The Bernstein report reveals the ETH staking yields and potential risks, how traditional whales are positioning themselves?

A recent report released by the brokerage firm Bernstein shows that Ethereum (ETH) reserves differ from companies focused on Bitcoin in asset management: they both hold ETH as reserve assets and generate cash flow through staking. However, analysts point out that this model also comes with liquidity risks and smart contract risks—important factors that companies need to consider when deploying capital. This report provides an in-depth analysis of the advantages and challenges of Ethereum reserve strategies, offering valuable insights for businesses in crypto assets allocation.

Ethereum Reserve Strategy: The Appeal of Staking Rewards

The Bernstein report points out that a significant advantage of Ethereum reserves is that they generate actual income through staking, which can be counted as operating profit. Staking refers to the process of pledging assets to support network operations. Ethereum, along with other proof-of-stake networks such as Solana, does not rely on energy-intensive mining models like Bitcoin, but instead relies on staking to validate transactions.

At the time of the report's release, an increasing number of companies are taking steps to establish Ethereum reserves. According to Bernstein's data, in July, companies such as SharpLink Gaming (SBET), Bit Digital (BTBT), and BitMine Immersion (BMNR) collectively accumulated 876,000 ETH. Notably, BMNR's ETH holdings have just surpassed 2 billion USD and plan to hold and stake 5% of the total supply of ETH on the network. At the same time, SharpLink also holds over 1.3 billion USD in ETH.

Challenges of Staking Rewards: Liquidity and Smart Contract Risks

However, Bernstein also emphasized that the Ethereum reserve strategy comes with liquidity risks and smart contract risks.

Liquidity Risk: Bernstein wrote, "Staking ETH to maximize returns can generate actual cash flow income, but staking contracts often require a waiting period of several days for redemption, thus creating liquidity risk. Therefore, ETH holders need to strike a balance between obtaining liquidity and optimizing returns."

Smart Contract Risks: The report adds that more complex strategies, such as re-staking (e.g., characteristic layer models) or generating returns from DeFi protocols, also increase the security risks of smart contracts. This means that while returns can be enhanced through more complex strategies, it also increases potential technical risks.

Ethereum and the Expansion of Digital Financial Economy

Bernstein emphasized that the growth of the digital dollar and tokenized assets-driven online financial economy will increase the transaction volume and user base of the Ethereum ecosystem, especially with Layer-2 solutions operated by well-known crypto service providers and platforms like Robinhood.

Bernstein assessed: "ETH, as the native asset of the Ethereum network, will directly benefit from the expansion of this digital financial economy, supported by transaction fee revenue and the token buyback and burn model."

Ethereum Price Outlook and Comparison with Bitcoin Reserves

Ethereum's price broke through $3,900 on Monday, reaching its highest level since early December, before slightly retreating. Driven by the growth of ETH treasury bonds, a more favorable regulatory environment following the passage of the "GENIUS Act," and increasing market expectations for Ethereum's potential, the price of Ethereum has risen by over 50% in one month. Many analysts predict that ETH will soon break above its historical peak of $4,800, with legendary trader Arthur Hayes even forecasting that ETH could reach $10,000 this year.

BitMine Immersion CEO Tom Lee stated in a report regarding the X platform that, based on the reset value estimates from analysts commissioned by the company, the price of ETH could rise 18 times, approximately equivalent to $60,000. However, it is worth noting that the motivation behind BitMine's optimistic remarks is quite clear, as it holds a substantial amount of ETH.

The Ethereum treasury bond is currently emulating the model created by Strategy. After years of poor performance in Bitcoin, Strategy abandoned its software in 2020 and turned to purchasing Bitcoin. At the current price, Strategy holds nearly $72 billion in BTC. However, Bernstein points out that the risk management of ETH requires deeper involvement.

Bernstein wrote: "Michael Saylor has always insisted that Bitcoin is held as a liquid asset on the balance sheet, rather than lent out to generate passive income. Strategy places a high emphasis on balance sheet management and liquidity management." They added: "Depending on market sentiment, the strategy will also continuously switch between debt and equity issuance to maintain a safe debt ratio." This shows that while Ethereum reserves can generate income through staking, its risk management strategy needs to be more proactive and complex than that of Bitcoin reserves.

Bernstein's report provides a comprehensive analysis of Ethereum's reserve strategy. While generating income through staking is a significant advantage of Ethereum reserves compared to Bitcoin reserves, liquidity risks and smart contract risks must also be fully considered. As the digital financial economy expands, the Ethereum ecosystem will continue to benefit, and companies adopting an Ethereum reserve strategy need to strike a balance between maximizing returns and managing risks.