With the ETH treasury explosion underway, where is the path of the institution-led bull market heading?

整理：ChainCatcher

The Ethereum treasury craze is sweeping the market. Several listed companies are continuously increasing their holdings while staking Ethereum to earn annualized returns of 3-14%.

Is this wave of institutional-driven enthusiasm the beginning of a long-term allocation? How far has the bull market really progressed?

In this episode of Space "ETH Treasury Explosion in Progress, Where is the Path of the Institution-Led Bull Market Going?" we have invited guests attending this Space event, including Bruce, the investment head of Summer Ventures, Duke SHI, the head of proprietary investment at Huaxing Capital, Anthony, the ecosystem director at Polyhedra, Jade, the PR manager/researcher at HashKey Group, Kiwi, a researcher at OKX Ventures, and Sam, a researcher at IOSG Ventures, to analyze the trends of the ETH treasury and discuss the progress and strategies of this bull market.

You can click here to listen to the full replay: https://x.com/i/spaces/1MYxNwlMNMNKw/peek

Highlights of Key Insights

• Bruce: Institutional allocation shows a long-term trend: First, the expectation of USD inflation continues, and mainstream crypto assets like BTC and ETH have certain anti-inflation characteristics; second, if Ethereum staking ETFs are approved, it will bring a stable annual inflow of 3-4%.
• Bruce: Ordinary investors should focus on four key institutional funding indicators: ETF net inflow/outflow, total locked value (TVL) in DeFi, stablecoin issuance, and Bitcoin market cap ratio.
• Duke: The recent rise of Ethereum is mainly driven by two factors: ETH ETF allocation and ETH treasury companies.
• Anthony: Regarding indicators for tracking institutional funding trends, I believe that in addition to price as a superficial data point, we should pay more attention to the substantive signals of capital flow.
• Kiwi: In the long run, if the supply and demand for Ethereum ETFs improve, this ratio could potentially reach 10%-20% of the circulating supply.
• Sam: I recommend that investors closely monitor the SEC filings of crypto stocks, especially the S4 forms and Investor decks.
• Jade: To seize event-driven trading opportunities, it is essential to analyze multiple factors such as capital flow and price trends comprehensively, rather than looking at a single indicator in isolation.

Question 1: Please introduce yourselves briefly.

Bruce: I am Bruce from Summer Ventures, mainly responsible for investments and research in the Web3 field.
Duke: I am Duke from Huaxing Capital. Recently, we have been focusing on projects and businesses related to the integration of crypto stocks, RWA, payments, and Web3 financial infrastructure.

Jade: I am Jade, the PR head at HashKey, and I also serve as a researcher. Recently, I have published some market analyses in Hong Kong media.

Kiwi: I am the research head at OKX Ventures. I have been deeply involved in Ethereum ecosystem investment research, continuously conducting foundational exploration and industry information analysis. It is a great honor to exchange and learn with everyone here.

Sam: Hello everyone, I am Sam from IOSG Ventures. I am currently focusing on the RWA (real-world assets) sector and continuously tracking payments and AI directions.

Question 2: How do you view the trend of increasing Ethereum treasury holdings? Is it a sustainable long-term layout or a temporary liquidity event?

Bruce: This week, ETF net inflows reached $2.8 billion, a significant increase from last week's $300 million, indicating a rapid rise in capital activity. From historical data, it has been six months since the last small bull market's ETF net inflow (December 2024), and current institutional allocation is still in the early stages.

Institutional allocation shows a long-term trend: First, the expectation of USD inflation continues, and mainstream crypto assets like BTC and ETH have certain anti-inflation characteristics; second, if Ethereum staking ETFs are approved, it will bring a stable annual inflow of 3-4%. Compared to traditional assets, Ethereum's allocation advantages are evident, and the timing for mid-to-long-term layout has emerged.

Market indicators show that the current total locked value (TVL) in DeFi has just reached the previous bull market peak, and on-chain data and ecological development indicate that the bull market is in its early stages. Institutions entering the market at this time confirm that the allocation cycle has just begun.

Duke: The recent rise of Ethereum is mainly driven by two factors: ETH ETF allocation and ETH treasury companies. Data shows that major mining companies currently hold 3.57 million ETH (accounting for 2.95% of the circulating supply), with leading companies like Bitmine planning to increase their holdings to 5%, and some companies targeting 10%, which will require long-term large capital investments.

Although the buyback trend is clear, it is important to note that mining companies often announce their buyback plans after ETH prices rise, and their average cost of financing through ATM issuance has reached $3,500-$4,400. Without experiencing significant corrections, the price response strategies of mining companies are worth continuous attention.

Anthony: Currently, funds are shifting towards programmable yield-generating infrastructure, and Ethereum is increasingly seen as a "digital sovereign bond" that combines programmability, liquidity, and low trust requirements.

Unlike the narrative-driven market of 2021, this round of market activity is driven by balance sheet integration (staking yields + custody solutions + ETF exposure). This reflects a fundamental shift in the holder structure: institutional funds have longer holding periods and lower turnover rates, forming a long-term structural rotation.

Kiwi: There is indeed a possibility of sustained buying in the short term. Currently, Bitcoin ETFs have accumulated about $5.5 billion in purchases, accounting for 6.5% of BTC's market cap. If we consider that Bitcoin has already corrected by 15%-20%, the actual proportion has reached 8%-9%. Meanwhile, the current Ethereum ETF is only $1.2 billion in size (excluding ATM mechanisms), accounting for 2.5% of ETH's circulating supply. This ratio is very similar to when Solana or Atom reached a staking rate of 30%-40%, but Ethereum and its derivatives (like Adobe, SSV) only slowly climbed to 20% at that time.

I believe this is strongly related to asset attributes. In the long run, if the supply and demand for Ethereum ETFs improve, this ratio could potentially reach 10%-20% of the circulating supply. After all, the overall liquidity capital pool remains abundant.

Question 3: For ordinary investors, which indicators should they pay the most attention to when tracking institutional movements?

Bruce: Ordinary investors should focus on four key institutional funding indicators:

1. ETF net inflow/outflow: directly affects the market trend; net outflows often indicate a downturn;
2. Total locked value (TVL) in DeFi: breaking previous highs indicates ecological activity;
3. Stablecoin issuance: USDT/USDC issuance reflects continuous capital inflow;
4. Bitcoin market cap ratio: dropping from 61% to 59% shows capital rotation.

The first three indicators directly reflect institutional movements, while the market cap ratio reveals the trend of capital rotation; combining all four provides the best grasp of market pulse.

Duke: First, it is the second-order changes in ETF fund flows. Daily flow can only reflect buying and selling games, but if we observe the long-term trend (such as the acceleration of weekly net inflows), we can discover the true movements of institutional funds.

Another more direct indicator comes from the movements of ETH treasury companies. A large proportion of this round of institutional funds comes from the secondary market, so the continuous financing and buying behavior of mining companies are actually providing ammunition reserves for the market.

I recommend focusing on:
1) Whether there are larger-scale financing plans announced;
2) The actual execution capability of the allocation after financing.

These two relatively easy-to-obtain hot indicators in the market can serve as important supplements to the indicator system proposed by Bruce.

Anthony: Regarding indicators for tracking institutional funding trends, I believe that in addition to price as a superficial data point, we should pay more attention to the substantive signals of capital flow.

For ordinary investors, I recommend tracking three key dimensions daily:

1. ETF fund flow, which directly reflects institutional asset allocation trends;
2. On-chain staking growth, which can measure the real confidence of market participants;
3. Net outflow scale from exchanges, which often indicates an increase in long-term holding willingness.

When these three indicators rise simultaneously, even if market sentiment has not yet warmed up, it means that real buying power is accumulating.

From the perspective of infrastructure construction, on-chain indicators such as cross-chain bridge activity and Rollup settlement scale are more forward-looking. These data can clearly distinguish between the actual use of funds and pure speculative behavior, often sending early signals before market speculation heats up. These indicators reflecting the real use of infrastructure are the most reliable barometers for predicting market trends.

Jade: While these indicators have reference value, it is not advisable to rely too heavily on them in actual trading. We have observed that despite listed companies frequently building structures and trading through ETH, as well as projects like ICP and XRP conducting Z-Portfolio operations, token prices have not shown significant fluctuations.

This reflects that in the current market environment, institutional actions and market news have limited direct impact on token prices. To seize event-driven trading opportunities, it is essential to analyze multiple factors such as capital flow and price trends comprehensively, rather than looking at a single indicator in isolation. It should be noted that the news aspect is only a small part of the market puzzle.

Sam: From my personal analytical framework, I focus more on the "active value" of ETH. This refers to its actual utility value within the entire crypto ecosystem, including the contribution of various L2 networks and their value components. As Ray just mentioned, referencing the valuation logic of the gold stock market, indicators such as NAV multiples are crucial for ETH valuation.

Taking institutions like ShopBank and SPET as examples, their weekly disclosures of daily ETH holding ratio changes can effectively help us gauge the pace of institutional accumulation of ETH and potential risks.

Question 4: What factors will most critically influence the ETH market and overall crypto capital flow?

Bruce: Regulatory policies are the core driving factors of this round of market activity.** From the shift in Trump’s policies, the release of the SEC roadmap, to the passing of the stablecoin bill, the gradual clarification of the regulatory framework has directly driven capital into the market. However, it should be noted that the SEC's "crypto plan" is still in the declaration stage and has not yet formed an executable plan.

The legislative process of the "2025 Digital Asset Market Clarity Act" (Clarity Act) is particularly crucial, as it will determine the compliance prospects for assets like Ethereum and Solana. However, considering the congressional review cycle and potential black swan risks, regulation still has significant uncertainties and requires continuous tracking and assessment.

Duke: Regulatory policies are the most direct influencing factors in the short term. The direction of U.S. policies has a leading effect on the global market, as evidenced by the market fluctuations at the end of July. The impact of macro factors is more complex; the current high debt issue in the U.S. is particularly critical. Although the development of stablecoins has temporarily alleviated pressure, fundamental issues such as debt restructuring will have a long-term impact on the crypto market.

Traditional assets are centralized, but the accounting method is decentralized, and the perception of crypto asset attributes is changing. Although once seen as a safe-haven asset, its actual performance is closer to high-risk assets, with volatility far exceeding that of the Nasdaq index and a high correlation with tech stock trends. This characteristic requires investors to be particularly cautious in risk control.

Jade: Currently, the most critical factor is the expectation of interest rate cuts. I am closely monitoring interest rate cut data, such as whether there will be two or three cuts this year. Currently, the Federal Reserve is filling the liquidity gap in the stock market through overnight reverse repos, which has actually strengthened market confidence in three rate cuts this year.

However, the real challenge lies in the fact that due to tariff policies and other factors, CPI data may rebound, and whether we can truly achieve three rate cuts remains uncertain. Although market sentiment is optimistic, how the specific path of rate cuts unfolds needs to be kept in clear awareness.

Sam: From the regulatory and policy perspective, in 2024, we witnessed the approval of Bitcoin ETFs and Ethereum ETFs, and we may soon see other ETFs like Solana pass approval. In July of this year, there were also provisions related to ETH in the "Genius Act."

As Mr. Bruce mentioned, these two bills will have a profound impact on the valuation system. The upcoming executive order in August will also influence the pricing mechanism of cryptocurrencies.

Question 5: Vitalik recently mentioned in a public speech that Ethereum's positioning as a "global ledger" may be more in line with the current development direction than that of a "world computer." How do you interpret this statement? Does it mean that Ethereum will fully embrace Wall Street and move towards compliance?

Duke: This question directly addresses the core contradiction in the crypto field: the conflict between the ideal of decentralization and the reality of the development path.** The concept of a "world computer" may lead to excessive centralization, which contradicts the original intention of decentralization when Ethereum was founded.**

The deep integration of Web2 and Web3 is driving traditional assets onto the blockchain, and these assets that require centralized endorsement are more easily trusted by the market. Vitalik's shift to the positioning of a "global ledger" is to uphold the essence of decentralization in real-world applications.

Interestingly, the market's attitude towards Vitalik changes with price fluctuations, while he has reduced public statements, which may indicate that Ethereum's development direction is increasingly shaped by market forces.

Question 6: How to achieve asset appreciation and risk control, and which assets should be allocated? Can DeFi become a new growth engine, or should we still focus on mainstream assets? Will the altcoin season come in the future?

Bruce: This round of market activity is fundamentally similar to DeFi Summer, both centered on liquidity, but the driving force has shifted from protocols like Uniswap to institutional funds like ETFs.

To recreate the former glory, three conditions must be met: compliance of on-chain assets, innovative applications of stablecoins (such as the Circle model), and the combinatorial innovation capability of DeFi projects. All three are indispensable.

Jade: The essence of capital rotation is a game of chips. In the past four-year cycles, capital quickly flowed from Bitcoin to Ethereum and then to altcoins, but in this round, Bitcoin has risen independently for nearly a year, while Ethereum has just started, indicating that institutional entry has extended the cycle rhythm.

Once Ethereum rises to a certain stage, capital will shift towards segmented application scenarios, which aligns with the operational logic of institutions first allocating mainstream coins and then laying out ecosystems. We are waiting for truly attractive landing applications to emerge.

Kiwi: This round of the market shows characteristics of fragmented capital pools, unlike the past where BTC, ETH, and altcoins moved in tandem; the volatility of each pool has significantly decreased. This is due to players shifting to the "stablecoin game," with altcoins often packaged through stablecoins to expand their capital pools. Although this will trigger long-term buybacks, it essentially represents a dynamic balance between project parties cashing out and market makers profiting.

In the dollar-dominated large capital pool, trading and unloading are easier to operate. Tokens must be linked to the dollar through ATM mechanisms to achieve circulation of sub-mainstream coins. After the FTX incident, platforms like Robinhood have seized development opportunities, and their buyback scale will become the industry benchmark. Compared to Binance, emerging platforms have a significant gap in unloading capabilities, while the Summort model may be most suitable for Robinhood's development.

Sam: I recommend that investors closely monitor the SEC filings of crypto stocks, especially the S4 forms and Investor decks.**

Taking The Ether Machine as an example, its documents indicate that when the stock price reaches a specific target, management can receive additional equity incentives that can be sold. In-depth research on these documents can help predict potential selling opportunities and better understand the underlying reasons during market downturns.

Jade: In addition to mainstream sectors, biotechnology and other fields are also worth paying attention to. The RWA sector has already seen leading companies with demonstrative effects, which will drive subsequent follow-up behaviors. Although previous research on tokens has been shallow, the current cycle provides a good opportunity for deeper exploration.