Ether's Risk-Reward Is Attractive, Bernstein Says

Ether ETH$3,445.73 has underperformed its larger rival BTC$102,550.34 year-to-date, but ETH exchange-traded fund (ETF) inflows have inflected suggesting this period of underperformance may be over, broker Bernstein said in a research report on Monday.

The broker noted that on Friday Blackrock's spot ether ETF saw inflows of $250 million, versus only $137 million of inflows for the asset manager's larger spot bitcoin ETF.

"This creates favorable demand-supply dynamics for ETH," analysts led by Gautam Chhugani wrote.

Staking yields could be another tailwind for the cryptocurrency. Bernstein noted that initial ether spot ETF applications did not include yields due to regulatory limitations.

"Under a new Trump 2.0 crypto friendly SEC, ETH staking yield will likely be approved," the authors wrote, adding that as activity on the Ethereum blockchain increases the yield can grow to 4-5%.

Ethereum blockchain activity is on the up, and the network remains the platform of choice for asset tokenization and stablecoins, the report said.

After Ethereum's transition to a proof-of-stake consensus mechanism, the supply of ether has remained "stagnant" at a total of 120 million tokens, Bernstein said.

Ethereum's transaction fees deliver a yield of around 3% to stakers, which keeps about 28% of ether supply locked in staking contracts, the report noted. Another 10% of supply is locked in deposit and lending contracts.

Almost 60% of ether has not changed hands in the last 12 months which is indicative of a "resilient investor base," and this reinforces the positive demand-supply dynamics for the cryptocurrency, the report added.

Read more: Ethereum ETF Inflow Streak Sets up ETH for New Lifetime Highs, Traders Say