Institutional Investors Turn to Ethereum: From Asset Reserves to Ecosystem Participants

The driving force behind Bitcoin's new all-time high has shifted from retail investors to institutions. The approval of the Bitcoin spot ETF has provided Wall Street with a compliant entry point, while some listed companies have seen significant increases in book value after listing Bitcoin as a financial reserve asset, gaining recognition in the capital markets and enhancing the credibility of Bitcoin as an asset allocation, attracting more institutions to follow suit.

However, the story of Bitcoin reserves has matured. Early entrants have a first-mover advantage, and their model is difficult to replicate, making it hard for later entrants to gain a similar brand premium and market recognition through Bitcoin allocation. For most traditional institutions, allocating Bitcoin is more like asset diversification rather than a growth strategy.

New growth points are gradually migrating towards Ethereum, with more and more institutions starting to lay out Ethereum reserve strategies. Unlike Bitcoin, after adopting the PoS consensus mechanism, institutions can participate in network validation and earn rewards by staking ETH, thereby hedging against the dilution risk brought by the new ETH. Data shows that as of July 18, 35.8 million ETH have been staked, with stakers earning an annualized yield of 2.8%, while non-stakers face an approximate annualized destruction rate of 1.4%.

Compared to simply holding Bitcoin and waiting for appreciation, Ethereum reserves institutions can profit by participating in the network. Several listed companies have begun to attempt strategic reserves in Ethereum and have seen initial results, with some even shifting from Bitcoin to Ethereum. For these institutions, ETH is not only a balance sheet asset but also a productive asset for participating in the ecosystem, as well as a pathway to becoming institutional "miners".

The destruction mechanism of Ethereum further reinforces this logic. When the network is active, the amount of ETH destroyed increases. If the amount destroyed exceeds the new issuance, the network will enter a deflationary state, enhancing the scarcity of ETH and improving the actual returns for stakers.

As more institutions enter the Ethereum staking market, they will no longer just be fund providers, but will also take on the role of major miners. Currently, Ethereum's strategic reserve layout is still in the early stages, making it a fair competition for companies looking to establish financial discourse power.

The Institutionalization Trend and New Opportunities in the Ethereum Staking Market

As the Ethereum market becomes increasingly institutionalized, the staking market will also shift from being crypto-native to being institution-driven, entering a new phase of compliance and scaling.

In addition to some institutions actively participating in staking through free reserve assets, ETF issuers are also accelerating their layout. Recently, several well-known institutions have submitted applications to regulatory authorities to add staking features.

Once these ETF institutions bring in large amounts of liquidity, it will further expand the market size of the Ethereum staking track. Data shows that as of July 18, the TVL of liquid staking on Ethereum has reached $51.62 billion, close to an all-time high, and has increased by 142.5% from the low in April.

Industry insiders point out that Ethereum's coin stock enterprises have two special financing conveniences: first, using staking rewards as cash flow to support interest financing, and second, using staking rewards and on-chain DeFi operations as another dimension of the valuation model, which may have a greater premium than a pure NAV model. Some institutions have begun exploring the investment of ETH reserves into DeFi foundational businesses. This suggests that staking and other DeFi sectors may be poised for a value reassessment.

Despite the increasingly positive attitude of institutions, there are also higher demands for the security, compliance, and liquidity management capabilities of protocols. Currently, multiple institutions have clear standards when selecting staking partners, emphasizing compliance capabilities and technical reliability. Some institutions even adopt diversified cooperation methods to disperse risks. This trend may further marginalize the staking protocols of small and medium nodes.

The Ethereum liquid staking market shows a significant head effect. A certain protocol dominates the market with a TVL exceeding $33.18 billion and a market share of over 60%. Several other large protocols form the second tier, with TVLs all at the billion-dollar level. In addition, there are numerous projects in the market covering subfields such as re-staking, infrastructure, and LSTfi.

From various institutions accelerating their entry to ETF issuers continuously pushing forward, the market sentiment for Ethereum has been ignited. However, whether the reserve narrative can continue to support the development of the staking market still needs time and practical testing.