- Coinbase analysts are optimistic about Ethereum’s future, citing strong demand drivers and unique scaling advantages despite current underperformance.
- They believe Ethereum maintains key strengths such as its Solidity community, EVM platform use, and crucial role in DeFi, supporting a strong case for the approval of spot ETH ETFs.
- Despite challenges, the potential for regulatory and market acceptance of ETH ETFs remains high, with a 30-40% chance of approval noted amidst growing political attention to crypto.
Despite Ethereum’s relative underperformance compared to Bitcoin and the overall crypto market, Coinbase analysts hold a positive view toward the second largest crypto. They anticipate ETH could surprise investors with a better-than-expected performance later in the cycle.
David Han, research analyst for Coinbase Institutional, wrote that they “believe that Ethereum has some of the strongest persistent demand drivers in crypto, and retains unique advantages to its scaling roadmap”.
Related: Analyst Who Sold All His Bitcoin Says He Hasn’t Lost Faith In BTC, Makes Bold Bet On Altcoins
Han added that ETH can draw from its historical trading patterns, which indicate its dual benefit as both a “store-of-value” and a “technology-token”.
Despite Solana being a potential threat to Ethereum and the potential for a Spot ETH ETF rejection in May, Coinbase still believes in the long-term outlook of the network.
We continue to believe that Ethereum’s long-term positioning remains strong and that it has important advantages that meaningfully distinguish it from other smart contract networks.
David Han, CoinbaseHan adds that the strengths of Ethereum include the well-established Solidity developer community, widespread adoption of its EVM platform, the role of ETH as crucial DeFi collateral, and the robust decentralisation and security of its mainnet.
Additionally, upcoming advancements in tokenisation are expected to benefit ETH more than other Layer 1 blockchains in the near term.
30-40% Chance of Approval, Says Analyst
Han further believes that the approval of spot ETH ETFs is likely due to their potential to offer regulatory clarity and access to new capital, similar to previously approved BTC ETFs.
These ETFs would allow ETH to access the same capital pools as BTC, significantly benefiting its market position. The rationale behind the BTC ETF approvals, based on the correlation between CME futures and spot rates, is applicable to ETH as well, supporting a strong case for approval, the analyst wrote.
We believe the odds of approval are close to 30-40%. As crypto begins to take form as an election issue, it’s also less certain in our view that the SEC would be willing to front the political capital necessary to support a denial.
David Han, CoinbaseDespite uncertainties, such as the SEC’s current non-committal stance and the unique challenges posed by Ethereum’s proof-of-stake mechanism, Han remains optimistic. Market indicators and political dynamics could sway the SEC towards approval, with potential reversals of initial rejections through litigation also likely, he concluded.
Matt Hougan: Bitcoin ETFs Opened Doors for Crypto
Bitwise Asset Management’s Matt Hougan agrees with that analysis, saying the Spot Bitcoin ETFs have opened the door for crypto ETFs. Hougan told CNBC that the United States’ outdated securities laws don’t fit with the digital asset world – but in the end what everyone wants is a “safe, secure platform where investors are protected, and innovation is protected”.
Hougan added:
We’ve entered the ETF era for crypto. We’ve seen the Bitcoin ETFs come to market. We’ve seen the great things they’ve done for investors: lowering costs, improving regulation, improving sort of safety, security and peace of mind. I think we will get there on Ethereum as well.
Matt Hougan, Bitwise Asset ManagementGet the most important crypto news delivered to your inbox by subscribing to the CNA newsletter
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