On January 3rd, Eastern Standard Time, the asset management company Bitwise updated its Ethereum spot ETF application and simultaneously released its annual crypto outlook report, expressing a bullish long-term stance on Ethereum through institutional channels. With Ethereum's price rebounding more than double from last year's lows, and the intertwining narratives of ETF developments and upgrade expectations, the market is beginning to reprice the valuation and narrative space of this asset. From capital flows to on-chain usage, from technological progress to regulatory dynamics, these signals are collectively shaping a new round of the main storyline about Ethereum.

Bitwise: Upgrading the ETF Layout from Bitcoin to Ethereum

● Bitwise's action rhythm: After its Bitcoin spot ETF product established a foothold in the U.S. market, Bitwise has updated its Ethereum spot ETF prospectus multiple times in 2024, with the latest version further detailing custody, risk disclosure, and valuation methods, demonstrating its determination to continue advancing compliant Ethereum products.
● Management scale and voice: Bitwise manages crypto-related assets amounting to billions of dollars, with several crypto index funds and strategy funds registered in the U.S. serving institutional clients such as family offices and RIAs. Its viewpoints in research reports and public interviews are seen as important indicators for traditional funds observing crypto.
● Clear ETH bullish stance: In the latest annual outlook and podcast interview, Bitwise repeatedly emphasized its bullish view on Ethereum, believing it is not only the "second-largest crypto asset" but also the core underlying layer of on-chain finance and application ecosystems, comparing Ethereum to the early growth stage of Nasdaq, suggesting significant upside potential for mid to long-term valuations.
● ETF as a gateway for allocation: Bitwise emphasized that once the Ethereum spot ETF is approved, it will open a convenient and auditable ETH exposure channel for compliant funds in the U.S., targeting clients that include not only traditional hedge funds but also asset advisors and pension plans with smaller but widely distributed allocations, indicating that potential participants far exceed the current group directly buying ETH on exchanges.

ETF Applications, Regulatory Signals, and Capital Expectations

● Regulatory progress rhythm: In the first half of 2024, the SEC has successively delayed and requested supplementary comments on several institutions' Ethereum spot ETF applications. Bitwise and other applicants have updated their prospectuses in sync, repeatedly communicating with regulators on issues such as custody arrangements, market manipulation monitoring, and Ethereum staking yields, indicating that regulation has not outright rejected but has entered a phase of technical detail negotiation.
● Futures and spot misalignment: Ethereum futures ETFs have been compliantly listed and traded in the U.S. Bitwise pointed out in its research report that this provides a real-world example for the SEC to accept that "ETH has a regulated market depth and price discovery mechanism." Whether this opens the door for spot ETFs hinges on the assessment of spot market manipulation risks and custody security.
● Layered capital expectations:
● In the short term, some funds are betting on a clear timeline, attempting to replicate the rhythm of the Bitcoin spot ETF approval before and after, viewing regulatory milestones as event-driven opportunities;
● In the medium to long term, Bitwise emphasizes the allocation inertia brought by "opening channels." Once the cumulative scale of ETF products reaches billions of dollars, it often generates a self-reinforcing effect through passive funds and asset allocation models.
● The importance of compliance labels: Bitwise repeatedly uses terms like "compliant exposure" and "audit-friendly" in its roadshow materials, emphasizing that for a large amount of funds constrained by compliance and custody terms, the existence of standardized vehicles like ETFs is a prerequisite for "whether they can buy," rather than "whether they want to buy."

Ethereum's Mainline and Key Data in Bitwise's Annual Outlook

● Frequently mentioned protagonist: In Bitwise's 2024 annual outlook, Ethereum is placed alongside Bitcoin in terms of coverage, with the report emphasizing ETH's central role in DeFi, Layer 2 scaling, RWA, and on-chain settlement, believing that the total economic activity of the Ethereum ecosystem is still in a phase similar to the "early broadband deployment period of the internet."
● Narrative framework:
● Ethereum is positioned as "the operating system for on-chain finance and applications," rather than a single asset;
● ETH itself is described as a hybrid of "oil + collateral + yield asset," with its value derived from Gas demand, staking yields, and on-chain collateral demand.
● Key data references: Bitwise cites on-chain data in its outlook, indicating that the total value locked (TVL) in Ethereum has rebounded several times from its lows, with mainstream Layer 2 transaction volumes exceeding those of the Ethereum mainnet multiple times, showing that the expansion of the "usage layer" is accelerating.
● Research methods and pricing logic: Bitwise does not provide a single valuation formula but emphasizes that "network usage and developer activity" are more important than short-term price fluctuations by comparing the early stages of the internet and cloud computing, reminding institutional investors to view Ethereum assets through a three to five-year lens rather than attempting to time the market precisely within quarters.

ETH Fundamentals: Repricing of Supply, Staking, and On-Chain Activity

The current optimistic expectations surrounding Ethereum are fundamentally rooted in changes in on-chain and supply structures. Since Ethereum completed its merge and transitioned to a PoS mechanism, the burning mechanism of EIP-1559 and staking lock-up have reshaped the circulation structure of ETH. During periods of high Gas consumption, ETH has even entered a "net deflationary" state multiple times. In terms of staking scale, as we enter 2024, the amount of ETH locked in staking contracts continues to rise, increasing its proportion of total supply. Even after the staking withdrawal window opens, redemption pressure is offset by new staking demand, indicating the stickiness of systemic yields for long-term funds. Meanwhile, the recovery of DeFi and on-chain applications is also driving a rebound in trading activity, with daily transaction volumes and active addresses on the Ethereum mainnet and major Layer 2s significantly increasing from their lows. Although there is still a gap from the previous bull market peak, a trend of recovery is evident. For traditional institutions accustomed to viewing assets through "price-to-earnings ratios" and cash flow discount models, this combination of "net supply tightening + usage recovery" provides a more easily understood pricing narrative for Ethereum, also offering underlying data support for institutions like Bitwise to tell the ETH story in their roadshows.

Market Divergence: The Collision of Bitwise's Optimism and Caution

Surrounding Bitwise's high-profile bullish stance on Ethereum, there are differing voices within the market. Some bullish funds agree with its logic, believing that Ethereum has established a clear "digital asset dividend and buyback" framework through PoS and EIP-1559, combined with the potential opening of a spot ETF channel, which is sufficient to support a mid to long-term valuation reassessment; they are more focused on how to complete their position layout before regulatory and technical turning points. In contrast, cautious voices remind that the approval of a Bitcoin spot ETF does not automatically guarantee Ethereum the same treatment, especially in the context where issues such as staking yields and securities attributes remain unresolved. Relying on "the ETF will definitely land" as a trading premise carries significant policy risks. Additionally, some quantitative and derivatives traders point out that the speculative trading of Ethereum prices under ETF and upgrade expectations is driving up volatility and implied volatility of options. If regulatory rhythms do not meet expectations or on-chain activity recovers less than optimistic assumptions, the potential for a significant pullback is also likely. Therefore, the current long-short showdown surrounding Ethereum resembles a comprehensive pricing of regulatory tolerance, technological iteration execution, and capital risk preferences, rather than merely betting on a single event.

Key Time Windows and Subsequent Observation Points

The next few quarters will be a critical phase to test whether Bitwise's optimistic thesis holds. On one hand, the multiple delays and feedback from U.S. regulators on Ethereum spot ETF applications will gradually narrow the uncertainty range, and the market will closely monitor changes in wording regarding staking, custody, and market monitoring in each document update to assess whether policy attitudes are marginally easing. On the other hand, Ethereum's own technical roadmap will also enter the next phase, with upgrades surrounding scaling, data availability, and protocol-level yield distribution mechanisms directly affecting Gas costs, on-chain application experiences, and attractiveness to developers. Furthermore, the evolution of on-chain capital structures cannot be overlooked; staking ratios, DeFi lock-up scales, Layer 2 activity, and cross-chain capital flows will collectively determine the real heat of Ethereum's "usage layer." If regulatory and technical rhythms generally progress according to the optimistic script, then Bitwise's bet on the "institutional Ethereum phase" is expected to gradually take shape; conversely, if any link shows significant lag, the current optimistic expectations surrounding ETH may face repricing. For participants with different risk preferences, finding their rhythm between event-driven and long-term logic will be the main challenge in the coming period.

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