Ethereum's Revival of Interest

Overview

Investing.com reports that Bernstein sees a "solid revival of interest" in Ethereum due to its strong fundamentals, despite its underperformance compared to Bitcoin this year.

Year-to-Date Performance

• Ethereum: Gained around 59%
• Bitcoin: Surged by 124%

However, Ethereum's recent performance is promising:
– In the last 30 days, Ethereum rose by 46%, while Bitcoin gained 41%.

Key Factors Driving Optimism

• Robust staking dynamics
• Steady transaction fees
• Growing institutional interest, especially through ETFs

Despite competition from faster networks like Solana and challenges such as fragmented user experiences on Layer 2 solutions, Ethereum's supply-demand dynamics remain favorable.

Current Supply Insights

• 28% of Ethereum's supply is locked in staking contracts, with an annual return of 3%.
• 10% is tied up in lending or bridged to Layer 2 chains.
• Nearly 60% of Ethereum's supply has not been traded in over a year, highlighting strong investor commitment.

Institutional Interest and ETFs

Institutional interest is increasing, with significant ETF inflows:
– Assets under management total $11 billion.
– Recent weeks saw net inflows reversing prior outflows from Grayscale's ETFs.

Future Potential

Bernstein predicts further momentum, especially if regulatory approval permits asset managers to incorporate Ethereum staking yields into ETFs, potentially enhancing returns to 4-5% with increased blockchain activity.

Scalability and Blockchain Activity

Ethereum’s scalability model focuses on Layer 2 chains, dramatically increasing blockchain activity, with daily transactions exceeding 15 million on Layer 2 solutions compared to just 1 million on Ethereum’s base layer.

Ethereum commands a 63% share of total value locked in blockchains, indicating strong trust among both retail whale users and institutional investors.