The financial world is experiencing a surge in encryption, and Ethereum may become the biggest winner.

The traditional financial sector seems to have exhausted its growth momentum. Investment in artificial intelligence has become saturated, and the appeal of software companies is no longer as exciting as it was in the past twenty years.

For growth investors seeking innovative stories, they are clearly aware that most AI stocks are overvalued, and other "growth" narratives are also hard to find. Even the once highly sought-after tech giant stocks are gradually transforming into "compound growth" stocks that focus on quality, profit maximization, and an annualized return of around 15%.

It is worth noting that the median enterprise value/revenue (EV/Rev) multiple for software companies has fallen below 2.0 times.

encryption assets back in the spotlight

Bitcoin has broken its historical high, and with improvements in the regulatory environment, cryptocurrency assets have returned to the public eye for the first time since 2021. However, unlike the previous boom, this time the focus is on digital gold, stablecoins, "tokenization," and payment innovations. Some well-known fintech companies have listed cryptocurrency assets as a key focus for the next phase of growth.

The potential advantages of Ethereum

For seasoned participants in the encryption industry, the competitive landscape of smart contract platforms appears to be fragmented. Various high-performance public chains and scaling solutions are emerging, and Ethereum's leading position seems to be facing serious challenges.

However, the traditional financial sector's understanding of these emerging platforms may be quite limited. In contrast, Ethereum, as the only encryption asset with a liquidity ETF besides Bitcoin, has qualities that withstand the test of time and are more easily recognized. For Wall Street investors who are accustomed to looking for clear catalysts in relative value investment opportunities, Ethereum may be more appealing.

A simple survey will reveal that Ethereum has the largest on-chain stablecoin pool. Investors will soon realize that, despite Bitcoin hitting new highs, the price of Ethereum is still over 30% lower than its peak in 2021. This relatively lagging performance may present a potential investment opportunity in the eyes of traditional investors.

Changes in capital flow

Data shows that since the beginning of the year, Ethereum's performance has begun to surpass that of some other major encryption assets. The inflow of funds into spot ETFs continues to rise, and some institutional investors are also starting to increase their exposure to Ethereum.

This trend indicates that Ethereum is attracting new buyers, possibly including some traditional financial institutions. It is worth noting that this influx of capital may lead to a decoupling of the value of Ethereum as an asset from the actual usage of its network.

Looking to the future

The influx of external investors may change the market's perception of Ethereum, challenging the long-held view of "only going down and not up." If this trend continues, it could trigger a broader speculative frenzy, driving the price of Ethereum to new highs.

However, it is important to emphasize that this potential price increase does not mean that Ethereum has resolved all the technical and ecosystem challenges it faces. Investors should remain cautious when participating and fully recognize the high-risk nature of the encryption market.