Ethereum has been underperforming against Bitcoin recently, but Coinbase thinks this might be changing soon.
Coinbase cited several reasons for Ethereum's incoming surge, like Ethereum's staking options, Layer 2 solutions network, and institutional adoption.
A Spot Ethereum ETF approval might be a game-changer if approved, as they might improve accessibility and liquidity for Ethereum.
SEC denying Ethereum ETFs is a possibility, according to several analysts. However, Coinbase's David Han thinks there is “room for surprises"
Overall, Coinbase believes Ethereum has room for growth despite ETF uncertainty.
Ethereum has been a hot topic in the crypto market as of late, considering how despite its growth, the launch of the Dencun upgrade and its prowess in the Defi space. It is still an underperformer and has been outshined by Bitcoin for far too long, as many would argue.
Despite its underperformance compared to Bitcoin though, Coinbase in a recent report, believes that now might be the best time to accumulate Ethereum before a takeoff.
In this piece, we go over Coinbase’s reasons, how big Ethereum has become under the hood, and why it might be poised for this rally as Coinbase posits.
Coinbase cited several factors to support its claims, and most of these are valid on closer inspection.
For example, Ethereum has only gone up by around 29% over the last 365 days.
This is a relatively meagre rate of growth, considering how Bitcoin has a 145% price increase in comparison.
Solana has more than a 700% price increase over a YTD basis, while Avalanche has 149% and even Chainlink has 141%.
This shows that Ethereum investors may be biding their time, and waiting for the right time to strike.
Moreover, Ethereum also has much to benefit from its growing liquidity sinks as we've seen with staking, where investors lock up a percentage of Ethereum to support and protect the network, therefore earning rewards.
Staking as a liquidity sink
Moreover, Ethereum also has the widest network of Layer 2 solutions that help it to process transactions off-chain.
Coinbase also cites factors like institutional adoption, where traditional finance (TradFi) institutions are starting to explore blockchain-based alternatives.
The Ethereum network's robustness and versatility make it the perfect choice for developers and investors alike.
While the expected launch of spot Ethereum ETFs hasn't been a very straightforward process, Coinbase notes that the approval of these ETFs might be a game changer.
For example, the ETFs would provide an accessible way for investors to buy and hold Ethereum, without all of the risks.
Moreover, these spot Ethereum ETFs would also boost liquidity, alongside the staking and the influx of institutional investors.
In less favourable developments, keep in mind that Scott Johnsson from Davis Polk and Wardwell in a 13 May tweet, noted that the SEC denying the Ethereum ETFs might be a strategic move on their part, considering how Ethereum can easily be mistaken for both a commodity and a security.
The Ethereum ETFs can be mistaken for both
Senior ETF analyst from Blomberg, Eric Balchunas as well, thinks that the odds of an ETF approval are low.
However, Coinbase institutional research analyst David Han seems to think that “there is room for surprise” when it comes to these ETF approvals.
Overall, regardless of how the ETF issues unfold, Coinbase’s report shows that there is a lot of room for Ethereum to grow and overtake the rest of the market, considering its complete domination in the areas of Defi and DePIN.
If Coinbase’s assertions are valid, it might be time to add Ethereum to the radar, because a price explosion might be coming in anytime soon.
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