After its price fell by 23% during the past three years, holders of Ethereum (ETH +2.02%) are understandably quite hungry for any signs that better times are ahead.
They're in luck. But is one piece of good news enough to make the coin worth buying again? Let's break down what just happened and what it could portend for its future.
CRYPTO: ETH
Key Data Points
It's going to be easier for certain institutional investors to hold Ethereum
For big financial players to use Ethereum, they need a lot more than the average retail investor to hold and trade it. On that note, on March 11 a subsidiary of the Deutsche Boerse, Germany's largest stock exchange, said that it would begin offering the ability to hold Ethereum as well as Bitcoin in its custody for its institutional clients. The exchange plans to offer additional cryptocurrency services, like holding stablecoins and tokenizing real world assets in the near future; its clients will be able to start using its Ethereum custody services in April.
This move signals that Ethereum, and cryptocurrencies more broadly, are finally getting a bit more traction in the E.U.'s financial industry, which has generally been more reluctant to engage with crypto than its U.S. counterpart. For holders, this is an undeniably positive development. Still, there is no guarantee that the investment banks and trading groups that use Deutsche Boerse will be buying large volumes of Ethereum to make use of the exchange's new capabilities. But, at a minimum, it's now going to be technically possible for them to do that if they want.
So, it's reasonable to expect that some of those clients will be buying at least a bit of the coin. Because the Boerse also will launch cryptocurrency transaction settlement at the same time, there may be a bit more Ethereum trading volume in the future. It's also very plausible that with more capital available to the blockchain, projects in the ecosystem will have a little easier time finding funding from institutional investors.
There's no salvation to find here
Nonetheless, this new development is not a reason to buy Ethereum, and it will probably not reverse or even slow the chain's tailspin.
Ethereum's market cap is $234 billion, and as of March 14, its 24-hour trading volume was close to $13 billion, down 29% from the prior 24-hour period. In January of this year, the German exchange reported a turnover of just over $140 billion across its cash-settled market transactions of stocks and other securities. Given that Ethereum is still a frontier asset, it is not likely that it will capture even 1% of the Deutsche Boerse's cash volume.
There's simply no way that conservative professional investors would start to pile into such a volatile asset even if they thought there could be some upside in store down the line. What's more, even if Ethereum did capture that share of the volume, it might not be enough to make for a meaningful difference in the average level of demand for the coin at any given point in time.
But the real reason Ethereum isn't a purchase now is that there is still not any major progress in making the chain more competitive with its arch rival, Solana. There aren't currently any disclosed plans to onboard Solana to the Deutsche Boerse, which is a small consolation for Ethereum holders, but that doesn't change the fact that Solana is a much faster and cheaper chain to use.
If other E.U.-based exchanges follow the Boerse's footsteps, or if Ethereum custody and trading is an unexpected smash hit in terms of its adoption among institutional investors in that region, it could be worth reevaluating whether to buy it. Until then, it's best to stay away.
