Trust Commodity • Digital Oil • Settlement Layer
Ethereum
The Foundation of Web3 Infrastructure
Market Overview
Ethereum today sits at the crossroads of decentralized trust and digital infrastructure. As the leading smart-contract platform, Ether serves as a "base layer of computing" underpinning vast DeFi, NFT and Web3 applications. Regulators explicitly treat ETH as a commodity (the CFTC has affirmed Ether is a commodity under US law), reinforcing its role as neutral "trust engine" money.
Investors and builders often call ETH "digital oil", since every transaction and smart contract execution is paid for with gas fees in Ether – analogous to how oil fuels an economy. These metaphors capture Ethereum's evolving identity: a global trust network and computational backplane whose security and utility give Ether intrinsic value.
Market Cycles: ETH vs. Bitcoin Dynamics
Ethereum has historically lagged Bitcoin in bull markets, setting up a catch-up narrative today. After Bitcoin's recent run, ETH/BTC hit multi-year lows. A weekly chart shows the ETH/BTC ratio in a clear downtrend since late 2021. For example, from Sept 2022 to now BTC/USD climbed ~470% vs. ETH/USD ~170%, dragging ETH/BTC from ~0.06 to ~0.026.
This prolonged underperformance reflects capital flowing first into Bitcoin (e.g. via the new spot BTC ETFs) and only later into altcoins. Indeed, on-chain analytics show Bitcoin investors reached "euphoria" metrics long before Ethereum traders did, and recent inflows into crypto ETFs have favored BTC so far.
Institutional rotation is now turning. Market analysts note a breakout in ETH/BTC: Ethereum has "decisively outperformed Bitcoin after lagging throughout the whole cycle". The recent Pectra upgrade (proto-danksharding) and ETH's rebound above key levels have renewed interest.
Trust Foundation
Ethereum secures a massive on-chain economy (over ~$400 billion in assets) as a neutral settlement layer. Its Proof-of-Stake consensus now leverages ~800K validators, making Ethereum one of crypto's most secure and decentralized platforms.
Security Metrics
- ~800K active validators
- ~$400B secured value
- 90% reduced issuance post-Merge
- CFTC-regulated commodity status
Key Initiatives
- Trillion Dollar Security initiative
- Global financial infrastructure
- Institutional-grade security
- Regulatory clarity
Post-Merge Tokenomics
Ethereum's supply dynamics flipped after The Merge (Sep 2022) and EIP-1559. Issuance plunged by ~90% – from ~15,000 ETH/day to ~1,500 ETH/day – an event dubbed the "triple halvening". At the same time, the London hard fork (Aug 2021) introduced fee-burning. Today ~85% of all transaction fees are burned, effectively acting as a network-wide "buyback" for ETH holders.
Dune/ultrasound data confirm the impact: since the Merge the network has issued ~6.5M new ETH and burned ~3.5M. That implies annualized issuance ~580K ETH vs. burn 1.75M ETH (today's gas levels). In other words, at recent activity levels Ethereum's net supply growth is slightly negative (–1.0% per year).
Issuance
- ~580K ETH/year
- ~0.5% inflation
- 90% reduction post-Merge
Burn
- ~1.7M ETH/year
- ~0.98% of supply
- Usage-driven deflation
Net Effect
- Mildly deflationary
- Supply shrunk ~350K ETH
- Dynamic supply curve
Usage & Growth
The base-fee burn depends on how people use Ethereum. Notably, DeFi dominates Ethereum activity – over 90% of all decentralized finance volume occurs on Ethereum and its Layer-2s. Major DeFi apps (AMMs, lending, etc.) drive significant gas usage and fees.
Primary Drivers
- DeFi TVL peaking ~$150B
- NFT trading and minting
- Layer-2 rollup growth
- Stablecoin transfers
Future Growth
- Pectra/Blobs upgrade
- L2 fee optimization
- RWA tokenization
- Gaming/metaverse
2024-25 Catalysts
Looking ahead, several macro and structural factors could catalyze Ethereum:
Market Catalysts
- Bitcoin Halving (Apr 2024)
- ETH ETFs & Institutional Flows
- 3-5% Staking Yields
- RWA Tokenization Growth
Technical Catalysts
- Pectra Upgrade
- EIP-4844 (Blobs)
- L2 Ecosystem Expansion
- Enterprise Adoption
Investment Perspective
In summary, Ethereum combines robust fundamentals with timely catalysts. It is both a base-layer trust asset and a usage-driven monetary asset. The post-Merge economics have tilted ETH toward deflation when the network is busy, a feature unique among blockchains.
After years of trailing Bitcoin, ETH now sits undervalued by some measures. The ETH/BTC ratio bottom and renewed ETH-specific narratives suggest we may be entering a "late-cycle" run for altcoins. Institutional flows (including ETF capital) are beginning to rotate into Ethereum, and upcoming demand drivers (crypto adoption, innovation) could push ETH higher.
From a research standpoint, Ethereum's thesis rests on its evolving identity: a "digital oil" powering a world-computer, and a trust layer securing trillions in value. This dual narrative — coupled with negative net issuance under heavy use — provides a strong case for Ethereum as a long-term store of value and growth asset.
ETH Is Digital Oil: The Investment Thesis for a Machine-Driven Future
TL;DR
Ethereum is not a company. ETH is not equity. ETH is programmable collateral, yield-generating commodity, and the neutral reserve powering the machine-native economy. As AI agents emerge, as finance moves onchain, and as institutions seek yield with credible neutrality, ETH is the asset they'll need—but don't yet own. This mispricing is our opportunity.
I. The Shift: From Sovereign Systems to Autonomous Infrastructure
We're witnessing a structural migration from fiat-based analog finance to permissionless, composable, and credibly neutral infrastructure. Ethereum is emerging as the operating system for this onchain future.
Over $767B in tokenized assets already reside on Ethereum L1 and L2s. It's the platform of choice for stablecoins (60%+ market share), RWAs (82%), and institutional-grade smart contract deployment.
Ethereum isn't just infrastructure — it's the final settlement layer of the AI and tokenized economies.
II. ETH's Role: More Than Money
ETH is not merely a speculative asset — it is a productive, scarce, and deflationary commodity underpinning the entire Ethereum economy:
- Digital Oil: ETH is consumed (burned) to fuel every transaction, every RWA issuance, every stablecoin transfer, and every AI agent deployment.
- Native Yield: ETH can be staked with a validator set securing > $88B in value, yielding ~3% APY while preserving liquidity through LSDs.
- Pristine Collateral: ETH is credibly neutral—free from jurisdictional or issuer risk—and collateralizes billions in DeFi, stablecoins, and permissioned finance.
- Deflationary by Design: Since The Merge, ETH's supply inflation has averaged ~0.09%, often going negative due to EIP-1559 burns.
- Strategic Reserve Asset: ETH is being stockpiled by protocols, DAOs, institutions, and sovereign treasuries. Its programmability makes it far more capital-efficient than BTC.
III. Why ETH Is Mispriced
ETH/BTC has declined 70% from its 2022 ratio, despite Ethereum dominating every institutional metric. Why?
Because BTC is understood by TradFi: "digital gold." ETH, however, defies legacy valuation. It's oil, it's yield, it's collateral. You don't model ETH with a DCF — you model it like energy or monetary base assets.
This disconnect creates asymmetric opportunity. ETH isn't lagging — it's loading.
IV. ETH x AI: The Coming Explosion
AI agents will need a native economy: money, identity, settlement, property rights. Ethereum is the only platform with all of that today:
- Finality & Composability: For agents transacting, bidding, and negotiating in real-time.
- Smart Contract Enforcement: Rights enforced by code, not courts.
- Agent Meshes: Autonomous agents staking, settling, and coordinating value — all denominated in ETH.
ETH is not just digital oil. It's machine money.
V. Valuation Benchmarks
Forget P/E multiples. ETH valuation maps to real-world commodity and monetary frameworks:
- Oil reserves: $85T
- Global M2: $93T
- Bond market collateral: $141T
- Tokenized global assets (10% penetration): $50T
Even a conservative 10% share of these flows implies ETH can support a multi-trillion-dollar valuation.
Short-term target: $8K ETH
Mid-term: $80K ETH
Long-term: Uncapped, reflexively deflationary
VI. Catalysts
- ✅ ETH ETFs approved, staking yield ETFs next
- ✅ Regulatory clarity: ETH = commodity
- ✅ Strategic ETH Reserve growing (~$2.5B publicly disclosed)
- ✅ AI-native economies forming: L2s for agents (e.g. World Chain, Base)
- ✅ Ethereum's renaissance: zkVMs, account abstraction, cross-L2 unification
Conclusion: ETH Is the Reserve Asset of the Onchain Renaissance
The Ethereum thesis is now simple: as the global economy replatforms onto autonomous, tokenized rails, ETH becomes the neutral, productive, and programmable base layer money.
The world just doesn't know it yet.