Wall Street Loads Up On Ethereum, Yield Is Only Half The Story

Summary Ethereum is emerging as the backbone of tokenization and stablecoins, potentially redefining global finance. With global yields collapsing, Ethereum staking offers 3.2% returns, making it a compelling alternative to bonds. Ethereum is approaching the critical $4,000 level; a breakout could set the stage for a run toward $7,000. Risks remain from volatility, regulation, and competition, but Ethereum’s unique position makes it a compelling buy even after the recent rally. Thesis Summary Ethereum ( ETH-USD ) is dominating the crypto space right now, after months of trailing behind Bitcoin ( BTC-USD ). It looks like institutions are finally starting to realise that Ethereum ( ETH-USD ) could be at the basis of many of the defining trends that could redefine not just crypto, but finance. I’m talking about tokenization and stablecoins. And here’s the kicker. Ethereum also provides yield in a world that is increasingly starved for yield. Ethereum has rallied over 40% in the last month, and could soon break above $4000, which would be a pivotal moment for the cryptocurrency. I remain bullish on Ethereum and believe a new high could be achieved within the next year. Why Ethereum Is Rising There are several key reasons why Ethereum has picked up over the last few weeks. Let’s dive into them. 1. Institutional Adoption and ETF Inflows Ethereum ETFs have been approved for over a year, but we are now beginning to see inflows really pick up. In July, Ethereum ETFs recorded $2.2 billion in inflows , showing that institutional adoption could be driving this rally. We’re seeing big gains also in Ethereum Treasury companies, like SharpLink Gaming ( SBET ), which are following the same strategy as Microstrategy ( MSTR ) but with Ethereum. Why? We’ll talk about that more in-depth below. 2. Staking Yields Outpacing Traditional Rates Ethereum shifted its consensus protocol to proof-of-stake (PoS) in 2022, which not only made it more resource efficient to sustain the ETH blockchain, but also allows investors to earn a yield by staking Ethereum. With the general rise of crypto, the fall in value of the US dollar and short-term rates likely beginning to fall soon, investors are seeking out yield further out the risk curve. Ethrem offers a 3.2% yield on its staking, and this will increase as network fees increase, which will happen as the network utilization increases, and this takes us to our next point. 3. Dominance in DeFi and Tokenization Ethereum is still the dominant chain when it comes to DeFi. Since April, the total value locked (TVL) of DeFi contracts has risen 57% . On top of that, though, Ethereum is set to be a massive beneficiary of the new trends on tokenization and stablecoins. 65% of USDC are settled in the Ethereum network, and slowly but surely, institutions are also beginning to play with the idea of moving real-world assets into the Ethereum blockchain . We’re seeing a lot of excitement around crypto after the passing of the GENIUS Act, and if this is indeed as bullish for crypto as many believe, then Ethereum should be one of, if not the biggest winner. Ethereum Is The Ultimate Yield Play The market is finally waking up to all of the benefits of Ethreum. If Bitcoin is digital golf, Ethereum is digital oil that also provides a yield. In this way, Ethereum arguably provides investors with the ability to both hedge against the weaker dollar and also obtain some yield in a world where it is becoming increasingly difficult and risky to obtain yield. Ethereum is, in fact, inherently deflationary, giving it another argument in favour as a store of value. Add to this the massive utility that could come from the adoption of stablecoins and the proliferation of tokenized assets, and this just becomes a very compelling buy. The GENIUS Act has laid the foundation for all of this to really take off, and coupled with the very real and ongoing concerns that worldwide currencies and bonds are not a good place to be, makes Ethereum one of the best plays right now. Technical Analysis ETH TA (Trendspider) After a pretty momentous rally, Ethereum is getting close to the $4000 price tag, which is quite clearly a very important technical level. Three times in the previous year, we tried to break out from this level without success. Perhaps the fourth time is the charm? Once the $4000 level is broken, we could see this quickly attempt to retest the all-time highs at $4800. If this level is surpassed, then I believe we could easily try to tackle the 1.618 ext of the bear market, which projects us towards $7200. Risks and Challenges Ahead Ethereum’s long-term story is compelling, but it’s not without hurdles. Firstly, volatility is a built-in feature in crypto, and Ethereum is no exception. Secondly, regulation could be a problem going forward, even though the current administration seems to be behind the adoption of crypto. Thirdly, competition from other L2s like Solana ( SOL-USD ) is very real and could still threaten Ethereum’s dominance. And lastly, it’s worth mentioning that centralization of the Ethereum network could be a problem. It has been pointed out that a large amount of Ethereum is centrally staked in platforms like Lido, which could raise regulatory concerns. The Bottom Line In conclusion, Ethereum has emerged as one of the big winners from the passage of the GENIUS Act and the current trans in crypto. Institutions seem to be piling into Ethereum and accepting it as potentially the place to build out tokenized assets and stablecoins. But it’s also important to consider that crypto can be a volatile asset, and things can change fast in this world. Ethereum has been quietly building out the most secure and one of the most efficient L2s out there, but its ultimate success isn’t a guarantee. Nonetheless, owning some Ethereum seems to make a lot of sense given the current environment, even after this big rally.

Source: Seeking Alpha