{"id":17287,"date":"2024-09-26T11:35:00","date_gmt":"2024-09-26T08:35:00","guid":{"rendered":"https:\/\/forklog.com\/en\/coinshares-deems-ethereum-investment-returns-uncertain\/"},"modified":"2024-09-26T11:35:00","modified_gmt":"2024-09-26T08:35:00","slug":"coinshares-deems-ethereum-investment-returns-uncertain","status":"publish","type":"post","link":"https:\/\/u1f987.com\/en\/coinshares-deems-ethereum-investment-returns-uncertain\/","title":{"rendered":"CoinShares Deems Ethereum Investment Returns &#8216;Uncertain&#8217;"},"content":{"rendered":"<div class=\"wp-block-text-wrappers-keypoints article_keypoints\">\n<ul class=\"wp-block-list\">\n<li>The price growth of Ethereum largely hinges on organic transactional demand for the asset, according to CoinShares experts.\u00a0\u00a0<\/li>\n<li>Currently, on-chain activity is primarily focused on speculative use cases.\u00a0<\/li>\n<li>Analysts criticized EIP-4844, which they believe has created imbalances between the first layer and L2.<\/li>\n<\/ul>\n<\/div>\n<p>Professional financial market players are beginning to show interest in Ethereum due to its capabilities in deploying <span data-descr=\"decentralized applications\" class=\"old_tooltip\">dapps<\/span>, yet the asset&#8217;s investment potential remains somewhat unclear, as stated in a <a href=\"https:\/\/blog.coinshares.com\/an-anatomy-of-ethereum-usage-cbd60525973b\">CoinShares report<\/a>.\u00a0<\/p>\n<p>Analysts believe the primary factor influencing Ether&#8217;s value is transactional demand.<\/p>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p>\n<cite>\u201cIt depends on how much users are willing to spend on the services provided by Ethereum,\u201d noted expert Matthew Kimmel.<\/cite><\/p><\/blockquote>\n<p>Although the ecosystem continues to expand, on-chain activity is significantly concentrated in a few speculative use cases, says Head of Research James Butterfill.<\/p>\n<blockquote class=\"twitter-tweet\">\n<p lang=\"en\" dir=\"ltr\">We have just finished some exhaustive work on mapping Ethereum usage, summarised below:<\/p>\n<p>\u2014 The primary driver of ETH&#8217;s value is demand for Ethereum transactions, particularly in applications and token transfers, rather than staking yield or other factors.<\/p>\n<p>\u2014 Ethereum usage is\u2026<\/p>\n<p>\u2014 James Butterfill (@jbutterfill) <a href=\"https:\/\/twitter.com\/jbutterfill\/status\/1838629921708466335?ref_src=twsrc%5Etfw\">September 24, 2024<\/a><\/p><\/blockquote>\n<p> <script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>According to him, the current situation \u201ccalls for a focus on the long-term value of the platform and fostering sustainable network utility.\u201d<\/p>\n<h2 class=\"wp-block-heading\">Structure of On-Chain Activity<\/h2>\n<p>The company notes that transactions on the Ethereum network have a much more significant impact on its value than staking revenues, monetary, or other factors.\u00a0<\/p>\n<p>The platform has long surpassed simple asset transfers, focusing on complex interactions with dapps, financial instruments, staking, and L2 solutions.<\/p>\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/u1f987.com\/wp-content\/uploads\/1_5oyYI_xUvxbNWaLwIHeeMA-1024x576.png\" alt=\"1_5oyYI_xUvxbNWaLwIHeeMA\" class=\"wp-image-241977\" srcset=\"https:\/\/u1f987.com\/wp-content\/uploads\/1_5oyYI_xUvxbNWaLwIHeeMA-1024x576.png 1024w, https:\/\/u1f987.com\/wp-content\/uploads\/1_5oyYI_xUvxbNWaLwIHeeMA-300x169.png 300w, https:\/\/u1f987.com\/wp-content\/uploads\/1_5oyYI_xUvxbNWaLwIHeeMA-768x432.png 768w, https:\/\/u1f987.com\/wp-content\/uploads\/1_5oyYI_xUvxbNWaLwIHeeMA.png 1481w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><figcaption class=\"wp-element-caption\">Structure of Ethereum fees across various categories of on-chain activity. Data: CoinShares.<\/figcaption><\/figure>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p>\n<cite>\u201cThe bitter truth is that only a limited range of services consistently ensures a significant share of Ethereum usage,\u201d noted Kimmel.<\/cite><\/p><\/blockquote>\n<p>According to him, the primary use case for Ether is decentralized exchanges. In this segment, Uniswap consistently leads, accounting for <a href=\"https:\/\/etherscan.io\/gastracker\">about 90% of transaction fees<\/a>.\u00a0<\/p>\n<p>While NFT marketplaces like OpenSea showed a brief surge in 2021, their influence has waned. As a result, DEX aggregators like 1inch and MetaMask have become the main drivers of <span data-descr=\"decentralized application\" class=\"old_tooltip\">dapp<\/span> activity. This, Butterfill asserts, confirms that speculation is the primary use case.<\/p>\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"577\" src=\"https:\/\/u1f987.com\/wp-content\/uploads\/app_fee_structure-1024x577.png\" alt=\"app_fee_structure\" class=\"wp-image-241978\" srcset=\"https:\/\/u1f987.com\/wp-content\/uploads\/app_fee_structure-1024x577.png 1024w, https:\/\/u1f987.com\/wp-content\/uploads\/app_fee_structure-300x169.png 300w, https:\/\/u1f987.com\/wp-content\/uploads\/app_fee_structure-768x432.png 768w, https:\/\/u1f987.com\/wp-content\/uploads\/app_fee_structure.png 1481w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><figcaption class=\"wp-element-caption\">Structure of Ethereum fee expenditure across various types of decentralized applications. Data: CoinShares.<\/figcaption><\/figure>\n<h2 class=\"wp-block-heading\">Stablecoins<\/h2>\n<p>Analysts believe token transfers are also a significant component of on-chain activity. Meanwhile, stablecoins are playing an increasingly important role as one of the most intuitive and viable use cases for crypto assets.<\/p>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p>\n<cite>\u201cAs the Ethereum ecosystem expands, the types of tokens transferred have significantly diversified, but Ether and &#8216;stablecoins&#8217; have become the dominant assets in terms of fee expenditure,\u201d explained Kimmel.<\/cite><\/p><\/blockquote>\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/u1f987.com\/wp-content\/uploads\/fee_spend_by_token-1024x576.png\" alt=\"fee_spend_by_token\" class=\"wp-image-241979\" srcset=\"https:\/\/u1f987.com\/wp-content\/uploads\/fee_spend_by_token-1024x576.png 1024w, https:\/\/u1f987.com\/wp-content\/uploads\/fee_spend_by_token-300x169.png 300w, https:\/\/u1f987.com\/wp-content\/uploads\/fee_spend_by_token-768x432.png 768w, https:\/\/u1f987.com\/wp-content\/uploads\/fee_spend_by_token.png 1481w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><figcaption class=\"wp-element-caption\">Structure of Ethereum fee expenditure across various crypto assets. Data: CoinShares.<\/figcaption><\/figure>\n<h2 class=\"wp-block-heading\">The L2 Factor<\/h2>\n<p>While Ethereum has matured and supports numerous applications for which users are willing to spend \u201cbillions of dollars,\u201d there is a steady trend of declining demand for Ethereum.<\/p>\n<p>According to Kimmel, the popularity of L2 solutions in recent years has helped solve scaling issues but also \u201cabsorbed\u201d demand for the base layer of the network. As a result, \u201cthe relationship between Ether&#8217;s value and the broader ecosystem has become more complex.\u201d\u00a0<\/p>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p>\n<cite>\u201cIn our view, the latest major change \u2014 <a href=\"https:\/\/u1f987.com\/en\/news\/ethereum-developers-activate-dencun-hard-fork-on-mainnet\">EIP-4844<\/a>, which strongly incentivized second-layer solutions, worked against the economic benefits of <span data-descr=\"activated as part of the London hard fork proposal, implying the burning of part of the transaction fees\" class=\"old_tooltip\">EIP-1559<\/span>, which linked Ether&#8217;s value to demand for the first-layer platform,\u201d he added.<\/cite><\/p><\/blockquote>\n<p>Moving forward, the main task is to create utility on the blockchain. This will not only scale but also provide significant long-term value for users, fostering sustainable demand for Ethereum services, concluded Kimmel.<\/p>\n<p>Earlier, Galaxy Digital experts <a href=\"https:\/\/u1f987.com\/en\/news\/dencun-update-spurs-rise-in-failed-transactions-on-ethereums-l2-networks\">noted<\/a> an increase in bot activity and failed transactions in L2 following the activation of the Dencun update.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The price growth of Ethereum largely hinges on organic transactional demand for the asset, according to CoinShares experts.\u00a0\u00a0 Currently, on-chain activity is primarily focused on speculative use cases.\u00a0 Analysts criticized EIP-4844, which they believe has created imbalances between the first layer and L2. Professional financial market players are beginning to show interest in Ethereum due [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":17286,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"select":"","news_style_id":"","cryptorium_level":"","_short_excerpt_text":"","creation_source":"","_metatest_mainpost_news_update":false,"footnotes":""},"categories":[3],"tags":[1191,46,1179,1150,1268],"class_list":["post-17287","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news-and-analysis","tag-coinshares","tag-ethereum","tag-layer-2-solutions","tag-news-plus","tag-on-chain-analysis"],"aioseo_notices":[],"amp_enabled":true,"views":"7","promo_type":"","layout_type":"","short_excerpt":"","is_update":"","_links":{"self":[{"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/posts\/17287","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/comments?post=17287"}],"version-history":[{"count":0,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/posts\/17287\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/media\/17286"}],"wp:attachment":[{"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/media?parent=17287"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/categories?post=17287"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/tags?post=17287"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}