In this cycle, Ethereum (ETH), which was once dormant in price (a "falling floor" for some), has recently shown a strong momentum that has excited the market, with its price surging over 65% in just a month and nearly doubling since its low point in April.
According to the latest report by Bernstein analysts, there are three core driving factors behind Ethereum's price explosion.
Stablecoin and Real World Assets (RWA) Wave
Bernstein analysts point out that the primary key factor driving Ethereum's recent price surge is the prosperity of the stablecoin market and the rise of Real World Assets (RWA) tokenization. The current cryptocurrency market cycle is continuously expanding, with its application scenarios extending beyond mere value storage. Under this trend, stablecoin payments and securities tokenization are gaining increasing market momentum.
For example, payment giant Stripe's acquisition of the stablecoin platform Bridge for $1.1 billion, and Meta's recent signal of considering restarting its stablecoin plan, are redirecting market focus back to the practical application value of underlying blockchain technology.
As the most mature smart contract platform currently, Ethereum holds 51% of the total stablecoin supply, undoubtedly making it a core beneficiary of this trend.
Moreover, traditional financial giants like BlackRock and Franklin Templeton are actively promoting market adoption of Real World Assets (RWA) tokenization. According to RWA.xyz data, the market valuation has exceeded $22 billion, with Ethereum again dominating, further solidifying its position as the preferred infrastructure for institutional applications and practical use cases.
Layer 2 Scaling Institutionalization
The second major driving factor is the institutionalization process of Ethereum's Layer 2 scaling solutions. Although there are still some doubts about whether Layer 2 can directly bring value accumulation to Ethereum's mainnet (ETH), Bernstein analysts believe that with Base, incubated by Coinbase, generating about $84 million in revenue last year, and Robinhood recently announcing the acquisition of WonderFi, which operates an Ethereum Layer 2 network, these cases clearly show that Ethereum's Layer 2 solutions are playing an increasingly important role in institutional crypto infrastructure.
These Layer 2 networks continue to bring actual usage and demand to the mainnet by paying Gas fees and settling transactions, positioning Ethereum as the leading platform for institutional smart contract applications. Analysts expect that the strong adoption of Layer 2 solutions could significantly drive ETH's price increase.
Strategic Short Covering
The third factor, which Bernstein analysts also consider more strategic, is Ethereum's short covering (ETH Short Unwind). In the past 12 to 18 months, some crypto hedge funds habitually used Ethereum as a Delta-neutral hedging tool, taking a strategy of going long on Bitcoin (BTC) and Solana (SOL) while shorting Ethereum.
However, as the market's narrative focus gradually shifts from mere value storage to the expansion of blockchain technology in institutional adoption and stablecoin payments, Ethereum's role as a "underperformer" becomes increasingly difficult to maintain. Therefore, these previously positioned strategic short positions are beginning to cover, meaning fund managers are starting to buy Ethereum to close their short positions, directly providing strong momentum for Ethereum's price increase.
