Bernstein Identifies Three Catalysts for Ethereum’s Rally

Analysts at Bernstein have pinpointed three primary factors that have driven Ethereum’s approximately 60% surge over the past month, according to The Block.

The brokerage firm’s experts noted that the ETH/BTC pair ratio has dropped by 45% over the past year, as Bitcoin has dominated as a store of value and a corporate reserve asset. Retail flows have shifted to faster and cheaper L1 networks like Solana.

Ethereum has been “stuck somewhere in the middle” as neither the best store of value nor the most convenient platform for speculation, according to analysts led by Gautam Chhugani.

In their assessment, the situation has begun to change, influenced by three main factors:

• the boom in stablecoins and tokenization;
• the institutionalization of L2 solutions;
• the closing of short positions in Ethereum.

The blockchain of the second-largest cryptocurrency by market capitalization accounts for about 51% of the total volume of “stablecoins.” Stripe’s purchase of the stablecoin platform Bridge for $1.1 billion and Meta’s announcement of potential integration of assets into its platforms have helped refocus attention on foundational networks.

According to FT experts, global banks and fintech companies have already entered the “stablecoin race”. The market leader’s capitalization, USDT from Tether, has exceeded $150 billion, and the US Treasury forecasts the segment’s capitalization to reach $2 trillion by 2028.

Ethereum is seen as the main beneficiary of this growth as the primary proxy platform for “stablecoins,” Bernstein analysts believe.

The blockchain also dominates the RWA sector, with the volume of tokenized real-world assets already estimated at $22 billion. Deloitte has suggested a surge in this figure to $4 trillion over the next 10 years.

Bernstein specialists also noted that Ethereum’s L2 networks, such as Base, are playing an increasingly significant role as crypto infrastructure for institutions. Robinhood’s acquisition of the WonderFi platform, which manages its own second-layer protocol, will enable the online broker to offer trading of tokenized stocks on its own chain.

Since L2 solutions use ETH as a gas token and means of settlement, this helps stimulate demand for the cryptocurrency, the analysts added.

The third factor in Ethereum’s recent rally was described as partly tactical. Over the past year to year and a half, institutional players have actively used the coin in delta-neutral hedging strategies—maintaining longs in BTC and SOL and short positions in ETH. As narratives shifted, it became more challenging for investors to label the asset as a “laggard,” Bernstein specialists noted.

Earlier, experts from crypto bank Sygnum found no convincing evidence that Solana will surpass Ethereum as the preferred blockchain for institutions.