- Ethereum sentiment is in the dumps.
- Coinbase has weighed in on whether this is the end for the leading crypto asset.
- These debates come at an interesting time for Ethereum with the recent approval of ETFs.
Over the past few months, sentiment around Ethereum, the second largest crypto asset by market cap, has been in the dumps amid a continued underperformance of other leading assets like Bitcoin and Solana. Further compounding concerns, Ethereum also appears to have lost the ultrasound sound money narrative as it endures its most extended inflationary spell since The Merge with burns plummeting due to record low fees and rising issuance.
Sponsored
Will ETH becoming inflationary be the final nail in the coffin? Is the “DeFi King” set to face the same fate of obscurity that has befallen some challengers that have come for its throne in the past? Leading crypto exchange Coinbase has weighed in.
Fears of Ethereum’s Death Overrated?
What is Ethereum’s value to investors if it is not a store of value? What will drive demand if users do not need to buy large amounts of ETH to interact with the network, as fees tend to zero thanks to its scaling roadmap? According to a recently shared Coinbase Institutional report, “application-based utility” answers both questions.
"we think that application-based utility may emerge as the largest demand driver. In fact, we think that the high throughput, low fee L2 environment will enable new forms of applications and native asset utility that were not previously feasible on the L1," Coinbase Research Analyst David Han wrote, highlighting the importance of Layer 2 chains to this shift.
Interestingly, Coinbase believes this demand from application-specific use cases is already growing. As highlighted in the report, over 4 million ETH has been bridged to Layer 2 chains, more than all the fees users paid on the Ethereum network over the two years between January 2022 and August 2024, an estimated 3.7 million ETH.
Coinbase stressed that users have sent much of these bridged assets to various applications, particularly for DeFi. For example, the firm noted that over 200,000 ETH is on Aave on Arbitrum alone.
The recent debates over Ethereum’s value proposition come at an interesting time, as the U.S. SEC just recently approved ETFs backed by the asset.
Institutions Undeterred?
On July 22, the SEC approved nine spot ether ETFs for trading. While total flows to these products in the first weeks remain mixed, largely thanks to outflows from Grayscale’s high-fee converted fund ETHE, products like BlackRock’s ETHA have offered hope.
ETHA alone has already accrued over $1 billion worth of ETH, an impressive feat considering fears over how ETH would be marketed to investors, especially as ETFs have been prevented from offering staking services.
Amid the ongoing debate over Ethereum’s value, mixed ETF Inflows, and uncertain macroeconomic conditions, the asset’s price has been stuck within a tight range between the $2,500 and $2,800 price points. When writing, the asset is trading at the $2,584 price point, representing an over 2.5% decline in the past 24 hours.
On the Flipside
- Coinbase has a vested interest in the success of Ethereum and Ethereum Layer 2 networks as it has an Ethereum Layer 2 called Base.
- Ethereum’s price and market sentiment will likely pick up under more favorable macroeconomic conditions.
- The recent debates around Ethereum’s value raise the question of how many investors are actually in the crypto space for the technology.
Why This Matters
With Ethereum sentiment cratering in recent weeks, Coinbase’s report offers a lifeline to investors questioning their commitment to the asset.
Read more on Ethereum:
Ether ETFs Reverse Three-Day Positive Streak with $39.21M Outflows
See how Nigeria’s SEC may be softening its stance on crypto:
Nigeria’s SEC Set to Issue Crypto Licenses in Major Body Language Shift
