Ether (ETH) has underperformed the broader crypto market this year, but its long-term positioning remains strong and could lead to unexpected upside, Coinbase (COIN) says. It said in a research report on Wednesday.
The second-largest cryptocurrency by market capitalization is up 29% since the beginning of the year, less than two-thirds of the rise of its larger rival Bitcoin (BTC), which is up 50%. The CoinDesk 20 Index (CD20), a measure of the broader crypto market, rose 28%.
“Ether could see an unexpected rally in the coming months,” the report said, adding that cryptocurrencies are subject to “primary supply-side overhangs,” such as pressure from token unlocking and miner sales. He pointed out that there were no “reasonable factors.”
“On the contrary, staking and Layer 2 growth are both meaningful and proven sources of ETH liquidity decline,” analyst David Han wrote. “Position as the center of ETH” decentralized finance We also believe that (DeFi) is unlikely to be replaced due to the proliferation of Ethereum Virtual Machine (EVM) and its Layer 2 innovations. ”
of E.V.M. It is the Ethereum blockchain's native processing system that allows developers to create smart contracts and nodes to interact with them. layer 2 is a separate blockchain built on layer 1, or base layer. Reduce scaling and data bottlenecks.
Additionally, the importance of a potential spot US Ether exchange-traded fund (ETF) cannot be underestimated. “We believe the market may have underestimated the timing and probability of potential approval, leaving room for unexpected upside,” Coinbase said.
“Even if the initial May 23, 2024 deadline is denied, we believe that litigation will likely overturn that decision,” the memo said. “For the foreseeable future, we believe that ETH’s structural demand factors and technological innovation within its ecosystem will enable it to continue to straddle multiple narratives.”
