Bernstein: Ethereum outperforms Bitcoin in year-to-date gains, aided by five major catalysts

Bernstein states that Ethereum (ETH), as the world's second-largest cryptocurrency, has achieved a 33% year-to-date gain, surpassing its larger competitor Bitcoin (BTC). This surge is driven by five major catalysts, not just the potential approval of a spot exchange-traded fund (ETF). Firstly, since the Ethereum blockchain transitioned to a proof-of-stake consensus model in September 2022, Ethereum's supply has shown deflation, a fact that has been underestimated. Additionally, the amount of Ethereum held on exchanges has reached a historical low of 11%, indicating more cryptocurrencies being locked up. Ethereum is being locked in staking pools, decentralized finance (DeFi) smart contracts, and layer-2 networks. Bernstein states that since early 2023, new layer-2 networks have brought scalability and lower fees to the Ethereum network, revitalizing decentralized finance. The final major catalyst is the planned DenCun upgrade of the Ethereum blockchain scheduled for March this year. The report adds that after the upgrade, "ETH contributors expect a further 90% reduction in transaction costs on layer-2 Ethereum, enhancing the profitability of layer-2 networks," which will alleviate congestion on the mainnet and bring higher transaction volumes to the ecosystem.