Bitcoin has long been in the spotlight during this bull market, but recently investors' attention has quietly shifted to Ethereum. In a report released by Standard Chartered yesterday (26th), it was pointed out that institutions are reserving Ethereum at an unprecedented pace, yet both ETH and 'ETH reserve companies' are still undervalued by the market.
Out of stock: ETF and vault companies team up to absorb nearly 5% of circulating ETH.
The report shows that since June, Ethereum vault companies have acquired 2.6% of Ethereum's circulating supply, and with the buying from spot ETH ETFs, a total of 4.9% of Ethereum's circulating quantity has been absorbed. This directly propelled Ethereum to reach a historic high on August 24, with ETH hitting $4,955.
Even if it falls below $4,500 later, Geoff Kendrick, Standard Chartered's global head of digital asset research, still maintains his price target of $7,500 for Ethereum by the end of the year, stating:
The current pullback is a ticket for long-term investors to enter.
Beyond passive holdings: Vault companies generate cash flow through staking and DeFi.
Unlike spot ETFs, which are restricted by U.S. regulations and cannot currently be used for staking, Ethereum vault companies can directly stake the ETH they purchase, participate in verification nodes, and receive annualized rewards ranging from 3% to 14%. If they invest some of their chips into decentralized finance, they can further create compounded returns.
Currently, the largest Ethereum reserve company, BitMine Immersion Technologies, holds 1.7 million ETH, with expected annual staking rewards reaching $87 million. The report points out that although these companies' mNAV multiples are lower than Bitcoin giant MicroStrategy, they can generate cash flow through staking and DeFi, potentially leading to higher valuation prospects.
Supply shock: 30% of tokens locked, exchange inventory has declined for seven consecutive months.
The report also calculates that over 30 million ETH (approximately 25% to 30% of total supply) are already locked in staking contracts or ETF holdings. The reserves of Ethereum on exchanges have also decreased by more than 15% since the beginning of the year, thus further supply contraction will continue to support Ethereum's price.
Moreover, as more vault companies move Ethereum out of exchanges and into long-term staking, it will not only enhance Ethereum's network security but also further amplify the deflationary effects brought by Ethereum's burning mechanism, establishing a more robust structural bullish pattern for ETH.
