Ethereum (ETH) appears to be positioned for significant growth as it embarks on its next phase. Over the past months, it has cultivated an environment ripe with cryptocurrency experimentation, increasingly resembling a network asset that exhibits concrete cash-flow dynamics, which directly contribute to its value proposition. As we look ahead to late 2028, various factors suggest that Ethereum’s upward trajectory will continue.
One of the primary drivers of Ethereum’s anticipated growth is its scaling capabilities. As transaction activity shifts onto the Ethereum blockchain and its Layer-2 (L2) networks, the base chain continues to collect gas (user) fees. A portion of these fees is burned, effectively limiting the currency’s float and rendering its price more sensitive to market dynamics. Currently, Ethereum’s L2 networks are processing a higher volume of transactions compared to the main chain, indicating a growing demand for lower-fee alternatives. Nonetheless, the base chain remains a significant source of value, having generated over $6.7 million in fees during a recent week.
In terms of supply, the net supply of Ethereum has remained relatively stable, thereby not raising major concerns for investors regarding inflation. This aligns with the original vision of Ethereum’s founders, despite delays in achieving these milestones.
On the distribution front, Ethereum’s integration into the financial landscape has become increasingly significant. Following the launch of U.S. spot Ethereum exchange-traded funds (ETFs) on July 23, 2024, there have been cumulative net inflows reaching the high single-digit billions. One of these funds reportedly amassed $10 billion in assets rapidly, demonstrating a strong, rules-based buying pattern typical of institutional investment. This kind of sustained institutional accumulation is set to provide a positive momentum for Ethereum in the coming years.
However, ETFs are currently unable to stake their coins, which means they cannot lock up holdings to validate transactions in exchange for staking rewards. Yet, they do offer a mechanism for investors to hold Ethereum within brokerage and retirement accounts, a situation that may evolve in the near future, potentially impacting market dynamics significantly.
Staking participation now encompasses around 28% of Ethereum’s total supply, with validator reward rates stabilizing near 3%. These rewards function similarly to cash yields for those who choose to stake their Ethereum. Recent protocol improvements, particularly following the update known as Pectra, are expected to enhance staking rewards, encouraging further investment in Ethereum.
The outlook for Ethereum over the next three years includes ongoing technological advancements that bolster investor confidence, continued inflows from ETFs, and increased participation in staking. Furthermore, the expansion of decentralized applications (dApps) and continued user onboarding on Ethereum’s L2s are poised to amplify the ecosystem’s growth. The constrained supply of Ethereum coins is projected to further accentuate these trends.
Given this landscape, many analysts suggest that now may be an opportune moment to invest in Ethereum. The recommendation is to adopt a long-term perspective, allowing sufficient time for these favorable conditions to translate into meaningful value generation.
