ETH/USD is Down 43% from ATH – Can the Pectra Upgrade Push Ethereum to $4K Again?

This year, the crypto community has its eyes on the widely awaited Pectra upgrade to improve the network’s scaling capabilities as competition in the smart contracts category continues to heat up.

This year, the price of ETH has dived 15.6% so far. Comparatively, the native tokens of its rival networks Solana (SOL), Tron (TRX), Cardano (ADA), and the newcomer Sui (SUI) have either posted gains or are dropping at a slower pace.

Ethereum has struggled to stay competitive as its network fees continue to be quite high compared to other blockchains while the number of transactions that can be processed per second is far lower.

This is What Pectra Will Do to Enhance Ethereum’s Performance

Before Sui arrived, Solana led the charts as the fastest network of all, as its infrastructure was able to (theoretically) process 65,000 transactions per second – compared to only 119 for Ethereum.

Meanwhile, the average transaction fee charged by the Ethereum blockchain ranged from $1.37 to $12 at some point in the past 30 days, while Solana charges an average fee of $0.036.

Although it will not dramatically reduce that huge gap between the two networks, the Pectra upgrade will introduce some changes that could reduce the volatility and cost of transaction fees once it is implemented.

One of the positive changes that Pectra will bring forth is that it will allow Ethereum users to pay for gas fees with something other than ETH. Once deployed, the blockchain will receive gas payments in USDC and gas to facilitate transactions.

This would allow some decentralized finance protocols (DeFi) to lower fees by subsidizing a portion of them without exposing themselves to the natural volatility of ETH.

Moreover, validators will now be required to stake a higher amount of ETH to process transactions. Previously, the minimum staking requirement stood at 32 ETH. Pectra will up that mark to 2,048 – which is the equivalent of nearly $7 million at today’s prices.

With this change, the Ethereum Foundation is aiming to consolidate and attract the presence and power of large validators who have the computing power to process transactions faster.

Finally, with the help of proto-dankharding – a significant change made to Ethereum’s transaction processing mechanism – the network has paved the way to improve how layer-two protocols like Arbitrum and Optimism function and help the network scale efficiently.

Pectra will solidify this move by increasing blob capacity to increase the number of transactions that can be added to each block without compromising performance.

Ethereum Could Drop Sharply if It Drops Below This Key Trendline Support

Ethereum has been on a downtrend since its mid-December peak and has made multiple lower highs along the way, as the crypto market keeps taking a breather after the post-election rally.

As a result of this decline, the token is now trading 11% below its 200-day exponential moving average (EMA).

The price action broke below the $3,000 psychological support on Sunday when the market experienced a flash crash following Donald Trump’s decision to increase tariffs on imported goods from Mexico and Canada.

However, the price rapidly recovered after briefly dropping to its lowest levels since September last year.

Momentum indicators are neck-deep into negative territory as the Relative Strength Index (RSI) has moved close to the oversold area, while the MACD has still not shown any signs that negative momentum is decelerating.

Although ETH could be poised to rebound off these lows, none of these two oscillators have provided confirmation that a trend reversal is about to take place.

For now, the trend line resistance shown in the chart is a key level to watch as a break below could result in a catastrophic decline for ETH to the low 2,300s.