Value Transfer Evolution - Bitcoin has evolved through stages of value transfer [1] - Initially, small value transfers occurred at layer 1 when Bitcoin was a niche market (example: 10,000 BTC for a pizza) [1] - As wealth flow increased, larger value transactions (txs) became dominant at layer 1, pricing out smaller transactions [1] - Small value transactions are now occurring at layer 2 [1]

Core Viewpoint - Citigroup has set new ether (ETH) price forecasts, predicting a year-end price of $4,300, down from the current $4,515, with a bull case of $6,400 and a bear case of $2,200 [1]. Group 1: Ether Valuation Drivers - Network activity is identified as the primary driver of ether's value, with recent growth largely occurring on layer-2 solutions, which complicates the valuation contribution to Ethereum's base layer [2]. - Citigroup estimates that only 30% of layer-2 activity contributes to ether's valuation, suggesting that current prices exceed the activity-based model due to strong inflows and interest in tokenization and stablecoins [2]. Group 2: Market Dynamics - Exchange-traded fund (ETF) flows, while smaller than those for bitcoin (BTC), have a more significant price impact per dollar; however, Citigroup anticipates limited ETF flows for ether due to its smaller market cap and lower visibility among new investors [3]. - Macro factors are expected to provide only modest support for ether, as equities are already near Citigroup's S&P 500 target of 6,600, leading to a lack of major upside from risk assets [4].