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ETH NFTs in the Banana Zone

If ETH ETFs make crypto go bananas, ETH NFTs could catch a bid
William M. Peaster William M. Peaster May 21, 20243 min read
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ETH NFTs in the Banana Zone

Last month, Real Vision cofounder and CEO Raoul Pal said crypto seemed to be on the verge of the banana zone, where majors and altcoins rally hard as new all-time highs (ATHs) are reached. 

That prospect of the, ahem, banana zone came further into focus this week as the ETH price surged to +$3,700 on the news that the U.S. Securities and Exchange Commission (SEC) seems prepared to approve its first ETH ETFs. 

With ETH now within 24% of its previous record of $4,878, and having seen $75B in inflows yesterday on the ETF excitement alone, it’s no stretch to assume that an official ETF approval in the coming days could rocket ETH through its previous ATH and into price discovery mode. 

Why? As DCinvestor recently pointed out, a supply-side crisis seems brewing around ETH. 

Imagine the buy pressure of major Wall Street inflows, which could be considerable, to say the least.

Then imagine that pressure against how Ethereum only issues ~2.5k ETH per day currently, and at times that issuance can be entirely offset by fee burns, and how there is a ton of ETH essentially locked away in staking and across various apps and Layer 2s (L2s) right now. 

via X

These factors create a perfect storm for a dramatic supply shock. As more institutional investors and retail buyers rush to gain exposure to ETH, the limited circulating supply would seemingly struggle to meet this demand. This dynamic could propel ETH into uncharted territory, driving prices far beyond previous ATHs. 

For those of us that stack ETH, that would be great—bring on the banana zone squared. But what else should we be looking out for?

For his part, the banana king himself, Raoul Pal, thinks the next NFT bull run will rev up once ETH breaches through its previous ATH.

via X

Personally, I agree, as we’ve seen this play out before. When ETH rallied hard in 2021, people also rallied hard into things you could do with your ETH, like NFTs. 

That said, if ETH really does take off in the weeks to come, then it’s not out of the question for the floor prices of, say, the top ETH NFT collections like CryptoPunks, Bored Apes, Pudgy Penguins, and Miladies to double or beyond by summer’s end. You would also undoubtedly see a resurgence around NFT apps like NFTfi platforms if that happened. 

via CoinGecko

Of course, I thought Runes would catalyze the Ordinals ecosystem, and while there are surely still synergies to come here, that catalyzing hasn’t panned out yet. 

And to be sure, I do think it’s always good to anticipate the unexpected. Maybe the arrival of ETH ETFs won’t be a huge catalyst for the ETH NFT scene. Yet the arrival of Runes and the arrival of ETH ETFs are very different beasts. 

Runes didn’t kick off the next leg up in the crypto bull market, but ETH ETFs seem primed to do just that. And the potential ETH supply-side crisis has no analogue with Runes. 

If the ETH price does rocket to new heights, holders will feel more risk-on, and a non-trivial number of them will bid on NFTs they’ve been eyeing over the past bear market. Plus, NFT projects of all stripes have better UX than they did just a few years ago, so the ecosystem is more fertile now. 

Another angle to consider is that a new bullish momentum in ETH and ETH NFTs would likely spur a new wave of innovation and experimentation within the NFT space, from crosschain experiences to games and beyond.

All in all, then? We may be on the verge of the next transformative period in crypto where NFTs and their use cases surge anew. Stay vigilant, and brace yourself, because things may go bananas soon…

William M. Peaster

Written by William M. Peaster

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William M. Peaster, Senior Writer, has been with Bankless since January 2021. Immersed in Ethereum since 2017, he writes the Metaversal newsletter on the onchain frontier, covering everything from AI projects to crypto games, as the team’s lead NFT analyst. With a background in creative writing, he writes fiction and publishes art on Ethereum in his free time. He lives in Washington.

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