This article is reprinted with authorization from Coin Market Trader, and the copyright belongs to the original author.
On August 14, after several unsuccessful attempts to break the historical high of 4870, Ethereum turned downward, initiating its first round of adjustment after surpassing $4000. As of August 20, its price had dropped from a high of $4790 to $4060, a cumulative decline of 15.2%, triggering a long liquidation of up to $1.6 billion. This unexpected "sucker punch" left many optimistic bulls, who had bet on a historic breakthrough, with significant losses. Many investors lamented that being long on Ethereum four years ago at $4800 was now repeating itself four years later.
However, as of now, Ethereum's current adjustment is primarily driven by profit-taking. According to Glassnode data, after breaking through $4700, the ETH price reached the key threshold of +1SD active realized price, indicating that the continuous rise has significantly deviated from the market average cost (realized price). Notably, the last time this indicator reached this level was in March 2024, after which Ethereum experienced a significant sell-off. The pressure for profit-taking is particularly evident in the staking data: during the rebound from August 3 ($3350) to August 14 ($4790), the number of Ethereum unstaking requests surged from 410,000 to 916,000, with the average cost (staking cost) of this batch of tokens being only $2800, indicating that a large number of early low-position holders are cashing out at highs.
Note: Realized price: The weighted average price of Ethereum's last transfer.
+1SD active realized price: The realized price plus one standard deviation of the four-year rolling average of the ratio of realized price to activity.
Despite facing significant profit-taking pressure in the short term, Ethereum has not shown any signs of a reversal in its upward trend. First, historical experience indicates that the end of a strong market for any asset is often accompanied by capital diversion and the spread of hot spots; however, the Ethereum exchange rate against mainstream currencies remains strong— for example, ETH/BTC has consistently stayed above the 5-day moving average, and its dominance in the market is further strengthening. As of August 22, Ethereum's contract trading accounted for 67%, indicating that Ethereum remains the main battlefield for capital speculation.
Secondly, in the global capital markets, core asset valuations are generally showing a trend of bubbling, and the valuation premium for high-growth assets continues to rise. Taking the S&P 500 index as an example, its current price-to-earnings ratio has risen to 29.51, placing it at the 89th percentile level over the past decade; the price-to-book ratio is as high as 5.3, even exceeding the peak during the 2000 internet bubble. Meanwhile, the average price-to-earnings ratio of the "AI Seven Giants" (AI7), regarded as having high growth certainty, has reached 37, significantly higher than the overall valuation level of the S&P 500, reflecting the market's strong pursuit of scarce growth. More notably, the Science and Technology Innovation 50 Index, currently in a small bull market, has seen its overall price-to-earnings ratio soar to 164 times, reflecting a highly optimistic expectation for the future growth of emerging technology companies.
In the blockchain field, Ethereum's systemically important position is comparable to the "Seven Giants" in the AI field, and its growth path is even clearer. Driven by the compliance dividends brought by the "GENIUS Act" and the dual push of the "Project Crypto" innovation plan, Ethereum has entered a high-growth phase driven by strong expectations. Its valuation evolution is expected to follow the premium expansion logic of growth assets, achieving further value reassessment under the dual catalysis of policy and ecology.
In summary, after a brief adjustment, Ethereum still has the potential to continue challenging historical highs.
As demand for convertible bonds and preferred stocks gradually wanes, MicroStrategy (MSTR) has had to abandon its previous commitment of "not issuing common stock if the market value is below 2.5 times the net asset value (NAV) of Bitcoin." This move has led to a significant decline in its stock price and has raised widespread concerns in the market about the sustainability of the Digital Asset Treasury (DAT) business model.
Undoubtedly, MSTR's recent decline is closely related to the deterioration of its capital structure, but the rise in leverage is not the fundamental cause. Almost all Bitcoin treasury-type companies face a common challenge: their cash flow largely depends on external fundraising rather than operational income. More importantly, the core asset they hold—Bitcoin itself—does not generate cash flow and is considered a non-productive asset. Once the financing environment tightens and fundraising activities are hindered, companies will be forced to sell Bitcoin to maintain operations and pay interest on debts, thus falling into a negative cycle of "selling assets - declining net worth - weakening confidence." In other words, once new external financing cannot be obtained, the net asset value per share of Bitcoin treasury companies will gradually decline, and their stock prices will also gradually fall.
In contrast, the business model of Ethereum treasury companies performs better in terms of sustainability. Currently, Ethereum PoS staking can provide an annualized yield of about 4%, with some lending protocols (such as AAVE) offering yields of 5%-7%, and yields from some mainstream stablecoin protocols (such as Ethena) even exceeding 10%. Therefore, even adopting the most conservative asset allocation strategy—such as directly staking Ethereum—the treasury can achieve returns close to the benchmark yield of 30-year U.S. Treasury bonds, thus providing endogenous cash flow support for operations without relying on continuous financing. Historical data shows that the annualized return on corporate earnings for the S&P 500 index over the past 100 years (1923 - 2023) is about 5.5%, while Ethereum, through risk-free staking, has already approached this level, indicating that the profit expectations for Ethereum treasury companies remain quite considerable.
In the past, the Ethereum community has repeatedly suggested that the Ethereum Foundation adopt such models to generate cash flow to avoid directly selling Ethereum assets. However, these proposals were opposed by Vitalik Buterin, mainly based on the reasoning that the foundation should avoid direct participation in network validation, which could lead to conflicts of interest. Now, the entry of Ethereum treasury companies provides a feasible validation for this development model.
When investing in Bitmine, Cathie Wood mentioned that investing in Ethereum treasury companies has advantages over crypto ETFs: according to U.S. tax law Section 40, funds obtaining relevant exposure through investing in crypto ETFs will inevitably face complex tax treatments, layered management fees, and potential tax risks from "unfavorable income." Notably, if the gross profit from a particular investment of the fund exceeds 10% of its total annual profit, it may lead to the entire fund losing its tax-exempt status, being forced to close, or even facing hefty fines. In other words, U.S. fund companies investing in Ethereum treasury companies face less compliance resistance and tax pressure than investing in crypto ETFs.
In summary, based on their high yield-to-cost ratio and inherent compliance advantages, Ethereum treasury companies still have significant growth potential in the market. As market awareness deepens, those Ethereum treasury companies with net asset premium rates approaching zero will gradually reveal unique investment value.
Related: Recent sell-offs of Bitcoin (BTC) and Ethereum (ETH) have led cryptocurrency ETPs to record their largest losses since March, with capital outflows of $1.43 billion.
Original article: “The Historical High is Within Reach, $4800 is Just the Starting Point of a New Round of Rise!”
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