Ethereum February 2024 Update

Market Data:

Market Commentary: 
In February, markets rose upwards as the big tech and AI equities led rallies continued, with the S&P up 5.2%, NASDAQ up 6.1%, and Gold up 0.2%. NVDA continues its rally alongside AI coins in crypto. Fixed income markets came under pressure as investors priced in later rate cuts in 2024, with US treasuries down 1.3% in February and US headline inflation coming in at 3.1% YoY for January. This is in comparison to ETH, which ended the month up 46.47%, rising from $2.3K to $3.3K. Both BTC and ETH performed similarly in the month of February, although we expect ETH to outperform BTC on a relative basis with the upcoming Dencun upgrade and a potential ETF decision in May. 

BTC ETFs showed sustained activity in February, reaching a peak inflow day of $673.4M on February 28. Notably, the BTC ETFs also obliterated previous volume records, almost reaching a $6B day towards the end of February. Importantly, IBIT is the newest member of the $10B ETF club and the fastest ETF ever to reach that milestone. It would appear that after a temporary and short-lived sell-the-news event, ETF inflows are strong and, importantly, sustained. 
GBTC outflows have slowed down significantly, and we are starting to see days with significant net inflows, which is a positive sign for ETF adoption. With the AUM wars continuing, Blackrock’s IBIT is currently winning with an AUM of $10.01B, and Fidelity’s a close second at $6.47B. 

Restaking demand has surged on EigenLayer, with TVL crossing $10B and a further $5B in TVL for liquid restaking protocols. The demand for LRTs shows no signs of slowing down, and we expect it to increase further as more AVSs launch and announce potential tokens. 

Next on the roadmap for Ethereum is the Dencun upgrade, which is currently slated for March 13. This should reduce data posting costs for L2s. However, there is much more work to be done to make Ethereum cost-competitive with pure DA layers like Celestia and EigenDA.