Positive factors for ETHFI
As the ETH/BTC ratio changes, the market will turn its attention to emerging tokens that are more volatile than Ethereum ETH and have relatively low circulation, such as ETHFI. Compared with old tokens such as LDO and OP, these new tokens are more attractive because of their higher volatility and growth potential.
Ethereum's transition to Proof of Stake (PoS) has highlighted the importance of liquidity staking protocols, making Lido and Rocket Pool core infrastructure for the Ethereum ecosystem. The upcoming EigenLayer innovation cycle will exacerbate this trend, increasing market attention to such projects. Currently, the total locked value (TVL) of liquidity re-staking exceeds $10 billion, making it one of the fastest growing areas in DeFi.
Ether.Fi is one of the top 10 DeFi protocols by total locked value and the leading integration, and started to grow exponentially earlier this year. In the future, it will inject strong momentum into the growth of the field through the development of enterprise-grade Active Verification Service (AVS) and incubation EigenLayer, along with the launch of the much-anticipated Cash mobile application.
ETHFI Market Analysis
Although ETHFI's price has dropped 40% in the past 30 days, market conditions have gradually stabilized. Currently, ETHFI is ranked 165th on Coingecko's market cap, and given its current market cap of $500 million and fully diluted valuation of $4.3 billion, ETHFI still has the potential to enter the top 100 in market cap rankings. This shows that despite the challenges in the short term, opportunities for long-term growth still exist.
The value of ETHFI airdrop
At the current price of $4.3, the ETHFI airdrop has created approximately $284 million in value for early community members. This not only strengthens user loyalty, but also stimulates the "wealth effect", laying a positive foundation for the second phase of the token incentive plan. This economic incentive creates an optimistic atmosphere for the project and further promotes active user participation.
Ether.Fi stands out in the cryptocurrency space with its lean team, the official team consists of only five people, but their TVL (total locked value) / contributor ratio is the highest in the entire DeFi space, and even in the history of DeFi. The team initially focused on ETH staking, but realized that there was a lack of products on the market that met their needs, so they created Ether.Fi, which aims to solve ETH custody and risk management problems, and supports native re-staking from the beginning, providing eETH that is both LST (liquidity staking token) and LRT (liquidity re-staking token).
The core team includes founder and CEO Mike Seligatze, head of revenue Rock Kopp, COO Joseph Schweitzer, and head of engineering Rupert Klopper. They designed Ether.Fi as a product that meets a clear market need and successfully raised $5.3 million in seed funding in February 2023. This was followed by a $27 million Series A round a year later, raising a total of $32.3 million.
Innovative protocol design
Ether.Fi is unique in the market as the only protocol that has Liquidity Staking Token (LST) and Liquidity Re-Staking Token (LRT) functionality built in from the beginning. This combination is implemented in a single framework, ensuring the completeness and efficiency of its functionality.
Safety and autonomy
Unlike other liquidity staking protocols, Ether.Fi allows stakers to keep their own keys, unlike traditional protocols like Lido where node operators control the staking keys. This design significantly reduces custody risk and removes node operators’ control over user assets. In Ether.Fi, each user holds their own keys, in contrast to traditional protocols such as Lido that rely on a small number of trusted node operators to manage keys, which increases counterparty risk and the probability of being attacked.
Pioneers of re-staking
Ether.Fi has also focused on re-staking from the beginning, making it a leader in the space. This fundamental focus on re-staking not only improves its market competitiveness, but also takes advantage of early market entry to become the largest liquidity re-staking protocol.
Unified staking solution
Ether.Fi advocates for unifying the functionality of the Liquidity Staking Token (LST) and Liquidity Restaking Token (LRT) into a single token. It foresees a future where this distinction will no longer be necessary and all staking solutions will naturally include restaking as a standard feature.
Advantages of eETH
In this context, eETH has become a unique solution in the market, which not only provides users with staking rewards, but also automatically re-stakes ETH through the EigenLayer platform to obtain higher returns. It combines the staking and re-staking functions into one, bringing users a more comprehensive income strategy.
After a few months of low-profile development, Ether.Fi has seen explosive growth since the beginning of the year and currently ranks in the top 10 of the DeFi total locked value rankings with a total locked value (TVL) of over $4 billion, equivalent to 1.2 million ETH.
The adoption rate is very impressive, thanks to a large number of integrations with leading DeFi protocols such as Pendle, Morpho Blue, Fluid, Gearbox, Silo, and Enzyme.
To take advantage of these favorable conditions, Ether.Fi recently launched Liquid, an automated strategy vault that generates yield by deploying eETH in DeFi. Currently, Ether.Fi's Liquid has a TVL of over $450 million, accounting for almost 25% of the total market share of yield aggregators in DefiLlama. This makes it surpass some other well-known projects, such as Yearn's TVL of $300 million and Sommelier's $70 million.
Ether.Fi’s Growth and Multi-Chain Expansion
Ether.Fi has over $400 million in funds on the Ethereum L2 network, and its eETH token has become the largest liquidity staking token (LST) on Arbitrum, even surpassing Lido's stETH. Now, users can perform native minting and re-staking of eETH directly on the L2 network. The second season's airdrop rewards will also be provided on the L2 network, saving users a lot of transaction fees.
In addition to Ethereum L2, Ether.Fi continues to expand its multi-chain footprint through collaborations with interoperability leaders such as Wormhole and LayerZero. ETHFI can be circulated between networks through Wormhole’s native token transfer (NTT), while weETH leverages LayerZero’s cross-chain functionality (OFT standard) to enable cross-chain activities.
Risk Management and Node Operation
To improve risk management, Ether.Fi is working with Gauntlet to develop a strategic AVS (Active Validation Service) allocation strategy. The launch of "Independent Validator Action" and the integration of Obol DVs (Distributed Validators) will further decentralize the protocol's node operator setup. Although the system is not yet fully permissionless, Ether.Fi plans to open it up in the coming months to enable anyone to start a validator to generate income by providing two ETH as a deposit and utilizing DVT-managed keys.
Resources and Cooperation
In the spirit of open collaboration, Ether.Fi has invested significant resources, including $600 million in ETH, to secure partnerships with other AVS such as Omni and further solidify the growth and development of its ecosystem.
In terms of the competitive landscape, no other protocol offers both LST and LRT in a single token. At the same time, despite the perception of saturation, the liquidity staking and re-staking space is not crowded. Many existing projects are mainly wrappers for existing liquidity staking tokens (LSTs), and only a few offer true native re-staking functionality like Ether.Fi.
Amid this market dynamic, Ether.Fi had the largest inflows over the past 30 days, while its main competitor Lido led in outflows.
In the current market, Ether.Fi stands out as the only Liquid Restaking Token (LRT) with withdrawals enabled, which provides a significant operational advantage (see Renzo’s ezETH 18% decoupling). While Swell has also recently enabled withdrawals for swETH and announced plans for rswETH after the SWELL Token Generation Event (TGE), Ether.Fi remains the most liquid LRT on decentralized exchanges (DEXs). This liquidity ensures the stability of eETH during periods of high volatility, which require a lot of liquidity to ensure close tracking. This also explains why Ether.Fi’s eETH is the most accessible LRT across DeFi platforms, consolidating its first-mover advantage.
The airdrop strategy, while still biased towards small stakers, has linearly injected $284 million of new capital into the supporter base, strengthening community engagement and loyalty. The second airdrop, which will distribute an additional 5% of the token supply, is likely to continue to amplify these positive effects.
Despite the so-called wealth effect, users who may still be on the sidelines are still paying attention to a protocol whose growth is hard to ignore. With Ether.Fi becoming a reference point in the LRT space (similar to Lido’s position in the LST market) its valuation has lifted the entire industry, showing its influential role. This becomes increasingly important when we consider that EigenLayer’s token launch may be imminent, potentially kicking off a “summer of restaking”.
For some, buying ETHFI will be their way of betting on the current market leader (taking advantage of its unique characteristics and first-mover advantage). However, others may question the utility of the token as it is currently rarely used in governance decisions.
Nonetheless, Ether.Fi’s recent blog post hints at an expected DAO proposal focused on token value accumulation to further enhance ETHFI’s intrinsic value.
At a very high level, the anticipation around possible EIGEN incentives in Q2 could further strengthen Ether.Fi’s market positioning as the leading LRT and re-staking protocol. This could attract more attention from multiple angles, as Ether.Fi itself will also be responsible for selecting AVS, and ETHFI holders may also receive airdrops in their native tokens.
Ether.Fi is also building on its core product, incubating Dappbridge, a decentralized RPC service launched as AVS, similar to POKT Network, but leveraging EigenLayer's re-staking capabilities. In addition, the launch of the Cash mobile app, which connects to users' Ether.Fi accounts, plays a key role in attracting non-crypto native users, allowing them to borrow high-yield balances such as eETH or liquid deposits. This application aims to bridge the gap between cryptocurrencies and real-world financial activities, significantly increasing the total addressable market (TAM), allowing users to spend in US dollars while continuing to earn DeFi returns.
Finally, although ETHFI is already traded on top exchanges like Binance or OKX, the token was recently listed on Coinbase International Futures Exchange, which means that spot listing may also be coming soon.
Perfect timing on local inflection points in token prices is impossible, and becomes even more complicated as we get closer to the TGE date. Due to low circulation, ongoing incentives, and reliance on overall market behavior (which is led by BTC), we can only rely on the fact that there are no upcoming unlocking events for the rest of the year — which means that FDV is not that important right now. On shorter timeframes, we may sometimes observe situations where funding becomes overly negative. This negative sentiment can fuel trap shorts and trigger a “disgusted” rally, just like we saw on April 28th when ETHFI rose by 30%.
At the time of writing, we can only express the view that those who wanted to sell may have already sold. At the same time, those who were receiving the airdrop may also be hedging their positions on the perpetual contract, which leads to the negative funding rate situation shown in the above figure.
However, with the current sideways market conditions, we cannot determine the "fair value" of an asset like ETHFI. This also complicates the construction of positions from a relative value trading perspective. However, this also opens the door for hedging trades, and you can consider going long ETHFI and shorting other tokens such as LDO and RPL, which are highly correlated with ETH and can protect us from overall downside risk. There is a strong positive correlation between LDO, RPL and ETHFI, which may provide attractive opportunities for hedging trades.
Regardless, we can expect ETHFI to be volatile, and rather than treating it as a “blind long-term hold,” it’s better to take the opportunity to trade this asset in the larger range of 3U to 4U.
Recent Price Trends
About a month ago, ETHFI launched and began trading at $4.73, and reached an all-time high of $8.53 on March 27. Given the many potential catalysts behind it, we can be optimistic about its future development, while being cautious about the factors already reflected in the price.
in conclusion
Ether.Fi is the market leader for users seeking restaking and Liquidity Restaking Token (LRT) investment opportunities. As a pioneer, its unique ability to offer dual functionality of LST and LRT in a single token sets it apart from its competitors. Even as other projects continue to offer incentives or points programs, this dual capability, coupled with easy withdrawal functionality and unparalleled liquidity on decentralized exchanges, solidifies Ether.Fi's leadership position.
Upcoming Ether.Fi catalysts, such as possible EIGEN incentives, the launch of the Cash mobile app, and other internally incubated Active Verification Services (AVS), will further expand Ether.Fi's potential market size and strengthen its user base. These initiatives are consistent with the commitment to increase the intrinsic value of ETHFI.
Additionally, the potential for listing on major exchanges like Coinbase or Upbit could generate more demand. Nevertheless, the current market environment suggests patience and a trading strategy of scaling positions at key levels while keeping expectations modest as overall market risks remain elevated.
