Wall Street Encounters Ethereum Once Again

Ask AI · How does ETHB solve the profit dilemma for institutional investors?

Author: David Christopher

Article translation: Block unicorn

BlackRock’s iShares Staked Ethereum Trust ETF (ETHB) began trading today on Nasdaq. This is the company’s first staking fund, quietly solving a longstanding problem that has troubled Ethereum institutional investors since the launch of spot ETFs.

Wall Street can now access ETH in a way that’s promoted: as a productive, income-generating asset.

Initial disconnect

From the start, spot Ethereum ETFs have faced a mismatch.

Ethereum has been promoted as a “native internet bond”—scarce (annual issuance cap of 1.5%), high-yield (annual compound interest of 3-5%), embedded in a new financial system (stablecoins and tokenized assets) as a settlement layer.

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

Although this description is somewhat “fantastical,” it still works, 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 gained price exposure but couldn’t experience Ethereum’s economic engine. We marketed a productive asset but ultimately gave institutions a non-productive wrapper.

Bitcoin doesn’t have this problem. Its value proposition is simple: store of value. Just hold it. Spot trading provides full value. Ethereum’s claim is different. Staking is an integral part of ETH assets. Holders benefit from staking by earning from the network economy and receiving compound interest that supports its core philosophy.

Spot ETFs cannot offer this.

While not the only reason, this dynamic has caused a severe lag in capital inflows into Ethereum (ETH). Currently, IBIT holds over $55 billion in market cap, while ETHA’s market cap is only around $6.5 billion. Admittedly, part of this gap reflects Bitcoin’s first-mover advantage and clearer narrative. But part also stems from product flaws. Institutions are attracted by Ethereum’s upside potential but end up with a diluted version of the asset.

Wall Street’s early entry

This poor asset-related performance often masks the actual adoption of Ethereum at the institutional level since the launch of spot ETFs in July 2024.

The supply of RWA (Real-World Assets) on Ethereum has increased about sevenfold. The supply of stablecoins has also more than doubled. Wall Street is increasingly viewing ETH as infrastructure—serving as a track for stablecoins and tokenized finance—rather than as a standalone trading asset.

From July 2024 to now, RWA growth on Ethereum.

BlackRock’s BUIDL fund, Franklin D. Dempsey’s FOBXX, and more tokenized money market products are settling on Ethereum or its L2 scaling systems. Banks and SWIFT are testing on-chain settlements. Despite disappointing ETF capital flows, institutional participation is actually expanding.

However, some of this capital isn’t driven by demand for ETH itself but by a lack of proper access channels. Institutions can hold ETH price exposure but cannot participate in the networks they increasingly use, are using, or at least are finally beginning to understand.

ETHB solves this.

For the first time, institutional investors have a truly compliant, regulated wrapped form aligned with Ethereum’s philosophy.

Growth of Ethereum stablecoins since July 2024

Structural impact

The significance of this goes beyond ETHB itself.

Previously, non-crypto investors wanting to effectively invest in ETH had to use workaround structures—mainly structures similar to DAT—that could freely stake, re-stake, and use DeFi, but whose value was not directly linked to the assets held.

These structures existed partly because institutional investors couldn’t directly participate in staking within their authorized scope. With the launch of staking ETFs, this has changed. Funds that previously required intermediaries can now flow directly into the Ethereum market.

Current landscape

According to DeFi Report, most cycle indicators show that at ETHB’s launch, ETH was in a fair-to-deep value zone.

MVRV is below 1, indicating the market is at a loss relative to total cost. Profit supply is lower than during the capitulation sell-off of 2022. The current cycle price just barely exceeds the 2021 high (sorry to repeat), oscillating within previous highs without breaking through. Historically, current prices are in an attractive compressed state.

As I mentioned before, poor performance can’t be solely blamed on the absence of staking ETFs. Ethereum’s L2 roadmap focuses on scaling and user experience, not L1 fees. Blob reduces rollup anchoring costs and breaks the fee-burning mechanism that once supported a deflationary narrative.

Certainly, Ethereum as a network has improved, but its investment outlook has become more unpredictable.

However, its monetary structure has never collapsed. The annual issuance rate is about 0.8%, roughly matching Bitcoin’s inflation rate. Now, various factors are converging again. The number of institutional users is growing significantly and steadily; RWA, stablecoins, and tokenized funds are thriving on Ethereum. The staking mechanism has finally matured, and prices have reached reasonable levels.

For years, Ethereum has been marketed to institutions as a yield reserve asset and settlement layer for a tokenized economy. This story has been continuously refined, formalized, and repeated: it’s a narrative aimed at those who see Ethereum’s network value but cannot participate in its economic programs.

Now, Ethereum’s packaging finally aligns with this narrative, and ETHB will be a test. We’ll see if Wall Street truly embraces Ethereum as an asset.

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