Author: Sunny, Messari Research
Compiled by Alex Liu, Foresight News
In the past few years, traditional finance (TradFi) has gradually lost the source of growth narrative. Artificial intelligence has been over-configured, and software companies are no longer as imaginative as they were in the 2000s and 2010s.
For growth investors who raise funds to bet on disruptive innovation narratives, the reality is that AI asset valuations are generally inflated, and other "growth stories" are difficult to tell new ideas. The once-popular FAANG stocks are now gradually transforming into moderate "compound stocks" that pursue profit maximization. The median price-to-sales ratio (enterprise value/sales) of software companies has now dropped below 2 times.
As a result, cryptocurrencies have returned to the spotlight.
Bitcoin broke through an all-time high; the US President "strongly advocated" crypto assets at a press conference; and a series of regulatory tailwinds brought this asset class an opportunity to return to the mainstream for the first time since 2021.
Unlike NFT and Dogecoin in the previous cycle, the protagonists of this round are digital gold, stablecoins, "tokenization" and payment system reform. Stripe and Robinhood announced that the focus of the next stage is crypto business; Coinbase was successfully included in the S&P 500 index; Circle showed the capital market a sexy enough growth narrative, making investors once again ignore the valuation multiples and focus on the potential story.
But what does all this have to do with ETH?
For crypto natives, the battle for smart contract platforms has long been divided: Solana, Hyperliquid, and countless high-performance new chains and Rollup platforms all pose a real threat to Ethereum’s dominance.
We know that Ethereum has not yet truly solved the value capture problem, and we also know that it faces structural challenges.
But Wall Street doesn’t know this. In fact, most Wall Street practitioners know almost nothing about Solana. In terms of popularity, XRP, LTC, LINK, ADA, DOGE and other old-fashioned currencies may have a stronger presence in their minds than SOL. After all, these people have almost completely faded out of the crypto market in the past few years.
What they know is that ETH is "lindy" - it has stood the test of time; it has been tested by many market fluctuations; for a long time, it has been the main "Beta" target outside of Bitcoin. What they see is that ETH is currently the only crypto asset with a spot ETF. What they prefer is the "value depression" with relatively cheap valuations and the catalyst that is about to come.
In their eyes, Coinbase, Kraken, and Robinhood all chose to build products on Ethereum. With a little due diligence, they know that Ethereum has the largest stablecoin pool on the chain. They start to do "moon landing calculations" - and then they will find that Bitcoin has set a new high, while Ethereum is still more than 30% away from its 2021 high.
For them, this "relative undervaluation" is not a risk, but an opportunity. They would rather buy an asset that is still at a low level and has a clear target price, rather than chasing a currency that is "too late" on the chart.
And they may have already entered the market. Now, compliance restrictions on institutional investment are no longer a big problem. As long as there is enough incentive, any fund can strive to allocate crypto assets. Although Crypto Twitter (CT) has repeatedly vowed to "never touch ETH again" over the past year, judging from the market performance since the beginning of this year, ETH has outperformed other mainstream assets for more than a month in a row.
So far, SOL/ETH is down nearly 9% this year; after Ethereum’s market capitalization hit bottom in May, it began its longest rally since mid-2023.
So the question is: If the entire crypto community thinks ETH is a "cursed coin", why can it still outperform?
The answer: It’s attracting new buyers.
Since March, the net inflow data of Ethereum spot ETF has been in an "up only" mode.
Ethereum “buyers” who mimic the MicroStrategy model are seeing their share prices take off, injecting structural leverage into the market.
At the same time, some crypto-native users may realize that their allocations are insufficient and start transferring funds out of BTC and SOL, which have risen sharply in the past two years.
It should be clear that we are not saying that the Ethereum ecosystem has solved its problems. Rather, the ETH asset is beginning to gradually "decouple" from the Ethereum network.
External buyers are reshaping the market's narrative on ETH, shifting the paradigm from "fall is inevitable" to "valuation reassessment". Shorts will be squeezed out sooner or later, and then native funds may also join the ranks of chasing the rise. In the end, we may usher in a round of market frenzy centered on ETH, and at some point usher in a climax-like top.
If this happens, ETH’s all-time high may not be far away.
