Ethereum
Ether (ETH) Price Could Surprise Upside in Coming Months, According to Coinbase (COIN)
Ether (ETH) has underperformed the broader crypto market this year, but its long-term positioning remains strong and it has the potential to surprise on the upside, Coinbase (COIN) said in a research report Wednesday.
The second-largest cryptocurrency by market value is up 29% year to date, less than two-thirds of the rise of its biggest rival Bitcoin. (BTC) who gained 50%. The CoinDesk 20 Index (CD20), a measure of the broader crypto market, rose 28%.
“Ether could have the potential to surprise to the upside in the coming months,” the report said, noting that the cryptocurrency does not have “major sources of supply-side overhangs” such as token unlocking or the pressure created by miner sales.
“On the contrary, staking and layer 2 growth have proven to be significant and growing sinks of ETH liquidity,” wrote analyst David Han. “ETH’s position as a center of decentralized finance (DeFi) is also unlikely to be moved in our view due to the widespread adoption of the Ethereum Virtual Machine (EVM) and its Layer 2 innovations.”
THE EVM is the native processing system of the Ethereum blockchain that allows developers to create smart contracts and nodes to interact with them. Layer 2 are distinct blockchains built on layer 1or the base layer, which reduces scaling and data bottlenecks.
Additionally, the importance of US ether spot exchange-traded funds (ETFs) cannot be understated. “We believe the market may be underestimating the timing and odds of potential approval, leaving room for upside surprises,” Coinbase said.
“Even if the first deadline of May 23, 2024 is rejected, we believe there is a high probability that litigation could overturn this decision,” the memo said. “In the meantime, we believe that the structural drivers of demand for ETH as well as technological innovations within its ecosystem will allow it to continue to straddle multiple narratives.”