Bitcoin
Ether (ETH) price could surprise positively in the coming months, says Coinbase (COIN)
Ether (ETH) has underperformed the broader crypto market this year, but its long-term positioning remains strong and has the potential to surprise on the upside, Coinbase (COIN) said in a research report on Wednesday.
The second-largest cryptocurrency by market cap is up 29% year-to-date, less than two-thirds the increase of its biggest rival, Bitcoin (BTC) who won 50%. The CoinDesk 20 Index (CD20), a measure of the broader crypto market, advanced 28%.
“Ether may have the potential to surprise positively in the coming months,” the report said, noting that the cryptocurrency does not have “major sources of supply-side gluts” such as token unlocks or pressure created by miner sales.
“On the contrary, both staking growth and layer 2 growth have proven to be significant and growing sinks of ETH liquidity,” wrote analyst David Han. “ETH’s position as a hub of decentralized finance (DeFi) is also unlikely to be replaced in our opinion due to the widespread adoption of the Ethereum Virtual Machine (EVM) and its layer 2 innovations.”
O EVM is the native processing system of the Ethereum blockchain that allows developers to create smart contracts and allow nodes to interact with them. Layer 2 are separate blockchains built on top of layer 1sor the base layer, which reduces bottlenecks with scaling and data.
Furthermore, the importance of potential US ether exchange-traded funds (ETFs) cannot be underestimated. “We believe the market may be underestimating the timing and chances of a potential approval, which leaves room for positive surprises,” Coinbase said.
“Even if the first deadline of May 23, 2024 is rejected, we believe there is a high probability that litigation could reverse this decision,” the note said. “However, we believe that the structural drivers of ETH demand, as well as technological innovations within its ecosystem, will allow it to continue to encompass multiple narratives.”