Matthew Sigel, Head of Digital Asset Strategy at VanEck, highlighted Ether’s potential amidst its underperformance compared to Bitcoin this year. On X, he noted, “Ethereum has been a laggard relative to Bitcoin – up 59% YTD vs. 124% for Bitcoin. However, Ethereum fundamentals look strong, and the recent inflection in ETF inflows indicates a solid revival of interest.”
Sigel referenced insights from Gautam Chhugani, a prominent Wall Street crypto investor, who outlined four compelling reasons to consider buying ETH now.
1. Resilient Supply Dynamics
Ether’s shift to proof-of-stake and the implementation of its burn mechanism have resulted in a stable total supply of approximately 120 million ETH. Chhugani noted, “~28% of ETH supply [is] locked in staking contracts… ~10% of ETH remains locked in Deposit/Lending contracts… ~60% of Ethereum has not changed hands in the last year, showing a resilient investor base.” This dynamic supports favorable supply-demand conditions, with staking yields currently at 3%.
2. Rising ETF Inflows
“Ethereum has been a laggard relative to Bitcoin – up 59% YTD vs. 124% for Bitcoin. However, Ethereum fundamentals look strong and the recent inflection in ETF inflows, indicates a solid revival of interest.”
Four reasons to BUY, by @gautamchhugani pic.twitter.com/fVilvkPMgl
— matthew sigel, recovering CFA (@matthew_sigel) December 2, 2024
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Ethereum ETF inflows have shown significant growth. Chhugani explained, “ETH ETF Assets stand at $11Bn today, with net inflows of $574Mn… Blackrock’s ETHA inflows at $250Mn exceeded IBIT inflows at $137Mn.” He also highlighted the decline in Grayscale ETF outflows, noting, “Excluding Grayscale, ETH under management… was up 36% Month-on-month in November.”
3. Potential for Staking Yields in ETFs
Chhugani suggested that a potential shift in regulatory stance could enable ETH staking yields for ETF holders. “Under a new Trump 2.0 crypto-friendly SEC, ETH staking yield will likely be approved. In a declining rate environment, ETH yield (3% in ETH today) can be quite attractive,” he stated. With increased blockchain activity, yields could rise to 4-5%, further enhancing demand.
4. Surge in Blockchain Activity
Ethereum’s blockchain activity remains robust, securing 63% of the total value locked across all blockchains. Chhugani observed, “While Solana has taken the lead on retail users, Ethereum remains a platform of choice for institutional use-cases such as asset tokenization and stablecoins.”
He also emphasized Ether’s dominance in layer 2 scaling, reporting, “Layer 2 chains have crossed ~15mn in daily transactions… Coinbase’s Base chain (hosted on Ethereum) has clocked daily 7.5mn transactions.” Additionally, Ether and its Layer 2 chains dominate over 60% of the stablecoin market, reinforcing its liquidity and institutional trust.
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