Analysts at Bernstein say that despite Ethereum (ETH)’s underperformance this year, its fundamentals are strong. They also note that the risk-reward ratio is now attractive. Analysts point to the potential approval of staking returns for spot Ethereum ETFs under the Trump administration. They also point to the recent surge in ETF inflows and favorable supply-demand dynamics.
Ethereum left behind: What’s behind the scenes?
Analysts at research and brokerage firm Bernstein say staking returns for the spot Ethereum ETF are likely to be approved. US exchange-traded funds have become one of the four factors that have led to a resurgence of interest in ETH under the new Trump administration. The total crypto market capitalization recently surpassed $3.5 trillion. Thus, it has increased by nearly 45% since Donald Trump’s victory.
Meanwhile, since the beginning of the year, Bitcoin has increased by 125% and Solana by 122%. In comparison, Ethereum has lagged behind with a 57% increase. Bernstein analysts led by Gautam Chhugani put forward the bear case argument. The analysts say that ETH is struggling as a store of value compared to BTC. They also note that it faces competition from faster Layer-1 Blockchains such as Solana, Sui, and Aptos. They also note that Ethereum’s reliance on Layer-2 solutions for scaling is disrupting the user experience. They emphasize that this potentially limits Ethereum’s fee growth and user retention.
‘The risk-reward here looks attractive!
Despite this underperformance, ETH’s risk-reward is now attractive, Chhugani says. He also outlines four catalysts for growth for the rest of the cycle. One of them is the imminent approval of the staking yield, which was initially excluded from US spot Ethereum ETF approvals. “Under a new Trump 2.0 crypto-friendly SEC, we believe the ETH staking yield will likely be approved,” analysts say. They note that in a falling currency environment, ETH’s current yield of 3%, which could rise to 4-5%, is becoming increasingly attractive.
The recent surge in Ethereum ETF inflows is another catalyst, according to analysts. Despite a modest launch, the funds attracted net inflows of more than $1.1 billion after the US elections. It also managed to overcome significant initial outflows from Grayscale’s ETHE. Analysts say that continued strong inflows will further reinforce the favorable demand-supply dynamics.
Other important catalysts for Ethereum!
As you have been following on Kriptokoin.com, Ethereum has gained a new quality with its transition to proof-of-stake. Thus, the burning mechanism stabilized the supply at around 120 million ETH. Moreover, 28% of ETH was locked in staking contracts and 10% in lending or Tier-2 bridges. In the past year, 60% of ETH has been immobilized. These factors point to a resilient investor base and positive supply-demand dynamics, analysts said.
Finally, analysts at Bernstein say that Ethereum’s blockchain activity is starting to increase again. They also note that 63% of the total value is locked across all Blockchains. They emphasize that this indicates a high level of trust for whales and institutions. “Solana has definitely taken the lead in individual users. However, Ethereum remains the platform of choice for institutional use cases such as asset tokenization and stablecoins.”
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