Bitcoin price briefly flew past $93K to hit a new all-time high (ATH) of $93,477 on Wednesday. Since then, prices have taken a breather, and as of this writing, BTC/USD is trading at $88,430, which is up 110% year-to-date (YTD).
These gains follow a 154.5% return recorded by the world’s largest asset with a market cap of $1.8 trillion in 2023.
While to some, it may seem it’s now too late to buy Bitcoin, that may not be the case according to Galaxy Digital’s Mike Novogratz and Bitwise’s chief investment officer, Matt Hougan, who believes $500k is coming for BTC.
These bold targets are contingent on Bitcoin being accepted as a store of value and President-elect Donald Trump delivering on his promise of setting up a BTC Strategic Reserve. So, there’s, of course, no guarantee that Bitcoin will hit these numbers. For now, the big target that the crypto king must first hit is $100,000.
With Bitcoin hitting new ATHs every other day now, the market sentiments have shifted to euphoria across the broad crypto market. These sentiments have the total cryptocurrency market cap now sitting around $3.144 trillion, surpassing Nov. 2021 peak.
Amidst this bull market mania, which is inducing FOMO among traders and investors, Ethereum continues to suffer.
The 2nd largest cryptocurrency with a market cap of $386 billion is currently trading at $3,069, still 37% away from its 2021 ATH of $4,880. So far, in 2024, ETH has only managed to go up by a meager 40%, trailing behind the equally lackluster performance from last year when it only registered a 90% upside.
Even Bitcoin Cash has managed to record 69% gains YTD. If we take a look at the coins among the top 100 cryptos by market cap that have performed poorly than ETH, they include the likes of XRP, ADA, AVAX, UNI, LINK, DOT, ICP, XLM, ETC, KAS, STX, MNT, RUNE, PYTH, POL, XMR, ARB, FIL, INJ, HBAR, TIA, VET, OP, IMX, ATOM, SEI, GRT, WLD, MKR, BSV, ALGO, LDO, BTT, GALA, and HNT.
While ETH is struggling against USD, it is getting absolutely demolished against BTC, with the ETHBTC ratio continuing to hit new multi-year lows. Currently, the ETHBTC ratio is at 0.0349, aiming for a new 2024 low, which, if things continue to go as they are, may come soon enough.
In contrast, SOLETH is rising to new highs. During the peak of the last bull market, the SOLETH ratio topped out at $0.05785. During the subsequent bear market, this ratio fell as low as 0.0069 when the SOL price dropped below $10 after the FTX bankruptcy.
However, ever since then, SOLETH has been on the rise, climbing to a new high of 0.0723 on Nov. 6. These new highs reflect Solana rapidly closing the gap with Ethereum in almost every economic metric.
A report by hedge fund Syncracy Capital revealed that Solana’s real economic value (REV) was just 1% of Ethereum’s REV in Oct. 2023, only to surge to 111% a year later, in Oct. 2024. This growth was driven mainly by meme coin mania, which led to higher network volumes, higher fees, and higher total value locked (TVL).
Interestingly, Ethereum’s modest gains came despite the crypto asset being approved for a spot exchange-traded fund (ETF), which was expected to drive ETH to new highs. Back in July, Hougan of Bitwise had forecasted that the price of Ethereum could surge past $5,000 following the ETF launch. He said the following at that time:
“By year-end, I’m confident the new highs will be in.”
His bullish thesis was based on Ethereum ETFs eventually capturing inflows after a choppy start. So, why are Ethereum ETFs, unlike Bitcoin ETFs, unable to attract institutions?
Click here to learn all about investing in Bitcoin.
The Disappointing Performance of ETH ETF: What’s Behind it?
It was late in July that the US Securities and Exchange Commission (SEC) allowed the first spot Ethereum ETFs to start trading, which came following the approval of spot Bitcoin ETFs in January.
Since their approval, Ethereum ETFs have accomplished $241.5 million in total net inflows compared to Bitcoin ETFs’ massive $28.3 billion, as per SoSo Value. So, there is simply no match between the two.
Flows have already pushed assets in the US Spot Bitcoin ETFs close to the levels seen in gold ETFs. While it was initially expected to take a few years, the speed at which Bitcoin ETFs have been attracting interest and capital has surprised analysts. Bloomberg senior ETF analyst Eric Balchunas noted:
“There’s a decent shot they surpass gold before their first birthday.”
The total assets held by all the Spot Bitcoin ETFs combined have reached $95.4 billion, while that of Spot Ethereum ETFs have $9.48 billion in total assets.
Ethereum’s lack of performance is partly due to the drag caused by outflows from Grayscale’s Ethereum fund (ETHE) on overall inflows. This pattern was the same for Bitcoin ETFs when they first started trading; once outflows from Grayscale peaked and inflows surged, the price of Bitcoin started rallying.
Since GBTC’s conversion to an ETF, it has lost more than $20 billion in net outflows, now having 19.69 bln in net assets. As GBTC outflows slowed down, inflows in other funds kept on growing, eventually outpacing the outflows.
The latest Bitcoin price action has actually created a positive feedback loop for Bitcoin, where the more the prices increase, the more capital flows into its ETFs, which then send its prices even higher. In the past six days, a total of $4.73 billion has flowed into these funds, according to data from Farside.
During the same period, Ethereum ETFs collectively saw almost $650 million in net inflows. Another bullish and interesting development is the Michigan Retirement System’s $11mln investment in Grayscale’s Ethereum Trusts, making it the first US state pension fund to add ETH to its portfolio. Surprisingly, this investment surpasses its $7 million allocation in Bitcoin ETFs.
While Ethereum funds have started to see record inflows, growth remains slow. Grayscale’s ETHE has seen $3.18 billion in total outflows and currently holds the top spot in terms of net assets at $3.18 billion. The fact that Grayscale’s Ethereum Trust hasn’t registered any outflows for a week now is a positive sign and may point to ETHE’s unlocks being over.
“Sunny days ahead, altho still several country miles behind BTC ETFs..” commented Balchunas on X (Twitter) on this development. He further noted that while Ethereum ETFs lag behind Bitcoin ETFs, in itself, it’s still doing well as it ranks as the 6th largest ETF launched by inflows this year out of over 600 new ones.
Grayscale’s ETHE is followed by BlackRock‘s (BLK +1.86%) ETHA with just $1.85 bln in net assets, while cumulative net inflow has been $1.7 bln. So, BlackRock’s Ethereum ETF has a lot to catch up, unlike its Bitcoin ETF (IBIT), which leads in both inflows and net assets at $29.15 bln and $42.6 bln, respectively.
Besides outflows from Grayscale’s Ethereum fund (ETHE), the lack of a narrative for the asset is another factor that weighs heavily on Ether’s price.
“With ETH, I think the investment story and narrative is a bit less easy for a lot of investors to digest, so that’s a big part of why we’re so committed to the education journey that we’re on with a lot of our clients.”
– Robert Mitchnick, BlackRock’s head of digital assets
Despite this, Mitchnick said at the time that they “believe in the potential of Ethereum” and that, in due time, they expect “investors to grasp the full extent of this asset.”
While Ethereum’s complexity is hindering its massive adoption among the institutions, there is one thing that TradFi understands well and would love to get its hands on—yield. Although Ether already offers yield through staking, Ethereum ETFs do not offer that functionality because the SEC considers staking a security offering. However, this may finally change with the incoming administration, potentially boosting ETH’s value.
Crypto Under a Trump Administration: What’s at Stake?
Source: Council of Foreign Relations
On Nov. 5, the US presidential election came to its conclusion, with President-elect Trump enjoying a landslide victory. Trump’s return to the White House on Jan. 20 sent excitement across the crypto sector, as seen with greens everywhere.
According to Consensys CEO Joe Lubin, Ethereum, which is more mature than other ecosystems, will “benefit” more from Trump’s victory than any other protocol.
Late last month, Consensys issued an open letter addressed to whoever becomes the next US president, noting that regulatory uncertainty is hindering the development of the crypto space and that clear and supportive regulations are requested.
The blockchain technology company focused on Ethereum development has been battling the SEC and reduced its workforce by 20% last month. But now, with Trump’s victory, Lubin sees things looking up, especially due to a change in the SEC leadership.
“America has had its boot on the neck of Ethereum for a pretty long time, specifically Ethereum, and that’s caused a bunch of FUD.”
– Lubin
He added that now, with Trump retaking the White House, the market has “already seen a rebound that has been more favorable to Ether.”
One of the biggest reasons for the bullish sentiments surrounding the change in administration has been Trump promising to fire SEC Chair Gary Gensler “on day one.” This shift can enable spot ETH ETFs to offer staking rewards, which, in turn, creates demand for the products, which can result in an increase in Ether price.
Under Genserler’s leadership, the SEC alleges staking programs constitute investment contracts, an interpretation that requires compliance with securities regulations.
In regards to that, the agency has charged CEX Coinbase (COIN +0.71%) for failing to register the offer and sale of its crypto staking-as-a-service program. While Coinbase has chosen to take the matter to court, its competitor Kraken decided to settle with the SEC after being penalized for failing to register its staking program.
As a result of the SEC’s strict stance on staking and rejection, Ethereum ETF issuers like Fidelity and Franklin Templeton had to remove this service from their ETF applications. The unstaked version was seen as “the easier path or path of least resistance” to getting the ETF approved.
At the time, Fidelity’s head of digital asset management, Cynthia Lo Bessette, shared an interest in helping educate investors about staking capabilities, which is “an important part of the investment experience and being able to invest in your ether.”
The exclusion of staking for institutional investors is seen as a contributing factor to the Spot Ethereum ETF’s disappointing performance.
Staking is a popular source of passive income in crypto and DeFi. Currently, 28.52% of ETH supply (34.8 million ETH worth $110 billion) is staked across over one million validators, as per Dune.
This promise of a passive, regular yield from staking, many believe, can help Ether stand out from Bitcoin in the ETF world and attract inflows.
According to on-chain researcher Tom Wan, staking only 25% of Ethereum ETF assets can generate enough yield to offset the fees charged by ETF issuers. The fees levied by these issuers currently range between 0.15% and 0.25%, with the sole exception of Grayscale, which charges a 2.25% fee on ETHE.
By making ETH ETFs essentially free, these products can not only draw institutional investors by competing better with Bitcoin ETFs but also increase their appeal to retail investors. According to Wan, “enabling staking yield could be a game changer” for ETH.
And this may finally be realized with the changes in the SEC leadership, which Trump is expected to bring.
In an interview with Cointelegraph, Nansen analyst Edward Wilson said that the regulatory environment is likely to be crypto-friendly.
“We may even see a staked ETH ETF approved early in this new administration, which will fully leverage the benefits of ETH as an asset. If this occurs, then ETH will become an exciting asset to watch. Put differently, ETH is cool again.”
– Wilson
It has Already Started! ETF Issuer Focuses on ETH Staking
Things are starting to change already, with crypto index fund manager Bitwise buying London-based crypto firm Attestant Ltd. in an undisclosed deal, which will add $3.7 billion in assets.
Founded in 2019, Attestant serves funds, exchanges, family offices, high-net-worth individuals, traditional financial institutions, and more. With this “new chapter,” Bitwise aims to provide broad capabilities at scale.
The asset manager is currently offering both Bitcoin and Ethereum ETFs. Bitwise’s Spot Ethereum ETF (ETHW) has $361.67 million in net assets, and so far, it has attracted $373.21 million in inflows. Meanwhile, its Spot Bitcoin ETF (BITB) has $2.40 billion in inflows and $3.88 billion in net assets.
“We want Bitwise to be the best possible partner to investors in the crypto space. This acquisition allows us to expand the ways we can help investors meet their objectives.”
– Bitwise CEO Hunter Horsley
More importantly, with this purchase, New York-based Bitwise is adding staking services to its business. “The Attestant team has built a truly best-of-breed staking solution for Ethereum,” which Bitwise CTO Hong Kim said offers “high performance and peace of mind.”
The Attestant acquisition actually comes on the back of crypto asset managers’ growing interest in crypto staking.
Earlier this week, Bitwise introduced a staking product for Aptos (APT) cryptocurrency. The Bitwise Aptos Staking ETP (APTB) will be listed on the Six Swiss Exchange on Nov. 19. Backed by the underlying APT token, the ETF aims to generate about 4.7% of net fees accumulated directly within the exchange-traded product.
In a previous interview with a media outlet, Attestant’s chief business officer, Steve Berryman, has called staking a major selling point for Ethereum, which would allow ETF investors to earn approximately 4% every year by simply having exposure to the crypto asset through a fund.
Talking about this capability’s exclusion from ETFs, Berryman said that while that sacrifice was required at the time, it may be introduced in the future because it makes sense.
“If you’re going to hold Ethereum, then why wouldn’t you also stake it?”
– Berryman
The decline in US interest rates can also help ETH’s demand and prices. According to a report from institutional brokerage firm FalconX, released late in Sept., returns from staking ETH are expected to surpass US interest rates in the near future.
While staking yields are currently hovering around 3.2%, a reduction in US rates will result in declining yields on traditional assets, which will narrow the yield gap with ETH staking and make it attractive to TradFi.
Conclusion
The crypto market is enjoying a bullish momentum, and while we are witnessing ‘extreme greed‘ with ETH OI reaching a new high of $87 billion, this latest price action and the excitement come after months of sideways actions. So, it won’t be wrong to say that the party is just getting started.
Also, while BTC is making new highs, Ether is still well below its ATH, which should start catching up soon as ETHE outflows slow down and inflows across other ETFs start gaining traction.
Unlike Bitcoin’s simple value proposition of being “digital gold,” ETH is harder to sell, but once staking is added to Spot Ethereum ETFs, which seems a real possibility under the presidency of Trump, it’ll become highly attractive to institutions.
With Bitcoin, crypto has already become an investable asset class for TradFi, and Ethereum will allow those investors to have a more diversified portfolio. With staking yield in the mix, it’s only a matter of time before investors recognize ETH’s potential and rush in for the passive income and price growth.
Click here to learn all about investing in Ethereum.