Original author: Etherealize
Original translation: SNZ Capital
summary
The global financial system is on the eve of an epoch-making change, with assets around the world gradually being digitized and transferred to the blockchain. The evolution from a semi-digital, independent financial system to a fully digital, composable financial system requires a secure, neutral, and reliable global settlement layer to support the operation of global assets. Ethereum has become this foundation.
Ethereum’s institutional adoption is accelerating rapidly, the U.S. regulatory framework is openly supportive of blockchain innovation, and digital assets are becoming a mainstream component of traditional investment portfolios.
It took 15 years for Bitcoin to be widely recognized as digital gold: a scarce monetary asset that transcends sovereign control. Ethereum complements Bitcoin: it not only stores value, but also facilitates seamless value transfer, trust building, and global collaboration. ETH is the next generation of asymmetric investment opportunities and is expected to become a core holding in institutional digital asset portfolios.
Ethereum has become the default platform for stablecoins, high-value tokenized assets, and institutional blockchain infrastructure. Currently, more than 80% of tokenized assets exist on Ethereum. Ethereum has earned the trust of the worlds leading asset managers and infrastructure providers due to its powerful architecture: it is the worlds most secure and decentralized blockchain, providing unparalleled reliability and zero downtime.
However, as the asset underpinning this transformative system, ETH remains one of the most undervalued opportunities in the global market to date. Despite Ethereum’s clear market dominance and significant technical upgrades, ETH is currently trading well below its 2021 all-time high. We believe this price discrepancy will not last, and understanding ETH’s unique value proposition will present one of the largest upside opportunities in the asset class today.
ETH is more than just a token, it is collateral, computational fuel, and interest-earning financial infrastructure for the on-chain economy. It is actively stored, staked, burned, and used. Where Bitcoin is a commodity that serves as a simple store of value, Ethereum is also a commodity that serves as a store of value but has tremendous utility at the same time - which effectively makes it a productive reserve asset: digital oil that powers the digital economy.
Report Overview
This report aims to explain why ETH should be considered a core allocation in institutional strategies, especially those that prioritize long-term value creation, technology exposure, and future-oriented financial infrastructure. The report is divided into three core parts:
Understanding ETH: The digital oil that drives the digital economy
This section will explore the relationship between Ethereum and ETH, the utility and unique characteristics of ETH, the appropriate valuation framework to assess the value of ETH as an asset, and why it is currently undervalued and underweight in the portfolios of institutional investors seeking asymmetric opportunities and productive value stores.
Ethereum: The underlying infrastructure that drives the rise of ETH
This section will cover the structural, technical, and economic drivers behind the growing momentum of the Ethereum network. It will describe Ethereums potential position as the base layer of the global digital financial system and how this position will support and amplify ETHs economic importance.
Ethereum and AI: The Economic Engine of an Autonomous Economy
This section looks to the future, assessing the role and potential value that Ethereum—and through it, ETH—might play in a financial system driven by autonomous agents.
Key Points
ETH is digital oil: ETH powers the Ethereum economy and accrues value through its utility, scarcity, and yield.
ETH is a censorship-resistant store of value: ETH is the settlement, security, and collateral asset for the digital economy. As the number of externally controlled tokenized assets (stablecoins, real-world assets, and permissioned financial instruments) on Ethereum grows, the need for a global neutral, censorship-resistant reserve asset as a foundational store of value is critical.
ETH is not a tech company: Valuation frameworks must evolve; ETH cannot be valued like a tech stock based solely on fee income - Ethereum is unique digital infrastructure and is encapsulated as a global reserve asset.
Programmatic Issuance + Destruction = Predictable Scarcity: ETH has a theoretical maximum annual total issuance of 1.51%¹, but commodity destruction generated by platform usage generally drives net issuance lower. Since September 2022, ETH supply inflation has hovered around 0.09%², lower than fiat currencies and Bitcoin.
ETH provides native returns: Validator staking makes staked ETH a productive³, profitable digital commodity.
ETH is already a reserve asset: ETH is already a reserve asset for the Ethereum digital economy and will soon become a reserve asset for institutions and sovereign nations.
ETH is undervalued: ETHs lag behind BTC is a temporary mispricing rather than a structural weakness, creating a rare asymmetric investment opportunity.
ETH’s role in the future AI economy has yet to be priced in: As autonomous agents integrate into the financial world, a new type of economic infrastructure will be needed. Ethereum is the most suitable and likely platform to support this future, serving as the operating layer for a hybrid human-machine economy — with ETH as its native currency and reserve asset.
ETH has a trillion dollar potential: the short-term target is $8,000; in the long term, conservatively estimated, as a monetary reserve/commodity asset, ETH could reach over $80,000.
ETH: Digital Oil that Drives the Digital Economy
ETH is the native asset of the Ethereum network and the economic engine that drives it.
It is digital oil — the asset that powers, backs, and reserves the internet’s new financial system.
The traditional financial system is at the beginning of a structural transition from analog infrastructure to a digital native architecture. Ethereum is expected to become the foundational software layer - similar to an operating system, such as Microsoft Windows - on which the new global financial system will be built.
When this happens, ETH will become the base asset for a comprehensive global platform that will encompass the future of finance, tokenization, identity, computing, AI, and more. This inherent complexity makes ETH harder to define, especially relative to simpler store-of-value assets like Bitcoin — but it also makes ETH more strategically valuable and means ETH has greater long-term potential.
ETH is more than just a cryptocurrency, it is a multifunctional asset that serves a variety of purposes, including:
Computational fuel: Each on-chain operation consumes (destroys) ETH. It is the underlying asset that drives computing, data storage, asset transfer, and value settlement on Ethereum, serving as fuel for the following:
o Every stablecoin transfer.
o Every issuance of a tokenized real-world asset.
o Every transaction executed on Ethereum.
o Every new application — DeFi, gaming, AI, identity — that runs consumes ETH.
Store of value asset with a yield: In addition to simply holding ETH as a store of value, ETH can also earn yield through staking. When someone stakes ETH, they agree to lock it into the system and become a validator - a network participant that acts like a referee, checking and verifying transactions. The verification process is mostly automated, so the person or entity that stakes a validator usually does not have to do any additional work other than staking their ETH. Validators are randomly selected by the network to propose or confirm new blocks of transactions. If the validator completes their work correctly, they will receive a reward in the form of ETH.
Original Settlement Collateral: ETH secures billions of stablecoins, RWAs (real world assets), and financial applications. Censorship-resistant, credibly neutral, and immune to debasement, ETH is the foundational collateral for the Ethereum ecosystem, with approximately 32.6% of the total ETH supply⁴ currently used in collateral roles, and another 3.5%⁵ exported for use on other blockchains. As the number of externally controlled tokenized assets on Ethereum (such as stablecoins, RWAs, and permissioned financial instruments) continues to grow, the need for a neutral reserve asset as the underlying store of value becomes critical. Tokenized assets may carry issuer, jurisdiction, and counterparty risks; in contrast, ETH anchors the entire system as a globally accessible, non-sovereign, neutral store of value, enabling settlement, collateralization, and liquidity routing without introducing systemic dependencies on any single actor.
In a world increasingly filled with tokenized assets that rely on external counterparties, the value of a truly neutral, native, and non-sovereign collateral asset has grown significantly. ETH is the only original collateral in the smart contract economy - completely independent of external counterparty risk. ETH represents the highest level of trust on the planet, which will make an increasingly important contribution to its future monetary premium.
Deflationary Asset: ETH becomes deflationary as network activity increases. Approximately 80.4%⁶ of transaction fees are burned, reducing the total supply of ETH. At a capped issuance rate of 1.51%⁷ per year (only reached in the extreme case of 100% of ETH being staked and no transaction fees being burned), ETH transforms into a deflationary commodity when network resources are in high demand. Unlike traditional commodities, an increase in ETH demand does not trigger an increase in production, leading to a dynamic where demand can exceed supply for extended periods of time.
Reflection of tokenized economic growth: Just as global demand for oil grows as the economy expands, ETH derives value from the growth of the on-chain economy — but due to its issuance cap, its supply is much less elastic than oil:
- Ethereums Total Value Secured: Ethereum currently hosts over $767 billion⁸ in assets. This represents the highest TVS of any blockchain, solidifying Ethereums position as the foundation of the tokenized economy.
- Exponential Growth: A paradigm shift is underway towards an increasingly decentralized global economy. As commerce, trade, and asset ownership move on-chain, Ethereum’s economic throughput is expected to grow exponentially. This will significantly increase demand for ETH, both as transaction fuel and as a core monetary reserve to support the new global financial system.
Reserve trading pairs: ETH is the main reserve trading pair in decentralized exchanges, with 70.6% of trading pairs on Ethereum⁹ denominated in ETH. Similar to how most currencies in traditional finance are traded against the US dollar, in order to trade most digital assets efficiently, they must be traded against ETH or a US dollar stablecoin.
Strategic Reserve Asset: A growing number of applications, DeFi protocols, and institutional treasury managers are accumulating ETH as a strategic reserve asset. This trend is accelerating as more institutions and sovereign entities turn to Ethereum’s financial infrastructure¹⁰. Unlike inert reserve assets, ETH is fully programmable, enabling treasury automation and sophisticated financial management. Reserve ETH can be programmatically staked, deployed as collateral for lending, used in automated market makers (AMMs), or integrated directly into custody protocols, vesting schedules, payment systems, bridging mechanisms, and more. While BTC primarily sits idle as a treasury asset, ETH actively drives treasury productivity and operational efficiency. As a neutral reserve asset, ETH is unique in securing and driving the global tokenized financial system.
This is not theoretical, the race to hoard ETH has already begun. Strategic ETH reserves are rapidly expanding, with publicly disclosed institutional ETH holdings now approaching $2 billion. As institutions increasingly recognize ETH’s multifaceted value proposition, the opportunity for first movers becomes clear and compelling. ETH is becoming not only a strategic reserve asset, but an integral component of institutional treasury management.
Source: strategicethreserve.xyz by Fabrice Cheng
Because of all these unique features and characteristics, we cannot evaluate ETH as a tech stock. ETH is a completely new class of asset.
Therefore, ETH cannot be accurately valued through the discounted cash flow method. Instead, ETH must be viewed from the perspective of strategic value storage and utility-driven scarcity. This perspective can capture ETHs true upside potential, and may even surpass Bitcoins digital gold narrative.
Oil is a consumable commodity asset that is stored as reserves and consumed as fuel. Oil has shaped nations, fueled industries, and driven global trade. Oil’s intrinsic utility, inherent scarcity, and strategic importance make it one of the most valuable commodities in history—shaping nations, fueling industries, and driving global trade. As a result, the total market value of the world’s proven oil reserves is approximately $85 trillion.
This is a meaningful reference point for ETH, considering that it is on a similar trajectory, but for the digital realm:
ETH powers the digital economy.
ETH ensures the security of the digital economy.
ETH derives its value from the growth of the digital economy.
Due to its supply dynamics and issuance cap, ETH is inherently scarce.
As the global economy transitions to a tokenized infrastructure, ETH will become indispensable, not just as a fuel, but also as the native asset of the currency and settlement layer of the future financial system.
ETH’s currency design: simple, transparent, and sustainable
The economics of ETH are elegant and simple, yet their importance is often overlooked. Unlike traditional commodities, Ethereum’s supply and demand dynamics are transparently encoded in its protocol, allowing for predictable issuance and sustainable network security. Ethereum has created an optimal issuance schedule for ETH, combining strong security (~$88 billion¹¹ of staked ETH, compared to ~$10 billion¹² of ASIC miners securing Bitcoin) with very low inflation, averaging just 0.09% per year since the September 2022 merge (when the network moved from proof-of-work to proof-of-stake consensus). The more ETH staked, the more expensive and impractical it is to attack Ethereum, as an attacker would need to acquire at least 51% of all ETH in existence to successfully disrupt or alter the network. This structure also provides protection against cartel-like, price-manipulating entities that have emerged around traditional commodities, similar to OPEC.
issued
Issuance Mechanism
ETH issuance is programmatic and transparent. Similar to Bitcoin’s halving mechanism, newly minted ETH is distributed as rewards to validators (i.e., groups of individuals or entities that have staked ETH to help secure the network and validate transactions; this is the “yield” component of ETH mentioned earlier and discussed further below). However, unlike Bitcoin, Ethereum issuance is dynamically adjusted based on network security needs rather than a fixed schedule. The calculation is simple:
Maximum annual ETH issuance = 166.3 × staked ETH
This formula creates a natural balance: as more ETH is staked to secure the network, issuance increases, but at a decreasing rate. This structure incentivizes validators while keeping inflation capped low.
Crucially, this mechanism places a clear cap on the issuance of ETH. Even in the extreme hypothetical scenario where all circulating ETH supply (currently ~120.8M ETH¹⁴) is staked and no ETH is burned by network usage, the maximum possible inflation rate is capped at 1.51% ¹⁵. In practice, ETH issuance will always be below this theoretical cap. Currently, only ~28% ¹⁶ of ETH is staked, which means the inflation rate before burn is ~0.8% ¹⁷.
In practice, ETH issuance has been well below the theoretical maximum since Ethereum switched to a Proof-of-Stake consensus mechanism. Since the merge on September 15, 2022, ETH issuance has averaged just 0.09% per year ¹⁸, with current annualized issuance at around 0.68% ¹⁹. As network activity increases — especially driven by institutional adoption and tokenized asset deployment — ETH issuance could become net deflationary, further strengthening ETH’s monetary dynamics. The impact of Ethereum’s improved issuance dynamics post-merger remains significantly underestimated by mainstream investors.
Over the past decade, the issuance rate of ETH has been declining in line with the “minimum viable issuance” principle. Between 2015 and 2017, an average of about 30,000 ETH was issued to miners per day. By 2019, this rate had dropped to about 13,000 ETH per day. Since the 2022 merger, daily issuance of ETH to validators now ranges from slightly negative to about 2,500 per day.
How is this sustainable? Unlike miners, validators have minimal operating overhead — i.e. no high electricity bills or large hardware depreciation costs — which allows them to maintain network security with significantly lower token issuance. Due to much higher operating margins, validators have a lower marginal propensity to sell their staked tokens to cover expenses than proof-of-work miners, further enhancing ETH’s price stability and monetary soundness.
destroy
In addition to predictable issuance, Ethereum incorporates a unique and powerful monetary feature: a programmatic fee-burning mechanism. This mechanism directly ties ETH’s monetary supply to network activity, tightly aligning token economics with real economic needs.
On average, 80.4%²⁰ of all transaction fees paid to validators are permanently destroyed, creating deflationary pressure on the circulating supply of ETH. As economic activity on Ethereum grows, increased demand increases total fees, reinforcing this deflationary effect and reducing the net issuance of ETH.
This creates a self-regulating balance:
Issuance is adjusted based on the amount of ETH staked to secure the network.
The amount destroyed varies based on demand for Ethereum block space and transaction execution.
Together, these forces create a dynamic monetary framework that causes ETHs net inflation rate to fluctuate between slightly positive and outright deflation, all driven by transparent protocol-level rules. This is a monetary system designed not only for scarcity, but also for sustainability, security, and alignment with real-world needs.
Source : dashboard.etherealize.com
Therefore, modeling ETH net issuance comes down to two core variables:
The amount of staked ETH determines the base issuance volume to ensure network security.
Transaction fees denominated in ETH drive the programmatic destruction mechanism
Together, these two factors create a dynamic, self-regulating monetary equilibrium. In the theoretical upper bound, if 100% of ETH were staked and no fees were incurred, annual issuance would be limited to 1.51%²¹. In practice, however, activity on Ethereum offsets issuance through fee burns, often driving net issuance toward zero or even negative values. As institutional adoption and demand for Ethereum blockspace continues to accelerate, ETHs issuance dynamics could structurally shift toward sustained deflation.
Source : dashboard.etherealize.com
ETH’s supply and demand dynamics are simple and sustainable: ETH is digital oil, with a predictable, programmatic issuance formula, supplemented by a burn mechanism directly tied to actual Ethereum usage.
supply
Unlike Bitcoin, ETH does not have a hard supply cap. Instead, Ethereum has a predictable, formula-based issuance strategy designed for long-term sustainability and security. Bitcoin’s fixed cap of 21 million coins, while attractive as a narrative, could pose security risks. The entities that secure the Bitcoin network — namely, miners — are compensated through newly minted Bitcoins and transaction fees. When Bitcoin reaches its supply cap and stops issuing new Bitcoins as a reward, securing the network will become much less attractive to miners, potentially causing them to leave the network to seek more profitable activities, making the Bitcoin network less secure. Ethereum will not face this problem.
The current ETH supply is approximately 120.8 million²², with a theoretical maximum annual issuance cap of 1.51%²³. In practice, as increased usage of the Ethereum network drives higher transaction fee burns (as described above), net supply growth is expected to be significantly lower, and possibly even deflationary.
Bitcoin has a supply cap. ETH has an issuance cap.
income
As mentioned earlier, ETH has a staking yield. Validators who stake ETH to secure the Ethereum network are compensated through newly issued ETH. This yield directly incentivizes network security, much like Bitcoin miners are rewarded for investing in hardware and consuming energy to secure the Bitcoin network.
The base yield that validators earn is determined by the programmatic issuance of Ethereum (as detailed above), supplemented by a portion of the transaction fees generated by network activity. Therefore, as economic activity on Ethereum expands, so too do validators’ yields. ETH is a unique asset: increased economic usage leads to more fees, which simultaneously drives net issuance below the issuance cap (via fee destruction) and increases validators’ yields. No other asset combines these dynamics, making ETH a structurally attractive, carry-yield digital asset.
Summarize
ETHs digital oil has complementary economic characteristics to BTCs digital gold and is more attractive in multiple dimensions: As the blockchain ecosystem flourishes, there will be a variety of institutional-level digital assets. In a diversified crypto portfolio, ETH uniquely provides exposure to the growth of the entire digital economy.
|Why is ETH lagging behind BTC?
From September 2022 to today, the ETH/BTC ratio has fallen from 0.085 to 0.024 — a drop of over 70%. Measured against BTC, ETH is currently trading near its 2018 lows — levels that predated the emergence of DeFi, mass adoption of stablecoins, and many of Ethereum’s proven use cases. At those 2018 lows, many investors gave up on Ethereum altogether. Yet today, Ethereum is the dominant institutional smart contract blockchain. So, what explains this disconnect?
The answer is simple: Bitcoin’s narrative has been accepted by institutions, while Ethereum’s narrative has not.
After 15 years of existence in the market, Bitcoin has firmly established itself as an institutional-grade asset. Its narrative as digital gold, a scarce reserve currency that resists fiat currency debasement, is now widely understood, mainstreamed, and investable. This narrative clarity has driven a substantial revaluation and mass adoption of Bitcoin.
In contrast, Ethereum’s value proposition is harder to define — not because it’s weaker, but because it’s broader. While Bitcoin is a single-purpose store of value asset, Ethereum is the programmable foundation that underpins the entire tokenized economy.
Ethereum builds on Bitcoin Core innovations and expands upon them by adding smart contract capabilities, unlocking use cases across finance, tokenization, identity, infrastructure, gaming, and AI. Over the past decade, Ethereum has grown to become the dominant world ledger, hosting the majority³¹ of tokenized assets, institutional activity, and on-chain value.
As mentioned earlier, this makes ETH inherently more complex than BTC. This multi-dimensional utility makes ETH more difficult to clearly categorize, and therefore slower and less accurate for the market to price. However, this complexity is a feature, not a bug. ETH represents an entirely new asset class that uniquely combines the monetary premium of gold, the productive yield of bonds, and the strategic utility of oil.
Taking a page from Amazon’s playbook, Ethereum is disrupting itself with its Layer-2 network (L2) roadmap in 2021-2022. Ethereum L1 — the base, original Ethereum blockchain — reached a plateau in popularity, with transaction speed limits leading to network congestion and high fees during peak hours. To improve scalability, L2 chains were launched on top of L1 to bundle and process multiple transactions off-chain, then submit summaries of those transactions back to L1 for final settlement. You can think of L1 as the base layer of a highway system, while L2 is the express lane or carpool lane that helps move traffic faster without building an entirely new highway.
L2s have greatly increased Ethereum’s throughput and customizability, albeit initially at the cost of liquidity fragmentation and a complicated user experience (challenges that are now being rapidly addressed).
Critics who narrowly value crypto assets through a discounted cash flow lens argue that L2s have siphoned away the value of ETH. However, this view fundamentally misunderstands the true nature of ETH’s value proposition.
ETH: Valuation Framework
Before quantifying potential valuation scenarios for ETH, we must first correct a commonly misused valuation method: the discounted cash flow (DCF) model, which fundamentally misunderstands the true nature and value drivers of ETH.
ETH is not a tech stock; it is a versatile commodity asset comparable to physical oil, but with a less elastic supply and programmatically controlled via an issuance cap. Oil, gold, and Bitcoin are not valued based on cash flows, so ETH should not be valued solely on revenue multiples. While DCF models based on future Layer-1 and Layer-2 fees provide some insights, they ignore the bigger picture - these fees as demand drivers for ETH as a commodity. Because ETH issuance is capped by design, growing ecosystem usage makes its price highly sensitive to supply and demand dynamics. In other words, fees alone represent only a small portion of ETHs valuation and significantly underestimate its broader commodity and monetary properties.
Viewing Ethereum fees as traditional “revenue” fundamentally misunderstands their role. Fees denominated in ETH are primarily a fundamental industrial input — fueling network transactions and incentivizing validators — rather than a profit stream denominated in USD. ETH’s true value derives from its unique productivity, robust store-of-value economics, and critical position as neutral, original collateral in the Ethereum ecosystem.
This is not to downplay Ethereum’s fee decline during 2021-2022 — although this decline is important for another reason. Despite record heights of institutional adoption and tokenization, revenues are falling precisely because Ethereum has strategically disrupted itself to achieve mass adoption. Just as Amazon, Tesla, and Uber intentionally sacrificed short-term profits to achieve global scale, Ethereum has similarly entered its own growth-stage transformation, drastically reducing transaction fees through Layer-2 expansion. This strategy, while temporarily suppressing fee revenue, is structurally bullish: it ensures that
This will increase the long-term popularity of Ethereum, massively expand its total potential market, and ultimately amplify ETH’s fee destruction and staking returns.
Source: https://l2beat.com/scaling/activity
Since the 2021 market high, Ethereums throughput has increased by more than an order of magnitude, while its transaction costs have dropped significantly. The biggest expansion breakthrough will be achieved in the next year, with some L2s expected to reach 100,000+ transactions per second.
If ETH is analyzed like a tech stock, these strategic scaling initiatives translate into orders of magnitude higher expected revenues, leading to significantly higher intrinsic valuations. Ethereum (and blockchain more broadly) adoption is still in its early stages and has historically been hampered by regulatory uncertainty, which has limited institutional and mass consumer access. Today, these barriers are being removed rapidly, paving the way for accelerated global adoption.
However, the value of ETH goes far beyond fees and current and future revenue streams. ETH is digital oil that powers the worlds ledger of assets, currencies, and transactions. Like Bitcoin, ETH also possesses significant store-of-value properties, with a monetary premium far exceeding its revenue-based valuation multiples.
Instead of using a DCF model, we provide a holistic valuation framework for ETH’s long-term potential based on comparables:
Oil Reserve Benchmark: Oil is a consumable commodity asset that is stored as reserves and consumed as fuel. The total market value of the world’s proven oil reserves is approximately $85 trillion³² — providing a meaningful reference point for ETH given its scarcity, capped issuance dynamics, and critical utility in the digital economy.
Asset tokenization benchmark: Global wealth totals about $500 trillion. Even if we conservatively assume that Ethereum only tokenizes 10% of global assets, Ethereum will carry more than $50 trillion in assets. In this scenario, ETH, as a key asset for network security and settlement, will not stop at a valuation of $300 billion.
Neutral, Original Collateral: ETH uniquely serves as a neutral, non-sovereign, original collateral asset, independent of external counterparties. It is essentially the safest and risk-free asset in the Ethereum economy, similar to the role that U.S. Treasuries play in the U.S. economy - but with significantly greater upside potential.
Store of Value Economics: ETH reflects the core monetary properties of gold: low inflation, institutional-grade reserve asset, and non-sovereign currency premium.
ETH Valuation Comparison: Relative to Other Global Reserve Assets
ETH represents an entirely new asset class, with value drivers that go far beyond traditional equity cash flows. In order to accurately reflect the valuation potential of ETH as a global reserve asset, we must consider comparable global reserve assets as a benchmark.
Ethereum is the worlds most battle-tested and widely adopted ledger for tokenized assets, stablecoins, and digital economic activity. Among digital assets, ETH uniquely offers investors the highest upside opportunity to capture blockchain-driven growth in finance, tokenization, and global commerce.
As ETH is repriced as a global digital commodity and reserve asset, its valuation potential becomes almost unlimited. While a long-term valuation of $85 trillion (about $706,000 per ETH) is possible globally, some mid-term valuation targets are as follows:
Short-term potential: $8,000 per ETH (~$1 trillion market cap)
Mid-term potential: $80,000 per ETH (~$10 trillion market cap)
Catalysts driving ETH repricing
1. Surge in demand: Institutional adoption and deployment of tokenized assets and financial infrastructure on Ethereum has begun at a rapid pace.
2. Accelerating demand for native crypto yields: The upcoming launch of the ETH staking ETF and the emergence of institutional physical subscription/redemption models will greatly increase institutional interest in ETH staking yields.
3. Strategic Hoarding of ETH: There is a race within the Ethereum ecosystem to hoard ETH as a monetary premium store of value asset, as evidenced by the growing strategic ETH reserves (approximately $2.5 billion publicly disclosed).
4. ETH as an institutional treasury asset: ETH’s unique characteristics—original collateral, neutrality, yield, and global utility—make it the preferred treasury reserve asset for institutions and globally.
Ethereum: The infrastructure that drives ETH upward
The first part of this report focuses on ETH as a unique digital commodity (combining scarcity, utility, and yield), but its long-term value cannot be fully understood without examining the infrastructure it enables. Ethereum is more than just the backdrop for ETH; it is the foundational platform that makes ETH’s utility indispensable and its monetary design structurally sustainable.
Ethereum has become the most important infrastructure layer for the digital economy. It is where tokenized assets reside, where decentralized financial applications run, and where institutional settlement increasingly occurs. Ethereum has become the default platform for stablecoins, high-value tokenized assets, and institutional blockchain infrastructure. Today, over 81%³⁸ of tokenized assets exist within the Ethereum ecosystem. Its resilience, trusted neutrality, and programmability make it the only platform capable of supporting the future of complex, programmable, and globally scalable financial services and the broad economic foundations of the future.
This section explores why Ethereum is uniquely suited to underpin the next era of finance and the digital economy. We examine its architectural advantages, recent breakthroughs in scalability, improvements in user experience, and the accelerated migration of institutions to its Layer-2 ecosystem. We also explore what we believe will be the next major catalyst for the Ethereum network, which, if realized, will make Ethereum more than just a base layer for future finance: the convergence of Ethereum with AI-driven autonomous agents. In such a future, Ethereum will not only be financial infrastructure, but the backbone of machine-native economic coordination.
In short, the value of ETH is a function of Ethereums growing centrality in the digital economy. As Ethereums adoption compounds, so does the demand and strategic importance of its native asset. Understanding Ethereums trajectory is therefore critical to understanding the full scope of ETHs investment potential.
Why Ethereum is unique as a financial infrastructure
Advantages
For ETH to succeed in the long term, Ethereum must be recognized by institutions as legitimate financial infrastructure and the undisputed leader among institutional-grade blockchains.
As institutional investors increasingly recognize the limitations of existing financial infrastructure, Ethereum’s capabilities—its security, stability, scalability, programmability, decentralization, and trusted neutrality—make it the platform most likely to host the future global financial system.
Proven uptime and resilience: Since its launch in 2015, Ethereum has never been offline, even during major protocol upgrades such as “merges.” Over 10 independent client implementations further enhance its redundancy and robustness. All of this demonstrates its readiness as an institutional-grade infrastructure.
Trusted Neutral Infrastructure: Ethereum is governed purely by transparent, auditable code — uninfluenced by corporate interests, political pressure, or centralized personalities. This trusted neutrality ensures fairness, predictability, and eliminates counterparty risk.
Massively Decentralized: Ethereum’s validator set is globally distributed and accessible to anyone with basic hardware and an internet connection. Its security comes from decentralization and diversity, not centralized data centers or privileged stakeholders.
Unrivaled Market Share: The Ethereum ecosystem hosts 60% of all stablecoins³⁹ and 82% of tokenized real-world assets (RWAs) 40 , including tokenized treasuries and credit instruments. The majority of blockchain-based financial activity already exists on Ethereum 41 .
High-value settlement layer: Ethereum currently secures over $767 billion in total value locked (TVS) in its ecosystem. 42 This number is expected to accelerate significantly as more global finance moves on-chain.
Most Secure Developer Tool: The Ethereum Virtual Machine (EVM) is similar to JavaScript in terms of its popularity and adoption in the wider crypto ecosystem. It is well understood and has been battle-tested by countless high-value financial applications over the past decade.
Transparency: Fully open source protocols and codes, data can be publicly audited.
Scalability: A clearly defined roadmap of performance enhancements and scaling solutions that will enable Ethereum to handle transactions and usage at a truly global scale.
Customized Environment: Modular, isolated solution custom designed for institutions - including privacy, KYC compliance, custom gas models, data availability, and specialized execution environments.
Security: Strong Proof-of-Stake consensus mechanism, enhanced by economic slashing and consolidated by validator client diversity.
Neutrality: There is no centralized foundation or privileged/subsidized set of validators. Ethereum is both global and permissionless, eliminating counterparty risk at the infrastructure level.
Programmability: Native, highly composable smart contract functionality, backed by the richest, most proven ecosystem of developer and security tools.
Regulatory Maturity: Ethereum is the most widely adopted and legally understood blockchain by institutional entities and regulators worldwide.
Minimal environmental footprint: ETH’s environmental footprint is close to zero (approximately 0.01 kg of CO2 per transaction) 43.
Ethereum is more than just a decentralized ledger; it is an institutional-grade public infrastructure. With its trusted neutrality, proven resilience, mature regulatory status, and long-term roadmap, it is the only blockchain that can serve as the infrastructure for the global financial system.
Why Ethereum is entering its renaissance
Ethereums fundamental advantages have long been underestimated, with its architecture, decentralization, and developer ecosystem quietly driving most of the meaningful innovation in the crypto space. Now, after years of quiet work and focused development, the ecosystem is experiencing a series of compounding benefits that together are expected to push Ethereum into the spotlight and drive its rapid adoption.
For ETH, this renaissance is more than just context — it’s a catalyst. ETH’s value is directly tied to Ethereum’s strength, usage, and institutional trust. As Ethereum becomes more performant, more intuitive, and more deeply integrated into the global financial system, demand for ETH as a fuel, collateral, and strategic reserve asset will accelerate.
What follows is a look at the structural improvements and ecosystem shifts that are defining Ethereum’s resurgence — and why they will position ETH for a dramatic revaluation in the months and years ahead.
A more coordinated and forward-looking ecosystem
Ethereum was born in an environment full of regulatory uncertainty, where innovation often faces resistance and visibility comes with risks. As one of the few truly decentralized blockchains like Bitcoin, Ethereum intentionally prioritizes neutrality, security, and censorship resistance over speed or aggressive promotion. As a result, for many years, the Ethereum Foundation has emphasized research and development rather than marketing and institutional partnerships.
That approach is now shifting dramatically. With regulatory clarity improving, the Ethereum community has taken a more forward-thinking stance. While no single entity governs Ethereum, the Ethereum Foundation’s new leadership—co-executive directors Tomasz Stanczak and Hsiao-Wei Wang—is articulating and clearly communicating the protocol’s technical roadmap. Around them, a diverse coalition of experienced builders, prominent funds, and critical infrastructure providers is coalescing to actively raise Ethereum’s profile and strategic relevance.
Ethereum Layer 1 is scaling — without sacrificing decentralization
Historically, Ethereums scaling strategy has focused primarily on Layer-2 solutions. As mentioned earlier, L2 is an independent chain designed to reduce Ethereum Layer 1 traffic, increase transaction throughput, and help keep fees at reasonable levels.
This approach is taken because direct scaling of L1 has previously compromised the core principles of Ethereum - the trusted neutrality and decentralized security of the base layer. However, recent breakthroughs such as production-grade zero-knowledge virtual machines (zkVMs) and innovative research projects like FOCIL have opened up new possibilities, allowing Layer-1 to achieve significant performance improvements without compromising decentralization or security.
Ethereum is now scaling in two directions: vertical scaling of L1 and horizontal scaling of L2. These advances have gone beyond the theoretical stage; enhancements to L1 are under active development and are expected to be deployed in 2025. The result will be
A significantly higher performance base layer that serves as the central hub for economic activity, complemented by a L2 network that continues to expand Ethereum’s scalability and global reach.
Ethereum L2 is faster, cheaper, and more interconnected than competing L1
The Ethereum L2 ecosystem has expanded at an extraordinary pace, forming a vibrant, modular, high-performance chain network that is anchored in the security and economics of Ethereum. This flexible architecture has attracted significant institutional adoption, with major global entities such as Deutsche Bank (through zkSync and Memento), Sony (through Soneium), UBS, Coinbase (through the largest L2 Base), Kraken (through Ink), and World Chain (co-founded by OpenAIs Sam Altman) actively deploying or developing customized L2 solutions.
The initial rapid growth led to fragmentation as each L2 operated independently, introducing friction to the entire ecosystem. Now, this challenge is being decisively addressed. A new generation of interoperability standards is being rolled out to reconnect these Layer-2 chains into a cohesive Ethereum experience.
The result will be a unified, seamless ecosystem - one that will retain the strong security guarantees of Ethereum Layer 1 while offering performance and cost advantages that match or exceed those of competing Layer-1 blockchains (because L2 uses Ethereum for security rather than rebuilding from scratch). With the full deployment of interoperability protocols and an abstracted wallet experience, Ethereum will once again run and feel like a single, unified chain.
Ethereum’s user experience is entering its fintech phase
One of the most important changes in Ethereum’s history wasn’t purely technical — it was experiential. For much of the past decade, interacting with Ethereum involved clunky interfaces, lengthy 24-word mnemonics, and uncomfortable tradeoffs between friction and risk. That era is rapidly coming to an end.
In May 2025, Ethereum introduced native Account Abstraction, its most ambitious user experience overhaul to date. Account Abstraction unlocks significant enhancements, including biometric-based transactions (e.g., Face ID), seamless integration with secure hardware enclaves (e.g., those built into iPhones) for native key management, and advanced smart wallet features like social recovery. Ethereum is finally beginning to emulate the seamless experience of the modern internet—intuitive, secure, and nearly invisible to the end user.
Institutional adoption is no longer hypothetical, it is accelerating
Ethereum’s architecture—decentralized at the base layer and customizable at the application layer—was built for institutional adoption. This design has proven prescient. Today, Ethereum has become the leading destination for tokenized assets 44 , attracting the vast majority of institutional-grade blockchain deployments built on Ethereum’s Layer 2.
From asset managers tokenizing treasuries and credit markets to banks deploying settlement infrastructure, Ethereum has become the de facto standard for these applications. This adoption is not accidental; it is structural. Ethereum uniquely offers the regulatory neutrality, security guarantees, and composability that institutions operating on a global scale require. Leading tokenization initiatives have explicitly chosen Ethereum as their foundational infrastructure. 45 Over $10.2 billion 46 (~82%) of all non-stablecoin tokenized assets, including treasuries, credit markets, and interest-bearing funds, have been issued on Ethereum by leading global institutions such as BlackRock, JPMorgan Chase, Franklin Templeton, Fidelity, Apollo, Deutsche Bank, UBS, and Sony. 47 Coinbase and other major exchanges are actively deploying custom Layer-2 blockchains that integrate directly into the Ethereum security layer and economy.
However, this institutional wave is still in its early stages. Ethereum’s infrastructure is finally maturing, the regulatory environment is evolving rapidly, and institutional demand continues to accelerate. Ethereum is approaching its “ChatGPT moment” — a sudden and widespread realization by mainstream institutions that Ethereum is best suited to power the digital infrastructure of the future.
Regulatory clarity is coming
Ethereum has been mired in constant regulatory uncertainty for nearly a decade. In the United States, the reputational, financial, and legal risks associated with developing on Ethereum are enormous, stifling innovation and deterring institutional capital. The Ethereum token (ETH) itself has also been mired in regulatory ambiguity, facing the ongoing risk of being classified as a security. As a result, despite Ethereum’s technological advantages, meaningful institutional adoption has been delayed.
However, the regulatory landscape is shifting. In 2018, the U.S. government48 confirmed and considered Ethereum a commodity rather than a security, and reaffirmed this decision in 2024.49 In May 2024, a spot Ethereum ETF was approved, which gave ETH legal status in the eyes of traditional financial institutions. In 2025, the U.S. government expressed its intention to implement a clear legal treatment framework for digital assets, which is likely to further reaffirm Ethereum’s approved regulatory status and increase institutional confidence in using blockchain.
Institutional confidence levels have begun to rise rapidly, as evidenced by the fact that more and more institutions are publicly moving their assets on-chain, indicating that they are not worried that doing so will put them on the wrong side of regulators.
Contrarian capital is pouring in — ETH is a core asset that is mispriced
Despite Ethereum’s adoption metrics reaching new highs, ETH itself remains significantly undervalued and underweight. Over the past two years, ETH has underperformed Bitcoin (BTC) despite clear evidence of the platform’s dominance, growing institutional trust, and substantial economic utility. This disconnect presents a rare investment opportunity.
Smart capital is starting to take notice. ETH currently offers asymmetric upside potential: it is a highly liquid, interest-earning, institutional-grade asset that is mispriced by retail narratives and traditional valuation frameworks. For contrarian investors, ETH represents a compelling, high-certainty revaluation opportunity - similar to AI in 2022, BTC in 2020, or tech stocks in early 2009.
ETH is the digital oil that drives the digital economy. As institutional adoption of Ethereum accelerates, the value of ETH will grow as well. The market has not yet priced in this rapid adoption curve, which provides investors with an excellent entry point.
Ethereum and AI: The Engine of an Autonomous Economy
The market drivers outlined in the previous section have set Ethereum — and therefore ETH — up for a near-term breakout. However, if we look a little further out in the timeframe, there is a future catalyst that, if it comes to fruition, will make ETH one of the most popular assets in the world, if not the most popular: the convergence of AI and digital finance.
The amount of capital flowing into AI today is comparable to the largest infrastructure projects in human history. The Apollo moon landings cost about $200 billion in today’s dollars, and the U.S. interstate highway system cost about $600 billion. In contrast, private sector investment in AI is already in the trillions and accelerating.
NVIDIA generates $130 billion in revenue in 2024 alone.
Meta allocates $65 billion in 2025 for its Llama model.
Microsoft is investing $80 billion in AI infrastructure, training, and deployment.
Apple announces unprecedented $500 billion investment in AI over four years
This influx of capital is reshaping the power grid, computing infrastructure, and the capabilities of software itself. At the heart of this evolution is a new paradigm: the rise of autonomous AI agents—intelligent, self-directed software entities that can interact with the world, perform complex tasks, and coordinate with other agents.
As AI agents become more sophisticated, they will require programmable currencies, embedded financial services, and native digital ownership frameworks. They will need to instantly transact, settle payments, and enforce contracts globally without relying on traditional human intermediaries.
Ethereum: Infrastructure for Autonomous Agents
Ethereum is uniquely positioned to support the emerging autonomous digital economy, providing capabilities that traditional finance and even other blockchains simply cannot replicate:
Finality and Execution Guarantees: Ethereum’s atomic, composable transaction structure enables AI agents to seamlessly execute complex financial interactions that traditional settlement systems cannot support.
Global property rights, not jurisdictional claims: Ethereum’s smart contracts enforce property rights through code rather than courts. AI agents can safely transact across borders without the friction and complexity of jurisdiction.
Permissionless Finance: Ethereum provides native access to stablecoins, tokenized assets, DeFi protocols, oracle services, identity systems, and more, all with institutional-grade liquidity and security.
Programmability and speed: AI agents interacting with Ethereum can instantly deploy, upgrade, and trigger complex financial logic, which mimics the human decision-making process but runs at the speed of computation.
Ethereum Toolchain: Agent Development and Collaboration Platform
In addition to its financial capabilities, Ethereum provides a powerful and mature toolchain perfectly designed for the creation, deployment, and coordination of autonomous AI agents:
Decentralized Data Curation and Governance: A transparent, protocol-based system for managing datasets, governance, and proxy evolution.
Tokenization Framework: Built-in mechanisms to define ownership, distribute royalties, and raise capital through tokenized models and assets.
Model Training Marketplace: A market-driven platform that transforms domain-specific data into high-quality, fine-tuned AI models.
Proxy Hosting Marketplace: An infrastructure marketplace that simplifies proxy deployment and operation without the need for private infrastructure.
Crucially, agents built on Ethereum do not exist in isolation. Once deployed, these autonomous agents can natively discover, communicate with, and compensate each other, forming a decentralized agent network capable of complex real-time collaboration. This autonomous agent mesh will enable a variety of applications, from autonomous logistics and transactions to personalized healthcare, education, and more - with ETH serving as the universal medium of exchange and coordination.
Bullish case for ETH
Ethereum is poised to become the infrastructure that underpins the global economy. If this is achieved, trillions or even tens of trillions of dollars of assets will eventually be tokenized on Ethereum’s Layer-1 and Layer-2 networks, unlocking unprecedented utility, innovation, and financial accessibility around the world.
Ethereum is already in the lead, and will continue to expand as its role as the global record book becomes more solidified. Ethereum’s strategic emphasis on decentralization, security, reliability, and uptime has enabled it to steadily gain global adoption, deliberately avoiding the pitfalls of a “move fast and break things” mentality.
ETH itself represents an entirely new asset class. While oil provides the closest classic analogy due to its global economic utility and strategic importance, even this comparison fails to capture ETH’s full potential.
ETHs supply is programmatically controlled via an issuance cap and secured by a global decentralized network. ETH is an ideal productive store of value asset. These properties will inevitably lead to a significant supply crunch as institutions compete to hoard ETH as a treasury-level reserve asset.
Ethereum currently dominates institutional blockchain adoption, but ETH remains a contrarian investment. As the financial industry realizes Ethereum’s unparalleled institutional appeal, ETH will quickly re-price to its true valuation.
ETH is the digital oil that powers the global financial system and the broader digital economy. Ethereum and its native asset ETH are entering a period of renaissance, creating a compelling opportunity for forward-thinking investors.
introduction
1 This maximum inflation rate is relative to the current supply; since inflation is a function of supply, this value will fluctuate inversely as supply increases or decreases.
2 Data source: ultrasound.money (change the timeframe to start from the time of the merger).
3 While staking ETH in combination with active validator services can generate yield—sometimes described as making ETH a “productive” store of value—this dynamic is similar to how gold earns yield when it is loaned out or used as collateral; in both cases, it is not the underlying commodity itself that is inherently productive, but rather the external service activity built around it. ETH’s core valuation is still driven by its role as a scarce monetary commodity, rather than through a discounted cash flow model.
4 Data from (ETH in DeFi) and validatorqueue.com (ETH staked); Breakdown graphic + script
5 Data from api.llama.fi/tokenProtocols/ETH ((Total ETH in chain and bridge contracts / Total ETH supply) ; Breakdown graphic +script
6 Data from defillama.com/fees/ethereum (from August 6, 2021 to May 9, 2025, the period during which the destruction mechanism is implemented, total destruction [US$12.388 billion] divided by total fees [US$15.401 billion])
7 This maximum inflation rate is relative to the current supply; since inflation is a function of supply, this value will fluctuate inversely as supply increases or decreases.
8 L1 total locked value (TVS) from defillama.com/bridged/ethereum ; L2 total locked value (TVS) from growthepie.xyz/fundamentals/total-value-secured (select all L2); L2 real world assets (RWA) from app.rwa.xyz/networks (not including other values), ETH market value .
9 Data from defillama.com/yields (total trading pairs using ETH or ETH derivatives on Ethereum L1 and the top 9 L2s)
10 Strategic ETH Reserve https://www.strategicethreserve.xyz/ BTCS Inc. https://www.btcs.com/wp—content/uploads/2025/05/Convertible—Note—May— 14 — 2025 —vF.pdf
Source: strategicethreserve.xyz by Fabrice Cheng
11 Data from validatorqueue.com , based on ETH spot value of $2,600.
12 860,000,000 TH/s / 500 TH/s = 1,720,000 units * $4791/unit = $824 million
13 Data from ultrasound.money (Change timeframe to start from the time of consolidation
14 Data from etherscan.io/chart/ethersupplygrowth
15 This maximum inflation rate is relative to the current supply; since inflation is a function of supply, this value will fluctuate inversely as supply increases or decreases.
16 Data from validatorqueue.com
17 Data from ultrasound.money
18 Data from ultrasound.money (changed timeframe to start from the time of consolidation)
19 Data from ultrasound.money (30-day time frame)
20 Data from defillama.com/fees/ethereum (total burned amount [$12.388 B] divided by total fees [$15.401 B] for the period from August 6, 2021 to May 9, 2025, when the burning mechanism is in place)
21 This maximum inflation rate is relative to the current supply; since inflation is a function of supply, this value will fluctuate inversely as supply increases or decreases.
22 Data source: etherscan.io/chart/ethersupplygrowth
23 This maximum inflation rate is relative to the current supply; since inflation is a function of supply, this value will fluctuate inversely as supply increases or decreases.
24 Data source: ultrasound.money (30-day time frame)
25 Data source : charts.bitbo.io/inflation
26 ETH vs. BTC: Ethereum’s Superior Monetary Properties y youtube.com/v/skcZbXitZxQ
27 Data source: defillama.com/fees/ethereum Total destruction amount [US$1.2388 billion] divided by total fees [US$1.5401 billion] Time range is from August 6, 2021 to May 9, 2025, that is, the period during which the destruction mechanism is implemented)
28 requires running a validator node with ETH as collateral; providing validation services to the network can be compared to an oil company providing services to the oil industry.
29 Ethereum data from digiconomist.net/ethereum-energy-consumption
30 Bitcoin data from digiconomist.net/bitcoin-energy-consumption
31 Tokenized assets are mainly found in the Ethereum ecosystem (82%) rwa.xyz/networks
32 Reserve data from worldometers.info/oil , price per barrel from marketwatch.com/investing/future/cl.1
33 Data from McKinsey
34 Reserve data from worldometers.info/oil , price per barrel from marketwatch.com/investing/future/cl.1
35 Data from companiesmarketcap.com/gold/marketcap
36 Data from techsciresearch.com/report/bond—market/27048.html
37 Data from streetstats.finance/liquidity/money
38 Data from app.rwa.xyz/networks (Ethereum L1 + L2s)
39 Data on the total amount of stablecoins in the Ethereum system comes from growthepie.xyz (select “Total Ecosystem”, select “All Networks”, and select “Stacked Chart”). Data on the total amount of stablecoins comes from app.rwa.xyz/stablecoins
40 Data from app.rwa.xyz/networks (Ethereum L1 + L2s)
41 High-profile entities using Ethereum : ethereumadoption.com/built-on-ethereum/
42 L1 TVS (total locked value) from defillama.com/bridged/ethereum; L2 TVS from growthepie.xyz/fundamentals/total-value-secured (select all L2s); L2 RWAs data from app.rwa.xyz/networks (not including other values)
43 Data from https://digiconomist.net/ethereum-energy-consumption
44 Assets are available at app.rwa.xyz/networks/ethereum .
46 Data from app.rwa.xyz/networks (Ethereum L1 + L2s)
47 major entities are currently building on Ethereum, from ethereumadoption.com
48 SEC.gov | Digital Asset Transactions: When Howey Met Gary (Plastic)
49 Federal Court Finds Ether Is a Commodity in CFTC Fraud Case |PracticalLaw
