Coinbase predicts that Ethereum (ETH) could soon outperform other cryptocurrencies.
The company’s recent report suggests that this second-largest cryptocurrency has the potential to positively surprise holders.
Key elements supporting Ethereum’s potential
This year, Ethereum has lagged behind the broader crypto market. Despite this underperformance, Coinbase remains optimistic about its long-term outlook. The report highlights that ETH is well-positioned as it is up 29% year-to-date and there is no significant supply-side pressure such as token unlocking or miner sell-offs.
Coinbase analyst David Han highlights that ETH is benefiting from a significant and growing liquidity sink. Staking, where investors lock up their tokens to support the network and earn rewards, is a big factor. Furthermore, layer 2 solutions that extend Ethereum by processing transactions from the main blockchain have also grown significantly.
Read more: 9 Best Places to Stake Ethereum in 2024
Experts also note increased institutional interest. As more financial institutions consider blockchain technology and decentralized finance (DeFi), Ethereum, the backbone of most DeFi applications, has benefited greatly. The platform's versatility and infrastructure make it a preferred choice for both developers and investors.
Impact of potential spot ETF launches
The potential launch of a spot Ethereum exchange-traded fund (ETF) in the US could have a significant impact on the asset's market position, increasing liquidity and potentially increasing prices. The SEC recently hinted at the possibility of a denial, and the prospect alone has already excited the market.
Scott Johnsson of Davis Polk and Wardwell highlighted the SEC's call for public input on classifying BlackRock's proposed Spot Ethereum ETF as a commodity-based trust. Johnson suggested that rejecting ETFs could be strategic because they could be incorrectly filed as commodity-based trust stocks.
“We believe the market may have underestimated the timing and probability of potential approval, leaving room for surprise upside,” Han said.
read more: How can I invest in an Ethereum ETF?
Regardless of how the U.S. ETF story ends, Coinbase's report suggests that Ethereum will outperform in the coming months. With strong demand factors and technological innovations, ETH remains an important asset to watch.
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