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Ethereum’s Expansion May Accelerate With Rising Institutional Investments in Early 2024: Coinbase
In a recent analysis published on February 8, Coinbase’s research team provided insights into the expected expansion of Ethereum’s trading activity during the first half of 2024.
Coinbase analysts pointed out potential growth areas following the approval of spot Bitcoin (BTC) ETFs in decentralized finance (DeFi) and the broader cryptocurrency market.
The report indicates that Ethereum has experienced sluggish movement in recent months as Bitcoin continues to draw in more institutional investments.
Spot Ethereum ETFs Anticipated to Drive Growth
Although Ethereum’s growth has been slower in comparison to others, analysts anticipate that institutional investments in the early part of the year could alter the current situation.
“…we believe there’s room for ETH to play catch up to its peers in 1H24. Although there was some rotation into ETH after the launch of spot bitcoin ETFs, the momentum was arrested by liquidations from a large defunct crypto lender alongside pressure from the sale of ETH options.”
The expectation of growth largely hinges on the potential approval of spot Ethereum ETFs, reflecting the market acceptance that Bitcoin has experienced. Such a development could create new opportunities for Ethereum.
ETH saw an increase of over 80% in 2023 and recorded rising DeFi metrics and institutional fund investments, even while it remained secondary to Bitcoin’s impressive ETF narratives.
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Bitcoin outperformed with gains exceeding 158% in 2023 as institutional funds began to flow in following BlackRock’s ETF application, recovering losses from the challenging crypto winter of 2022.
Solana’s Growth Outpaces Ethereum
Ethereum’s institutional growth was further overshadowed by Solana (SOL), which experienced a series of inflows into investment funds, earning the title of an institutional investor favorite.
This year, the approval of spot Bitcoin ETFs has resulted in inflows into both the market leader and altcoins, yet Ethereum’s momentum remains below the expectations set by many analysts.
Last year, a group of wealth managers identified Ether as having the greatest growth potential among leading crypto assets, despite the figures at that time.
The firms assessed the activities surrounding decentralized applications (dApps) on the Ethereum Network and their performance during a bull market to formulate their predictions.
Moreover, the staking mechanism on the blockchain, following its transition to a Proof-of-Stake (POS) model, may attract new users interested in earning staking rewards.
In a similar vein, a report by Grayscale highlighted Ethereum’s underperformance in 2023, noting that its smart contract growth was relatively higher than that of other networks along with various other metrics.
“Ether produced strong returns in 2023 but underperformed Bitcoin as well as certain other smart contract blockchain tokens. We think this reflects Bitcoin-specific positives this year and a slower recovery in Ethereum’s on-chain activity.”
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