Ethereum Dencun Upgrade

Dencun is a fundamental catalyst for both Ethereum and L2 tokens. EIP-4844 will drastically reduce transaction costs for L2s, as sequencers will be able to post transaction data to Ethereum mainnet through blobs. A decrease in L2 transaction fees, coupled with EIP-1153’s transient storage, should expand the overall design space for Ethereum and L2 smart contracts. EIP-4788 will greatly enhance security for liquid staking and restaking protocols, which are some of the largest businesses in crypto. 

With that being said, how could one allocate in preparation for Dencun? While BTC continues to attract institutional flows, a rising tide often lifts all boats. One potential headwind for BTC will likely be the distribution of BTC to Mt. Gox creditors over the coming months. ETH and broader ETH-beta tokens, such as LDO, ARB, and OP, should benefit from Dencun. L2 tokens are particularly attractive, as lower L2 transaction fees in a period where mainnet transaction fees become unattractive should drive more usage to the L2s. As a result, each L2 will likely see a surge in sequencer profit. UNI may also serve as an interesting asset in March, largely due to EIP-1153’s enablement of Uniswap V4. Follow through for a continued ETH rally could then likely come from increased speculation about a prospective ETH ETF, with a decision expected in May.