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Ethereum crashed in Q1. Could May’s Pectra upgrade bring it back?

Cointime Official

After suffering a 45% price drop in Q1, Ethereum (ETH) could be gearing-up for a revival. On May 7, the much-anticipated Pectra upgrade should pass its final test run, paving the way for a mainnet go-live.

The network re-tooling is a portmanteau of two improvement packages called Prague and Electra, which encompass 9 Ethereum Improvement Proposals (EIPs) overall. Taken together the changes promise to smooth the onboarding process for new retail traders while making the planet’s number two blockchain more attractive for institutions.

Pectra raises the validator staking limit from 32 ETH to 2,048, reducing the need to run multiple validator nodes. By simplifying staking, Ethereum’s caretakers hope to enable stronger liquidity lockups and even facilitate whale movement.

If user experience (Ux) improves and big investors get an easier go, on-chain activity should shoot up — the thinking goes. Ethereum’s price curve post-Pectra will be a key crypto market metric in Q2. Let’s look at what’s behind it.

What Is the Ethereum Pectra upgrade?

Pectra is an upgrade to the Ethereum blockchain designed to make staking more efficient, improve user experience, build on the network’s previous attempts at rollup-centric scaling, while improving Ethereum’s decentralization.

Before they were united, Prague aimed at making changes to Ethereum’s execution layer, while Electra focused on consensus layer upgrades.

Pectra has been anticipated for many months but we now have an official date for go-live: May 7th 2025. If all goes to plan, it will be the largest update Ethereum has ever seen.

The main proposals behind Pectra

As of March 2025, the Pectra upgrade consisted of nine EIPs:

  1. EIP-2537: New precompile that allows 120+ bits of security for operations vs 80 bits of security in existing BN254 precompile
  2. EIP-2935: Saves historical block hashes to support stateless clients.
  3. EIP-6110: Supply validator deposits on chain
  4. EIP-7002: New mechanism to allow validators to trigger withdrawals and exits from their execution layer withdrawal credentials.
  5. EIP-7251: Increase the max stake limit of Ethereum validators from 32 ETH to 2048 ETH.
  6. EIP-7549: Provides extra data availability for Ethereum layer twos (L2).
  7. EIP-7685: Framework to allow validator smart contracts to undertake certain operations.
  8. EIP-7702: User experience-focused improvements to EOA users.
  9. EIP-7742: Uncouple blob count between consensus layer and execution layer.

EIP-6110, EIP-7002, EIP-7251, EIP-7549, and EIP-7742 will be implemented in Ethereum’s consensus layer.

Meanwhile, EIP-2537, EIP-2935, EIP-6110, EIP-7685, EIP-7002, EIP-7702, and EIP-7742 will change Ethereum’s execution layer.

Pectra’s main features

More efficient staking

Ethereum currently limits the size of a single validator stake at 32 ETH. For larger trades this limitation requires the trading entity to run a large number of validator nodes.

With the introduction of EIP-7251, the max stake per validator node will be increased from 32 ETH to 2048 ETH. The minimum validator stake threshold, however, will remain at 32 ETH so as not to discourage individual staking.

The increase in max stake per validator node will allow large validators to consolidate to running fewer nodes, ultimately reducing the number of peer-to-peer messages and digital signatures.

Small validators will still be able to increment their stake instead of accumulating ETH at multiples of 32 to run multiple validator nodes.

Ethereum had over 1.07 million daily active validators as of December 2, 2024. A large number of validators can result in high computational and bandwidth load on the network.

User experience improvements

The Pectra upgrade has EIPs to improve Ux for Ethereum users and developers.

EIP-7702 will introduce new transaction types that will allow multiple operations from the same user to be conducted in one transaction. The upgrade will also allow accounts to sponsor gas fees for another account. We have previously explored this type of ‘gas abstraction.’

“Privilege de-escalation” is a new feature that will be introduced with EIP-7702 that will allow users to authorize condition-met spending. For example, permission to spend a specific type of ERC-20 token or permission to spend up to 2% of a total balance per day.

EIP-2537 will also introduce new functions used in zero-knowledge cryptography and EIP-7002, which are targeted at making the Ethereum staking pool experience more trustless by introducing a mechanism for smart contracts to trigger validator exits.

Improved rollup scaling

The Pectra upgrade builds on the success of data blobs introduced in proto-danksharding, which drastically reduced gas fees on Ethereum L2s.

EIP-7594 will introduce a new protocol called PeerDAS which will allow nodes to check that L2 blob data has been made available while downloading only a subset of the data.

How might Pectra impact ETH’s value?

In a research note published last October, Galaxy VP of research Christine Kim wrote that as Ethereum pursues its rollup-centric scaling roadmap, protocol upgrades on the L1 “should matter less to ETH value over time”.

Upgrades on L2s are likely to have the most effect on ETH’s value, she added, as the revenue of Ethereum will likely be driven by user activity on L2s going forward.

From $3 to $4,000, then down: Ethereum’s price history to 6th April 2025. Source: CoinMarketCap

“The upgrades that happen on L2s that advance UX, interoperability, decentralization, and security on these networks matter more to Ethereum’s value than the optimizations and improvements on the base layer,” Kim noted.

The take away

Ethereum’s rollup-centric scaling plan has divided analyst opinion, and the uncertainties around it likely affected its market valuation over the past year.

However, network upgrades like proto-danksharding and Pectra suggest a heighetened level of planning and effort. Ethereum — the backbone of dApps, DeFi and much of what drives modern crypto markets — will surely benefit from increased efficiency and flexibility.

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