Coinbase: Bullish on Ethereum fundamentals, ETH expected to outperform the market in the second half of the year

The cryptocurrency exchange Coinbase has released its monthly report, stating that despite Ether's poor performance since the beginning of the year, the historical trading patterns of ETH indicate that it benefits from the combination of "store of value" and "utility token" narratives, giving it a sustained significant driver in the crypto space. The issuance of an Ethereum spot ETF is only a matter of time, and Coinbase is optimistic that ETH will continue to outperform the market in the second half of the year.

Ethereum Continues to Dominate DEX Trading Volume

While other highly scalable integrated chains have been eating into Ethereum's market share, particularly in the past year, Solana has grown from 2% to 21%. However, Ethereum's ecosystem still dominates the trading volume of decentralized exchanges (DEX).

Ethereum Leads in Stablecoin Issuance

When it comes to stablecoin issuance, Ethereum remains at the forefront.

Furthermore, the growth rate of stablecoin supply on Ethereum L2 is still faster than Solana. Although the final conclusion of the scalability debate is far from clear, early signs of stablecoin growth may actually benefit Ethereum L2 rather than replace L1.

ETH Staking Does Not Put Pressure on Coin Price

Since the transition of ETH to Proof of Stake (PoS) in 2022, the collective balance of stakers far exceeds the cumulative issuance of ETH as shown in the figure below. This is in sharp contrast to Bitcoin's Proof of Work (PoW) mining economics, where in Bitcoin, the competitive mining environment means miners need to sell most of the newly issued BTC to finance operations. However, the low operating cost of staking ETH means that stakers can continue to accumulate their positions indefinitely.

L2 Expansion Brings Liquidity to ETH

L2 itself is also a meaningful demand driver for ETH. Layer 2 solutions like Arbitrum and Optimism are growing rapidly and use ETH as gas fees, with over 3.5 million ETH already connected to the L2 ecosystem.

The Launch of Ethereum Spot ETF is Only a Matter of Time

Historically, ETH's trading behavior has been more consistent with BTC than any other altcoins. This trading behavior reflects the market's relative valuation of ETH as a store of value token and a utility token.

However, this trend has changed since the approval of the Bitcoin Spot ETF in the United States. Coinbase believes that this highlights the structural impact of ETF-based capital inflows, but after the approval of an Ethereum Spot ETF, ETH may undergo a similar shift and adjustment in trading patterns. Coinbase firmly believes that the approval and launch of an Ethereum Spot ETF is only a matter of time!

Coinbase: The approval of an Ethereum Spot ETF hinges on staking, and the SEC will not approve all at once