Ethereum - and the crypto space - saw a tectonic shift over the past 24hrs

A hostile regulatory regime will to flip to constructive. Innovation will finally be rewarded - instead of punished

With that backdrop, 3 reasons why ETH has the best risk-reward setup in crypto:

(1/5) 1) If investors want exposure to the global asset tokenization movement - **the best way to express that is ETH**

ETH is the institutional tokenization platform

Tokenization - and trading activity - ultimately accrues value to ETH

Careful betting against this titan:

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**Prepare for Ethereum’s Renaissance**

Despite the ETH ecosystem having:

- The most devs and marquee apps
- The most capital onchain
- A vibrant set of L2s for scaling
- Regulatory clarity + ETFs

ETH feels subdued.

3 reasons why ETH will start winning again - swiftly:

(1/7) 1. Fundamental

While the memes, speculation, and financial nihilism movement has moved onto other L1 pastures…

Institutions are consistently - and increasingly - building and deploying on Ethereum:

- Blackrock launched its first tokenized fund, BUIDL, on Ethereum…

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We are about to see the perfect storm of upside catalysts for ETH

In hindsight, the second half of 2024 will be the most obvious bullish setup for the Ethereum ecosystem in recent history

Three headwinds that have held ETH back will become tailwinds, starting this week:

(1/9) 1. The ETH ETF will unlock new capital into the Ethereum ecosystem

Crypto has largely been a closed loop; the barriers to entry for inflows are still too high

As a result, we’ve only seen a rotation of capital between crypto assets over the last 2 years - a zero sum game

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And just like that, the Ethereum ETF rose from the ashes to imminent approval

Three unexpected implications of the ETH ETF:

1. Lack of ETH staking in the ETF is *very good*
2. Regulatory clarity Trumps inflows as a price driver
3. The ETH ETF benefits $ETH, not other L1s

(1/5) 1. Lack of ETH staking is very good

If ETH ETFs could stake their ETH:

- Staking yield would be diluted
- Solo staking would be less attractive
- ETH staking would centralize (like BTC mining - see below)

The SEC is inadvertently fostering decentralized staking design!

(2/5)

**WE WILL SEE ALL SPOT ETH ETFS APPROVED ON MAY 23**

The backdrop:
- ETH sentiment is at a cyclical low
- ETF approval is priced between 0-25%
- SEC is suing every legit institution in the ecosystem (Uniswap, Coinbase, Consensys)

5 reasons why we’ll see approval anyway:

(1/9) Exhibit 1: ARK and 21Shares, whose spot ETH ETF decisions are due 5/23, amended their filings to remove staking

Staking the underlying ETH in a spot ETF is free revenue. No issuer would proactively remove this without guidance from a regulator who signals a path forward…

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https://twitter.com/eleanorterrett/status/1789040009560961386

The Ethereum Institutional Thesis: A Store of Value with Cash Flow

As crypto comes back into institutional vogue, we wrote an 18 page report on first principles: why blockchains, why tokens, and why ETH

Link / PDF below. We explore 8 ETH theses:

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bitooda.io/research/ether…
1. Ethereum has one the strongest monetary policy of any major crypto asset

A picture is a thousand words. Since the Merge, ETH has been net deflationary (-0.235% annualized deflation, nearly 420k ETH burned)

More economic activity = more deflation = stronger asset

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Ethereum is scaling. It’s getting faster and cheaper. The Rollup Renaissance is just beginning

At the same time, the world is valuing property rights more and more. We don’t want our property/speech/data censored

This powerful combo will spark mass adoption of Ethereum

(1/3) Right now, the internet is easier to use than #Ethereum

And self sovereignty of assets/data is not worth the clunky crypto onboarding experience for the majority of users

But once $ETH is as cheap (via L2s) and and as easily accessible as the internet, it’ll become the default

September sucked:

Aug 31 Sep 30 MoM
S&P 3955 3586 -9.3%
NDX 12272 10971 -10.6%
BTC 20059 19280 -3.9%
ETH 1554 1307 -15.9%
Gold 1711 1661 -2.9%

What’s the bull case for $ETH now?

(1/9) First - kudos to $BTC acting as the haven asset not only for crypto, but also across all risk assets

In the risk-off environment that shrouded September, Bitcoin stepped up and acted as digital gold. Gold also held its ground. Only the dollar outperformed both in Sep

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The Ethereum Merge is no longer an “if”, but a “when”

Yet, knives are out (as always) attacking ETH - this time claiming PoS governance is more centralized than PoW

This is false. Let’s see how ETH governance actually works:

(Hint - it’s the exact same process as BTC!)

(0/8) First and foremost, Proof of Stake is *not* a voting mechanism. It is a consensus mechanism

ETH is not governed by whoever holds the most tokens; if you have the most tokens, you can’t magically change the protocol

ETH PoS != token voting

https://twitter.com/vitalikbuterin/status/1546776353776832515?s=21&t=fkbwg0x_i-2gW4ffd9886w

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The Merge has been part of the Ethereum roadmap for 6+ years: a community-wide effort telegraphed from the early days

Yet now, less than 8 weeks away from mainnet Merge, a wave of doubt is rising focused on a hostile PoW fork

Here's why a PoW ETH fork is a *non-event*:

(0/15) First, what is a fork?

The ability to fork is a *fundamental right* for a blockchain's community. Forks provide the community the ability to choose; forks represent a right to underlying freedom

There are 2 types of forks - soft forks and hard forks - with key traits:

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Why ETH will flip BTC:

There are 900 BTC mined per day. At current prices, that’s ~$20mm to miners daily

Let’s assume miners sell 90% to cover costs. That’s ~$18mm in sell pressure *every single day*

Meaning, without ~$18mm of new daily buy pressure, BTC price goes down

(1/8) What if that ~$18mm in daily sell pressure vanished - what would that do to BTC’s price?

Wouldn’t it naturally drift up with each marginal new buyer vs being constantly weighed down by daily sell pressure?

This is exactly what is going to happen to ETH after the Merge

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The Ethereum Merge is one of the most powerful catalysts in crypto history, and it is quickly approaching

As we reach the endgame for ETH under the proof of work regime, let's address 10 important characteristics of post-Merge, proof of stake ETH:

(0/11) 1. Post Merge, ETH L1 fees will NOT come down

The purpose of the Merge is to deprecate Ethereum's PoW consensus mechanism and replace it with PoS. Fees are a function of blockspace demand, NOT consensus mechanism. For lower fees, use the L2s (already live) for execution

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2021 was won by alt L1s b/c rollup scaling on ETH moved too slowly

Web3 went mainstream with NFTs, gaming, DeFi 2.0

Blockspace supply on ETH remained scarce while demand blossomed. Excess demand went to alt L1s

But 2022 belongs to ETH and its rollup ecosystem:

(1/9)

https://twitter.com/vivekventures/status/1381970900925493252

While alt L1s made blockchains cheaper and more accessible in 2021, they took shortcuts to scale and will hit structural limits

Optimistic rollups are ready for the mainstream spotlight, and the ZK rollup cavalry is on the way (Polygon, Starknet, zkSync, and others)

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