Ethereum’s Risk-To-Reward Outlook Shines, Says $725B Asset Manager Bernstein

Gautam Chhugani, Managing Director at Bernstein’s Global Digital Assets division, has identified Ethereum’s risk-to-reward ratio as “attractive,” particularly given its recent underperformance. Chhugani sees the current market conditions as favorable for Ethereum (ETH), which he believes is poised for further growth.

Chhugani points out that Ethereum’s supply has remained largely stagnant since its transition to proof-of-stake, coupled with its burn mechanism. This shift has helped maintain a balance in the asset’s supply while fueling steady demand. “Yet, Ethereum’s underlying transaction fees drive a steady yield of ~3% (in ETH terms) to Ethereum stakers,” Chhugani explained. He noted that approximately 28% of Ethereum’s supply is locked in staking contracts, reinforcing its demand dynamics.

Moreover, Chhugani highlighted that nearly 10% of ETH remains locked in deposit and lending contracts on the blockchain, further supported by Layer-2 bridges. With around 60% of ETH not changing hands over the past year, the resilience of Ethereum’s investor base is evident. This, according to Chhugani, sets up favorable demand-supply dynamics, positioning Ethereum for potential growth.

Ethereum ETFs and Future Staking Yields

Another factor contributing to Ethereum’s strengthening outlook is the increasing momentum of Ethereum exchange-traded funds (ETFs). Chhugani believes that the rising popularity of ETH ETFs will likely drive stronger demand. He also speculated that these ETFs could eventually allow investors to earn staking yields.

“The ETH ETF approval excluded the ability of asset managers to offer the underlying ETH yield to ETH ETF holders, due to regulatory limitations. We believe under a new Trump 2.0 crypto-friendly SEC, ETH staking yield will likely be approved,” Chhugani said.

Chhugani also pointed to Ethereum’s dominance in blockchain activity, with the network continuing to account for 63% of the total value locked (TVL) across blockchains. TVL is an essential metric for assessing the health and growth of crypto ecosystems. While other networks, such as Solana (SOL), have gained traction among retail users, Ethereum continues to lead the way in attracting institutional interest.

At the time of writing, ETH is trading at $3,858.78. Despite some challenges, Ethereum’s strong fundamentals make it a promising asset for the future.