Ether (ETH), the world’s second-largest cryptocurrency, may be entering a phase where it could outperform Bitcoin (BTC), according to a new report from Bernstein. The brokerage firm highlighted several factors contributing to this potential shift, especially in light of recent ETF inflows.
Positive Shifts in Ether’s Market Outlook
Despite Ether’s underperformance relative to Bitcoin throughout 2024, Bernstein suggests that this trend may be coming to an end. The report, released on Monday, points out that Ether’s ETF inflows are showing signs of improvement, signaling a potential turnaround for the cryptocurrency.
On Friday, BlackRock’s Ether spot ETF saw $250 million in inflows, surpassing the $137 million inflows seen by its larger counterpart, the Bitcoin spot ETF. This marks a positive shift in demand dynamics, creating a favorable environment for Ether (ETH). Bernstein’s analysts, led by Gautam Chhugani, noted that this shift could bolster ETH’s price going forward.
Staking Yields and the Ethereum Blockchain’s Resilient Demand
Ether staking could further propel the cryptocurrency, according to the report. Initially, Ether spot ETFs didn’t include staking yields due to regulatory restrictions. However, with the possibility of a more crypto-friendly SEC under the incoming Trump administration, ETH staking yields are expected to become a significant catalyst.
As the Ethereum network grows and more users stake their Ether, yields could rise to 4-5%, providing additional incentives for investors. This growth in staking yields is expected to bolster the Ethereum ecosystem, already the dominant platform for asset tokenization and the issuance of stablecoins.
Ethereum’s Stable Supply and Active Network
Another critical factor for Ether’s market potential is its limited supply. After Ethereum’s shift to a proof-of-stake consensus mechanism, the supply of Ether has remained stable at 120 million tokens. Approximately 28% of the supply is locked in staking contracts, and 10% is tied up in deposit and lending contracts.
With Ethereum’s transaction fees delivering around 3% yield to stakers, the network continues to attract long-term investors. Bernstein also pointed out that nearly 60% of Ether has remained inactive for the past year, signaling a resilient investor base that continues to support the cryptocurrency’s price stability. This “inactive” supply adds to the positive demand-supply dynamics, making Ether an attractive option for investors.
Ether’s Future Looks Strong
Ether has faced challenges compared to Bitcoin in 2024, but recent market developments suggest that ETH’s outlook is improving. With strong ETF inflows, potential staking yield growth, and a stable supply of Ether, Bernstein believes that Ether’s risk-reward profile is becoming increasingly attractive. As the Ethereum blockchain continues to gain traction, it remains the leading platform for decentralized applications, reinforcing the cryptocurrency’s long-term potential.
