Ether (ETH), the world’s second-largest cryptocurrency, has outperformed its larger rival bitcoin (BTC), with a 33% gain year-to-date. This rally is being driven by catalysts other than the potential approval of a spot exchange-traded fund (ETF), broker Bernstein said in a research report on Monday.
Firstly, the ether supply is deflationary and has not increased since the Ethereum blockchain’s shift to a proof-of-stake consensus model in September 2022, the report said, adding that this fact is being underappreciated.
The amount of ether locked up is also an important factor. Bernstein notes that ETH held on exchanges is at an all-time low of 11%, a sign that more of the cryptocurrency is being locked up. There is ETH locked in staking pools, decentralized finance (DeFi) smart contracts and on layer-2s.
“With the growth of ETH transaction fees based on higher blockchain activity (more DeFi, NFTs, tokens), more ETH holders are incentivized to stake their ETH,” analysts Gautam…