did not sell them immediately though, and it is likely that many have bundled their coins and opened new validator nodes with them.

Also, the ability to withdraw ethers reduced the liquidity risk of locking them up, prompting previously hesitating investors (often institutional) to rush into the space.

According to ConsenSys, top ETH institution-grade staking service providers reported inflows in April three times larger than all of the previous month, with 80% of the inflows occurring after the Shanghai upgrade went live. These inflows confirmed the results of a survey conducted by Kiln, one of such providers, in February, which indicated that 68% of investors were willing to start staking or increase their staked amount after Shanghai.

All in all, since April 12, the net inflow to Ethereum (excluding rewards) has been over 445.6k ETH ($855 million), marking a rather successful upgrade. Ethereum price rose by 11% on the day it went live but succumbed to the general crypto market slump several days later. A total of 18.6 million ETH, or $35bn, are now locked up in Ethereum staking contract.

The upcoming upgrades include EIP-4844, which will feature the first prototype for danksharding – using the sharding method to increase space for groups of data. It is anticipated in the third quarter of this year.

More distant upgrades, outlined by Vitalik Buterin in the end of last year, will include the Verge, increasing scalability; the Purge, getting rid of historical data to decrease network congestion; and the Scourge, addressing certain centralization issues.

A complete ecosystem

Ethereum's primary objective is not to function as a currency like Bitcoin, but rather to fuel a smart contract platform where third-party developers can build their DApps and launch their tokens. This means that the activity generated by these DApps and tokens is directly related to the success of Ethereum.

The latest statistics for Q1 2023 indicate that Ethereum remains a highly sought-after destination for web3 developers. Alchemy, a top web3 developer tools provider, reported a consistent increase in the number of installs for Ethereum SDKs (software development kits): 1.9 million in Q1 2023 vs 1.3 million a year prior.

With 126k monthly active wallets, Ethereum ranks fifth among the most popular blockchains, trailing behind BNB, WAX, Polygon (Ethereum's layer-2), and Hive (source: DappRadar). These are highly scalable blockchains, used mostly for gaming and social DApps, and Ethereum cannot compete with them (at least until the sharding upgrades are implemented). 

However, Ethereum's dominance remains uncontested in the NFT space, with $4.1 billion of trading volume, and in the DeFi, with over 67% of Total Value Locked across blockchains. The recent upheavals in traditional finance have highlighted the need for a decentralized financial infrastructure, and DeFi is gaining traction, making Ethereum all the more valuable.

With a monthly correlation coefficient between $ETH and $BTC of around 0.8, we can say that macroeconomic and regulatory factors that move crypto markets play a very important role in Ethereum’s price action.

However, the developments proper to Ethereum and its ecosystem ensure that real value can shine through the speculations and expectations.