1. **Ethereum's core position and value capture within the ecosystem:**
* **'Global settlement layer' and 'digital economy platform':** Ethereum is not just a digital currency; it is widely regarded as the foundational infrastructure platform for building decentralized applications, DeFi (decentralized finance), NFTs (non-fungible tokens), DAOs (decentralized autonomous organizations), and other next-generation internet (Web3) applications. Institutions recognize that investing in Ethereum essentially means investing in the underlying protocol of this vast and rapidly growing digital economy ecosystem.
* **Network effects and moats:** Ethereum boasts the largest and most active developer community, the most DApps (decentralized applications), the highest total locked value, and the most mature user and institutional infrastructure (wallets, exchanges, custody services, etc.). This strong network effect forms a significant competitive advantage, making it difficult to replace.
2. **Ethereum's ongoing technological upgrades and improvements (The Merge, Surge, Scourge, Verge, Purge):**
* **Transition to Proof of Stake:** The successful 'Merge' has transformed Ethereum from an energy-intensive Proof of Work mechanism to a more environmentally friendly and energy-efficient Proof of Stake mechanism. This significantly addresses institutional investors' concerns regarding the environmental impact of cryptocurrencies, particularly those constrained by ESG investment philosophies, eliminating a major investment barrier.
* **Improvements in scalability and user experience:** Subsequent upgrades (such as the Cancun upgrade) will primarily focus on significantly increasing network transaction speeds and reducing gas fees through Layer 2 Rollups. This allows the Ethereum mainnet to handle a greater volume of transactions, significantly improving user experience, paving the way for large-scale applications, and enhancing institutional confidence in its long-term utility and adoption prospects.
* **Enhanced deflationary mechanism:** After the merge, during periods of active trading, the net issuance of ETH may become negative (the amount burned exceeds the amount newly issued). This potential long-term deflationary characteristic, combined with its utility as ecosystem 'fuel' and staking asset, increases ETH's appeal as a store of value.
3. **ETH as a yield-bearing asset (Staking):**
* The PoS mechanism allows holders to earn rewards by staking ETH (currently with an annualized return of about 3-5%). This transforms ETH from a mere 'commodity' or 'currency' into a cash-generating 'yield-bearing asset'.
* For institutional investors seeking returns (such as hedge funds and asset management companies), staking provides a relatively low-risk (at the protocol level) source of income, enhancing the appeal of holding ETH, especially in a low-interest-rate environment.
4. **Expectations and drivers for the spot Ethereum ETF:**
* The tremendous success of the U.S. SEC's approval of the Bitcoin spot ETF has greatly stimulated market expectations for the approval of the Ethereum spot ETF. Top asset management firms like BlackRock have already submitted applications.
* Institutional investors typically prefer to gain exposure to crypto assets through regulated and convenient traditional financial instruments (such as ETFs). Once the spot Ethereum ETF is approved, it is expected to attract a massive influx of traditional capital, prompting institutions to position themselves early, betting on the price increases and enhanced liquidity that will follow the ETF approval.
5. **Portfolio diversification needs:**
* As cryptocurrencies are gradually seen as an independent asset class, institutional investors are no longer satisfied with just holding Bitcoin when allocating crypto assets. As the second-largest cryptocurrency by market capitalization, Ethereum has different technical characteristics and application scenarios compared to Bitcoin (Bitcoin is more inclined towards 'digital gold' as a store of value, while Ethereum is a smart contract platform often referred to as 'digital oil'), making it a significant choice for institutions to diversify their crypto asset allocations.
6. **Market sentiment and FOMO (fear of missing out):**
* The influx effect of Bitcoin spot ETF approval and the positive prospects brought by Ethereum's own upgrades have created strong market optimism.
* When seeing peers or competitors begin to allocate Ethereum, other institutions may also accelerate their entry due to FOMO psychology, aiming to avoid lagging behind in a potential market uptrend.
**In summary, the institutional 'frenzy' for Ethereum is driven by multiple reasons, including its role as:**
* **Core infrastructure platform (ecological value)**
* **Continuously evolving technical protocols (upgrade potential)**
* **Yield-generating yield-bearing assets (staking returns)**
* **Targets expected to gain access to mainstream financial instruments (ETF expectations)**
* **Key components of crypto asset portfolios (diversification needs)**
**Recognition and betting on this multi-faceted value attribute.**
**It is important to emphasize:**
* **The degree of 'frenzy' may be amplified by media or market sentiment.** Institutional investment is typically cautious and strategic; although allocation is indeed significantly increasing, describing it as 'frenzy' may be somewhat exaggerated.
* **Risks still exist:** The cryptocurrency market is highly volatile, with regulatory uncertainties (especially the SEC's determination of whether ETH is classified as a security), potential delays or failures in technological upgrades, increased competition, and changes in the macroeconomic environment posing risks.
