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ETH Is Ready for Institutional Adoption

Ethereum is prepared for institutional buying, here's why
Arjun Chand Arjun Chand May 23, 20244 min read
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ETH Is Ready for Institutional Adoption

There’s been a huge shift in sentiment around ETH. It’s like the market is tipping its hand, suggesting that the approval of ETH ETF is a question of 'when' rather than 'if.'

The institutions are preparing to buy our ETH bags. Today’s article breaks down the fundamental reasons why ETH is primed for institutional adoption. 

Let’s dive in!

via X

ETH’s Lindy Proof

The Lindy effect suggests that the longer something has been around, the more likely it will continue to exist. Ethereum exemplifies this, boasting nearly a decade-long track record of operation. It pioneered the smart contract blockchain meta in crypto and has become the hub for DeFi innovation and experimentation. 

Ethereum’s network effects are unparalleled:

  • Decentralization and security — Ethereum is secured by a global network of thousands of nodes, ensuring no single point of centralization or failure. Research indicates that an attack on Ethereum would be more costly than one on Bitcoin, highlighting its security strength.
  • Developer ecosystem — Ethereum has the biggest developer community in crypto, supported by an abundance of tools and resources for Solidity programming. These tools have been battle tested over years and there are many auditing firms that ensure smart contracts on Ethereum meet the highest standards.
  • Ethereum Virtual Machine (EVM) everywhere — The EVM has become a standard, with countless chains and applications adopting EMV-compatibility. As more developers use EVM tools, we see more innovation and widespread network effects of Ethereum. For example, Coinbase, a publicly-traded US company with over 100 million verified users, is building an EVM-compatible layer 2 blockchain based on Ethereum, reinforcing Ethereum's reputation as a reliable tech platform.
The network effects of Ethereum. Source: An Evolutionary Lens on Web3/Open Source Software (2023)

Why is this important?

The institutions are not your average crypto investor. They manage large sums of capital for their clients and strict regulations govern their investment choices. They seek reliable, long-term high conviction bets and in crypto, very few options meet these criteria. ETH stands out as a prime candidate.

ETH’s Liquidity Depth

Institutions require deep, liquid markets to trade to handle their sizable trades. ETH, with a market cap of over $450 billion is one of the most liquid crypto assets. It boasts daily trading volumes suprassing $600 million across tier-1 exchanges. This market depth ensures that ETH can absorb large-scale institutional trades via ETFs without significant price fluctuations.

ETH's liquidity goes beyond traditional exchanges given its role in DeFi where it is used as a form of collateral in lending markets and is also the go-to trading unit for exchange pairs onchain.

Moreover, there are billions of dollars in capital across applications within Ethereum's ecosystem. This robust liquidity isn't lost on traditional players. It has attracted many institutions to launch products on Ethereum in recent years. For instance, BlackRock’s BUIDL fund, which launched on Ethereum, now has a market cap of over $400 million, highlighting the importance of this liquidity as an increasing number of institutions venture into crypto.

All these factors matter in shaping the perception and confidence of institutional investors towards Ethereum, and can increase ETH’s adoption considerably.

ETH’s Growing Regulatory Acceptance

The regulatory environment for ETH is gradually becoming clearer. Many countries are now embracing ETH by allowing the launch of ETH-based financial products for institutions. This helps build confidence among institutional investors and shows a clear path for compliant ETH exposure.

For instance, the US greenlit Ethereum futures ETFs in 2023, offering institutions a regulated avenue for ETH exposure, albeit with some limitations. Globally, there are 27 active Ethereum ETFs, collectively managing $5.70 billion in assets.

via CoinGecko

Further solidifying this trend, Hong Kong approved Asia’s first spot ETFs for both BTC and ETH, making it the first jurisdiction to offer spot ETH ETFs. This shows that there’s a growing recognition of Ethereum as a tech platform and ETH as a valuable asset.

No One Has Enough ETH

Despite ETH’s somewhat subdued price performance this year, its fundamental value within the crypto ecosystem remains undeniable. With institutional capital flowing in, the potential for significant upside is clear. If the $600 single day gain on the back of ETF whispers is something to go by, we’re simply not bullish enough in our price targets for ETH.

What do you think? Will ETH outperform the market in the coming months? Share your thoughts in the comments below!

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Arjun Chand

Written by Arjun Chand

17 Articles View all      

Cross-chain tech critic at LI.FI. Mostly focused on memes, passively interested in current happenings in the multi chain reality. Former XRP bag holder.

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