5 Investments to Double Down on Ethereum

Bet on Ethereum's vision with these five trending adjacent opportunities
Jan 16, 20244 min read

Spot BTC ETFs arrived last week, and with them came... investor excitement for Ethereum?

The ETH/BTC ratio has climbed aggressively over the past several days and is up nearly 20% since a hacker sent a fallacious BTC ETF approval Tweet from the SEC’s account. This event proved to be the catalyst market participants needed to pivot from front-running Bitcoin’s ETF to positioning for the inevitable arrival of Ether’s ETF.

Ethereum’s time to shine may have just arrived, but for many investors, gains from holding spot ETH simply won’t suffice.

Today, we present to you our top 5 Ethereum-aligned investments – opportunities that will not only support the Ethereum network in achieving its various missions but also present investors with an opportunity to amplify upside!

🔴 Optimism (OP)

Ethereum’s L2s are vital to the network’s rollup-centric scaling roadmap, and crypto market participants are finally starting to price them as such!

Over the past three months, Optimism has been the highest flier among Ethereum L2s, with both token price and TVL surging to new all-time highs, increasing by 200% and 47%, respectively.

Ethereum’s Dencun upgrade is scheduled to hit mainnet in March, and EIP-4844 – the upgrade’s core component – is expected to bring massive gas savings to L2s, meaning the fun could just be getting started for OP holders! Lower gas fees on Optimism should translate to increased activity, which will reflect positively on the chain’s fundamentals and should help further bolster price.

While all L2s stand to benefit from decreases in gas fees resulting from EIP-4844, Optimism stands apart from the crowd thanks to the massive adoption its OP Stack codebase has received.

Not only has the OP Stack been utilized by Coinbase to create Base, it has also been implemented by Aevo, Zora, and Lyra for their own chains and is now a core offering for many rollup-as-a-service (RaaS) providers, including Conduit and Gelato.

OP token holders will benefit from an increased number of chains building on the OP Stack thanks to the SuperChain vision, which creates shared sequencing and interoperability between rollups sharing a sequencer.

🔵 Arbitrum (ARB)

Much like Optimism, Arbitrum (as an L2 on Ethereum) stands to benefit from the rollup cost savings resulting from EIP-4844 and has been a beneficiary of the pre-Dencun L2 rotation, posting an impressive 145% gain in price over the past three months!

While the OP token received slightly more love than ARB over the past three months, it was Arbitrum who managed to post the greatest percentage increase in TVL, up 48% during this period.

Encouragingly, bridged ETH into Arbitrum is vastly outpacing inflows into competitive L2 ecosystems, indicating that capital continues flowing into the Arbitrum ecosystem to access its available opportunities.

 Optimism’s OP Stack may have the edge on Arbitrum in terms of the number of chains currently deployed, but Arbitrum’s Orbit L3s are gaining traction among teams, including Parallel, an omnichain liquidity market, and Xai, a recently launched gaming platform.

💧 Lido (LDO)

Hardline Ethereum decentralizationists have long questioned Lido’s ETH alignment over the Protocol’s refusal to implement deposit hardcaps and may detest LDO’s inclusion in this list, but the fact remains that the dominance of stETH across Ethereum DeFi makes LDO the consensus bet to capitalize on ETH staking.

Currently, control over the Lido network is vested to LDO token holders and the validators operating the Protocol’s nodes, but Lido is seeking to empower its LST holders with the ability to veto governance votes through a dual governance model.

In addition to Lido’s plans to improve the decentralization of governance, Lido’s upcoming staking router will allow anyone – from solo-stakes to distributed validator technology (DVT) clusters – to operate nodes, helping to further bolster the decentralization of the network.

While Lido’s dominance may be undesirable, the decentralized reality we find ourselves in is vastly preferential to the centralized alternative where large CEXs, like Coinbase, would control the entire staking stack (i.e., both deposited Ether and node operation) and LST holders are devoid of the vote.

🖥️ EigenLayer

There may not be a liquid EigenLayer token to invest in, but depositing LSTs into their restaking contract is undeniably one of the best ETH-aligned investments to make.

EigenLayer’s restaking will be transformational for Ether the asset when it goes live later this year by allowing ETH stakers to rehypothecate their deposit to secure other types of crypto economic applications.

While EigenLayer services are not currently live (i.e., restakers are not actually securing any applications or earning yield), the protocol is offering restaking points to early depositors, which are expected to translate into an airdrop allocation with the token goes live.

Participating in the EigenLayer opportunity will allow you to earn yield from staking to secure the Ethereum network while positioning you to receive an airdrop from a Project that seeks to increase the number of use cases for ETH.

🍨 Gelato (GEL)

If you subscribe to the belief that applications will need their own individual chains to reach peak scale, then you should be bullish on the rollup-as-a-service specialists who will be building the chains!

Gelato Network is best known for providing decentralized backend services that enable developers to make their smart contracts automated, gasless, and off-chain aware, but they’ve recently emerged as a RaaS provider, assisting with the deployment of an OP Stack rollup for alt-L1 Lisk Network.

Developers using Gelato’s RaaS platform can select between the OP Stack, Arbitrum Orbit, and Polygon CDK rollup frameworks and they can optionally choose to outsource data availability to either Celestia or Avail. Their RaaS platform leverages Gelato’s Web3 services – in addition to third-party infrastructure – to provide deployers with a full-service L2 and production-ready web3 development environment right from the Genesis block.

If Ethereum needs hundreds (if not thousands) of purpose-built L2s to achieve scale, it will fall on RaaS specialists to furnish these chains to developers; Gelato is positioned to meet their requirements!

Not financial or tax advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This newsletter is not tax advice. Talk to your accountant. Do your own research.

Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here.

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