Written by: David Christopher

Translated by: Block unicorn

The iShares Ethereum Trust ETF (ETHB) under BlackRock began trading today on Nasdaq. This is the first staking fund launched by the company, quietly addressing a challenge that has plagued institutional investors in Ethereum since the introduction of spot ETFs.

For the first time, Wall Street can access ETH in the way it has been advertised: a productive asset that generates yields.

Initial Disconnect

From the outset, there has been a mismatch with spot Ethereum ETFs.

Ethereum has been marketed as an "Internet-native bond"—scarce (with an annual issuance cap of 1.5%), high-yielding (annual compounding of 3-5%), and embedded into the settlement layer of a new financial system (stablecoins and tokenized assets).

Etherealize formalized this framework last year: ETH is both digital oil, productive collateral, and a reserve asset.

Even if this claim sounded slightly "outlandish," it still worked, as we previously saw with DAT promoting ETH as a stablecoin investment tool. However, the product itself did not deliver.

Spot ETFs failed to provide yields. Investors got price exposure but could not experience the economic engine of Ethereum. What we were selling was a productive asset, yet ultimately provided institutions with a version devoid of productivity.

Bitcoin does not have this problem. The essence of BTC's value proposition lies in its simplicity: a store of value. Just hold it. Spot trading can provide complete value. Ethereum’s claim is different. Staking is an integral part of Ethereum’s asset. Holders benefit from the network's economy through staking and earn compounding that supports its core idea.

Spot ETFs cannot provide that.

While this is not the only reason, this dynamic has resulted in a significant lag in fund inflows from institutional investors to Ethereum (ETH). Currently, IBIT holds over $55 billion in market capitalization, while ETHA's market cap is only around $6.5 billion. Admittedly, part of the gap reflects Bitcoin's first-mover advantage and clearer narrative. But part of the reason also reflects the flaws of the product itself. Institutional investors are attracted to Ethereum's upside potential, but what they ultimately receive is a diluted version of the asset.

Wall Street Has Already Entered

This poor performance related to assets often obscures the actual adoption of Ethereum at the institutional level since the introduction of spot ETFs in July 2024.

The supply of RWAs on Ethereum has grown about sevenfold. The supply of stablecoins has also more than doubled. Wall Street is increasingly inclined to view ETH as infrastructure, serving as the backbone for stablecoins and tokenized finance, rather than as an independent trading asset.

The growth of RWAs on Ethereum from July 2024 to the present.

BlackRock's BUIDL fund, Franklin Templeton's FOBXX, and an increasing number of tokenized money market products settle using Ethereum or its L2 settlement systems. Banks and SWIFT are also testing on-chain settlement. Despite the disappointing fund flows from the ETFs, institutional participation is indeed expanding.

However, some of the fund flows do not originate from demand for ETH but rather from a lack of suitable access channels to ETH. Institutional investors can hold price exposure to ETH but cannot participate in the network they are increasingly using, actively using, or at least beginning to understand its value.

ETHB addresses this issue.

For the first time, institutional investors have a truly regulated packaged form that aligns with Ethereum's philosophy.

The growth of Ethereum stablecoins from July 2024 to the present.

Structural Impacts

The significance of this extends beyond ETHB itself.

Previously, if investors from non-cryptocurrency sectors wanted to effectively invest in Ethereum (ETH), they had to use some workaround: primarily structures like DAT that allowed for free staking, re-staking, and DeFi use, but their value was not directly tied to the assets held.

The existence of these structures was partly because institutional investors could not directly participate in staking within their authorized parameters. With the launch of staking ETFs, this situation has changed. Funds that previously had to flow through intermediaries can now go directly into the Ethereum market.

Current Landscape Status

According to the DeFi Report, most cyclical indicators show that when ETHB went live, ETH was in a fair to deeply valued range.

MVRV below 1 indicates that, from a total cost perspective, the market is in a state of loss. The supply of profits is lower than during the capitulation phase in 2022. This cycle's price has barely surpassed the 2021 peak (sorry for the reminder), and prices have been oscillating within the prior high range without breaking through. From a historical standard, the current price is in a highly attractive compressed state.

As I mentioned earlier, this underperformance cannot simply be blamed on the absence of a staking ETF. Ethereum's L2 roadmap optimizes for scale and user experience, not for L1 fees. Blob enables Rollup anchoring costs to be low and breaks the fee-burning mechanism that once supported deflationary rhetoric.

Certainly, Ethereum has improved as a network, but its investment outlook has become more difficult to predict.

However, its monetary structure has never collapsed. The annual issuance is around 0.8%, roughly in line with Bitcoin's inflation rate. Now, various factors are reconverging. The number of institutional users is significantly and continuously growing, RWAs, stablecoins, and tokenized funds are all thriving on Ethereum. The staking mechanism has finally matured, and prices have reached reasonable levels.

For years, Ethereum has been marketed to institutional investors as a yield reserve asset and settlement layer for the tokenized economy. This narrative has been continuously refined, formalized, and repeated: it perpetually sells this idea to those institutions that clearly see the value of the Ethereum network but cannot engage in the Ethereum economic plan.

Now, the packaging of Ethereum finally aligns with this theory, and ETHB will be a test. We will wait and see if Wall Street truly recognizes the value proposition being marketed for Ethereum as an asset.

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