The institutional division of the American cryptocurrency exchange Coinbase emphasized optimistic expectations for the cryptocurrency market in a report released last week, believing that factors such as expectations for interest rate cuts in the U.S. and monetary stimulus policies in China could boost Bitcoin's performance in the fourth quarter of 2024. The exchange also noted that on-chain activity for Ethereum is growing.
The new report from Coinbase Institutional, co-authored by Head of Institutional Research David Duong and Institutional Research Analyst David Han, summarized key insights from the "Token2049" and "Solana Breakpoint" conferences held in Singapore. They wrote:
"We expect the fourth quarter of 2024 to be positive, thanks to interest rate cuts in the U.S. and large-scale fiscal and monetary stimulus policies in China, which should enhance market liquidity and support BTC's performance."
Coinbase also mentioned that the U.S. Securities and Exchange Commission (SEC) approved the options trading for BlackRock's Bitcoin spot ETF (IBIT) [still pending approval from OCC (Options Clearing Corporation) and CFTC (Commodity Futures Trading Commission)], which the exchange views as a positive signal, as this options trading will enhance institutional adoption and liquidity for Bitcoin.
Ethereum Faces Scrutiny, But On-Chain Activity Is Growing
On the other hand, Coinbase stated that they sensed positive investor sentiment from the two cryptocurrency events, but also found some skepticism in the market regarding Ethereum, including that Ether did not benefit as expected from the launch of the U.S. Ether spot ETF. This skeptical attitude contrasts with the excitement surrounding Bitcoin and alternative networks, such as Solana, which is rapidly expanding its ecosystem through new products and partnerships.
Coinbase's report stated: "Compared to Ethereum Layer-2, people seem to be more focused on emerging alternative Layer-1 networks, as well as the potential for Bitcoin L2 to provide stronger programmability and new revenue sources for miners."
Coinbase pointed out the revival of on-chain activity for Ethereum, which has led to an increase in transaction fees for the network, although the absolute number of transactions and active addresses remained stable. The report indicated that the growth in activity does not have a single driving factor, with a slight increase in trading volume on Ethereum decentralized exchanges (DEX) and a moderate rise in USDC deposit rates on the lending platform Aave from 3.5% to 4.5%, indicating a slight increase in leverage, while the total transfer volume of ETH also rose by 17% alongside the increase in fees.
Nevertheless, Coinbase stated that the weekly growth rate of activity on the Ethereum mainnet remains relatively small compared to L2 and Solana's activity, "In our view, this is due to the sensitivity of block space limitations on the Ethereum mainnet, which also demonstrates the success of expanding block space through the integration of networks and L2."