Ethereum Set for Major Gains as Strong Fundamentals and Institutional Interest Surge

Ethereum's recent underperformance may actually present an enticing opportunity, according to Gautam Chhugani, the managing director of Bernstein’s global digital assets division.

He points to Ethereum’s relatively stable supply since its shift to a proof-of-stake model and the implementation of a burn mechanism, suggesting that these factors create a favorable environment for the cryptocurrency’s future potential.

Chhugani explains that Ethereum’s ongoing transaction fees provide a steady yield of around 3% to those staking ETH, which has led to nearly 28% of the total supply being locked into staking contracts. Additionally, around 10% of ETH is tied up in lending or deposit contracts on the blockchain, with a portion also bridged to layer-2 solutions.

Notably, 60% of ETH has not been traded in the past year, demonstrating strong investor commitment. This long-term holding behavior helps maintain a balanced supply-demand dynamic, which Chhugani sees as a bullish sign for ETH.

He also highlights the growing interest in Ethereum-based exchange-traded funds (ETFs) as a positive development. The approval of these ETFs has sparked more institutional interest in ETH, further strengthening its demand-supply balance. Chhugani predicts that the regulatory landscape could shift under a more crypto-friendly SEC, potentially allowing ETH staking yields to be included in ETF offerings, which would increase Ethereum’s appeal to investors.

In addition to the growing institutional interest, Ethereum’s dominance in blockchain activity remains significant. With Ethereum accounting for 63% of the total value locked (TVL) across all blockchains, it continues to outperform other networks.