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 increasing.
The new report from Coinbase Institutional was co-authored by David Duong, head of institutional research, and David Han, institutional research analyst, summarizing 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 U.S. interest rate cuts and China's large-scale fiscal and monetary stimulus policies, which should enhance market liquidity and support BTC's performance."
Coinbase also mentioned that the U.S. Securities and Exchange Commission (SEC) approved the trading of options for BlackRock's Bitcoin spot ETF (IBIT) [still pending approval from the OCC (Options Clearing Corporation) and CFTC (Commodity Futures Trading Commission)], which the exchange views as a positive signal that this options trading will increase institutional adoption and liquidity for Bitcoin.
Ethereum is questioned, but on-chain activity is increasing
On the other hand, Coinbase stated that they felt 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 trading volume on Ethereum decentralized exchanges (DEX) slightly increasing, and the USDC deposit rate on the lending platform Aave rising moderately 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 proves the success of expanding block space through integrating networks and L2."