Ethereum Outpaces Bitcoin in 2024 With 33% Gain: Report

Published: Feb 26, 2024
Written By:
Vignesh Karunanidhi
Milk Road Writer

Ethereum (ETH) has rallied 33% year-to-date, handily outpacing Bitcoin’s gain. Beyond speculative demand for a spot ETF, other catalysts appear to be driving the outperformance.

In their latest research note, analysts at Bernstein cite Ethereum’s deflationary tokenomics as a key driver of ETH’s robust appreciation this year.

Additionally, swelling amounts of ETH deposits into staking pools and DeFi protocols are also constraining supply.

Key Details:

  • ETH has gained 33% year-to-date versus Bitcoin’s rise.
  • Bernstein analysts attribute the rally to favorable tokenomics.
  • ETH supply has held static since the Merge upgrade.
  • Just 11% of the ETH supply is now held on exchanges.

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Importantly, Ethereum’s transition to proof-of-stake consensus has kept net ETH issuance at zero since September 2022.

Ethereum held on exchanges sits at all-time low

The percentage of ETH deposited on exchanges has also plunged to all-time lows below 11%. More ETH is instead getting staked, deposited into DeFi protocols, or migrated to layer-2 scaling solutions like Arbitrum and Optimism.

“And as financial smart contracts on Ethereum Layer 2 networks scale (Arbitrum, Optimism, and Polygon), more ETH finds itself locked in smart contracts, leading to a reflexive feedback loop of increased demand,” the report stated.

Read more: MicroStrategy Buys 3,000 Bitcoin (BTC) For $155 Million

Additional Tailwinds:

  • Surging transaction fees incentivize ETH staking.
  • The emergence of layer 2 networks enhances scalability.
  • Upcoming ETH upgrade to further reduce fees.
  • Regulatory clarity may enable DeFi revenue sharing.

Bernstein believes Ethereum’s layer 2 momentum and progress on tackling high fees will continue as developers launch new scalability solutions. The upcoming Dencun upgrade in March is also seen as reducing layer 2 costs by 90%.

With ETH supply crunched and demand drivers multiplying, analysts cite Ethereum’s strengthening network is likely to drive additional upside for ETH holders.

Vignesh Karunanidhi

Vignesh has been a seasoned professional in the crypto space since 2017. He has been writing for over 6 years and specializes in writing and editing various types of crypto content, including news articles, long-form pieces, and blog posts, all focused on sharing the beauty of blockchain and crypto.

Vignesh Karunanidhi
Milk Road Writer
Vignesh has been a seasoned professional in the crypto space since 2017. He has been writing for over 6 years and specializes in writing and editing various types of crypto content, including news articles, long-form pieces, and blog posts, all focused on sharing the beauty of blockchain and crypto.