Author: Daii Source: mirror
I have always said that Ethereum is currently the biggest value trough in the cryptocurrency market.
How deep is this trough exactly? You can see it by comparing its market share with Bitcoin.
From the above chart, we can see that Bitcoin's market share has reached 60%, while Ethereum's has only 10%, hitting a new low in nearly four years.
1. What are the problems with Ethereum?
JPMorgan Chase's analysts have provided a table that may give you a general idea.
First, the current ETH supply has not increased significantly, only from 120 million to just under 121 million, with an inflation rate of less than 1%, far lower than Solana's 4.78%.
The problem may lie in the 8th item (see the above figure), Gas fees, which have dropped by 54% at once. There are two main reasons for this:
One is that Ethereum's own L2 has diverted some of the traffic;
The other is the "shitcoin" craze, which Ethereum has failed to catch up with.
It needs to be explained that the term "shitcoin" is used instead of "meme coin" because these coins are purely tools for harvesting, fundamentally different from traditional meme coins like Pepe, Doge, and SHIB, and calling them "shitcoins" can make more people stay away from them.
Due to the constant negative news brought by "shitcoins" to Solana, first the Trump couple, and now the Argentine President Milei. This has also made people start to re-examine what the core value of Solana is.
It can be said with certainty that the traffic brought by "shitcoins" to Solana is only temporary, and Solana is currently being counterattacked by "shitcoins". This is another topic, and we'll talk about it another day.
Due to Solana's inherent lack of decentralization, it is destined not to become the stage for big capital. On the contrary, decentralization is Ethereum's advantage, which is reflected in the 5th item in the above figure. Even if the price of ETH has not been able to rise, the TVL priced in ETH has been rising, and it has risen quite a lot, by 25%, which is really rare.
The following TVL distribution chart is a true portrayal of Ethereum's dominant position in decentralized finance.
Decentralization is the foundation of Ethereum, and also the capital that Ethereum can take off with. So, what makes you say that Ethereum is going to take off "now"?
2. Smart money tells you
In the article on Wednesday, "4.3 Billion Outflows! The Crisis and Opportunity of Bitcoin", I mentioned the 4.3 billion outflows from Bitcoin ETPs. I didn't have time to talk about the details of the inflows to Ethereum ETPs, as shown in the box in the figure below.
On the surface, Ethereum also saw an outflow of 7 million last week, only Solana and XRP had inflows of 89 million and 85 million respectively due to the potential SEC approval of their ETF applications (see the red circles above).
But if you compare Ethereum's inflows this month and this year, you will find that more smart money from institutions is accelerating its entry into Ethereum ETPs.
Considering that the US currently accounts for 75% of the crypto ETP market, and the US has not yet had a Solana ETP. So the above Solana data only represents the attitude of 25% of the market, let's convert it to the attitude of the entire market.
Have you noticed that after the conversion, Ethereum's inflows this month are still 9.6 times that of Solana, and its inflows this year are 4.5 times that of Solana.
It is clear that more smart money is flowing into Ethereum. The possible reasons, I mentioned in the article "Learn from the Example of Institutions", that Goldman Sachs increased its Ethereum ETF holdings by 2000% in the fourth quarter of last year. The power of role models is huge.
It seems that everything is ready, so where is the tailwind?
3. Where is the tailwind?
There are two tailwinds, one is the SEC's approval of Ethereum ETF staking, and the other is the launch of Ethereum's 2025 upgrade.
The first tailwind: regulatory breakthrough of staking-based ETFs
Cboe BZX Exchange has submitted a proposal to the SEC requesting permission for the 21Shares Core Ethereum Exchange Traded Fund (ETF) to stake Ethereum. Once approved, the ETH ETF will also become an income-generating asset class, which could ignite an investment frenzy in ETH ETFs. Shortly after, the New York Stock Exchange also proposed to stake Grayscale's Ethereum ETF.
Once approved, it means that traditional investors not only can hold ETH, but also can obtain an annualized yield of 3.5%-5% through staking. It is estimated that if the SEC approves such ETFs, the annual staking revenue of Ethereum could exceed $5 billion, becoming a "magnet" to attract traditional capital. More importantly, the opening of the staking function will realize the transition of Ethereum ETFs to "income-generating assets" - staking-based ETFs may open up a multi-trillion dollar market for ETH.
The second tailwind: Pectra upgrade to reshape the technical foundation
If ETF staking is the key to opening the floodgates of capital, then the Pectra upgrade in April 2025 is the engine of Ethereum's self-revolution. This upgrade contains three killer features:
EIP-3074: Allows users to combine multiple transactions into one operation, with the Gas fee paid by a third party. This improvement directly targets Ethereum's "user experience problem", and is expected to reduce the interaction cost of ordinary users by more than 50%. For example, project parties can pay the Gas fee for users like "treating them to dinner", completely eliminating the threshold for new people to enter DeFi.
EIP-7251: Raises the staking limit of a single validator node from 32 ETH to 2048 ETH. This change directly benefits institutions - like Lido, the staking service provider, can reduce the number of nodes by 98%, reducing operating costs while improving network speed. Analysts estimate that this move could attract over $20 billion in new staking capital.
ERC-7683 and 7841: Unification of cross-chain standards, allowing seamless asset flow between Ethereum L2s like "high-speed rail transfer". Uniswap and Across Protocol have built cross-chain order systems based on this standard, with transaction failure rates expected to drop by 70% and liquidity pool depth to increase by more than 3 times.
If the first tailwind still has variables, then the arrival of the second tailwind is just a matter of time.
Conclusion
Ethereum's long-term price depression has made many people forget its many advantages.
As the world's first programmable blockchain, Ethereum has a strong network effect and a huge developer community, and its smart contract functionality and decentralized application platform provide fertile ground for countless innovative projects. As more and more large institutional capital flows into Ethereum ETPs, the value of Ethereum will be rediscovered.
Are you ready to make a big move then? Wait, let me show you a picture.
When I wrote this article, the price of ETH was $2702. Once the price does not rise but falls, around $2566.5, there will be over $800 million in long positions liquidated. Don't forget that the current ETH price is still controlled by centralized exchanges, and most of the centralized exchanges lack regulation. Before Ethereum takes off, take a moment to give you a "needle" and draw a "U" to harvest a bit, it's not difficult at all. If you still have any doubts about this, take a look at the article "Big Rise Coming? Beware of the Black Hand!".
Leverage can amplify returns, but it can also accelerate destruction - controlling risk and preserving capital is the way to survive.
