According to CoinDesk, Ether (ETH), the world's second-largest cryptocurrency, has outperformed its larger rival bitcoin (BTC) with a 33% gain year-to-date. Broker Bernstein identified five catalysts contributing to the cryptocurrency's recent gains in a research report on Monday. Firstly, the ether supply is deflationary and has not increased since the Ethereum blockchain’s shift to a proof-of-stake consensus model in September 2022. The amount of ether locked up is also an important factor, with ETH held on exchanges at an all-time low of 11%.
Increased decentralized finance (DeFi) activity, the growth of Ethereum Layer 2 networks, and the upcoming Dencun upgrade of the Ethereum blockchain are also driving factors. With further clarity on token regulations, application tokens such as DeFi tokens could potentially allow revenue sharing with token stakers, driving higher activity and Ethereum fees. The Uniswap fee switch proposal, which resulted in a 60% gain in the UNI governance token, is cited as an example of how token economic designs could improve. Following the Dencun upgrade in March, ETH contributors expect a further 90% reduction in Ethereum layer 2 transaction costs and improved profitability of layer 2 networks, reducing congestion on the mainnet and driving higher volumes to the ecosystem.
