Ether, the second largest crypto after by market cap, might be hustling for a second act — and looks like it’s Donald Trump’s presidency that could light the fuse.
Ethereum and its ETFs have surged 49% since November 5, beating Bitcoin’s 38% rise in the same period. Investors who ditched Ethereum throughout 2024 are starting to reconsider, drawn back by the potential for regulation that could finally make Ether shine.
Ethereum’s 2024 wasn’t pretty. Bitcoin stole the show with simple narratives and skyrocketing ETFs, jumping 126% for the year.
Solana, a rising star in crypto, pulled in users and capital while Ethereum’s supply continued to climb, raising questions about its deflationary promises. Even with a respectable 59% gain for the year, Ether lagged far behind the broader crypto market’s 94%.
The Trump effect
Regulation is the name of the game, and Ethereum has more to gain than Bitcoin. You see, Ether is a network for decentralized finance (DeFi), tokenization, and smart contracts. All of this complexity demands clear rules, which were absent during the Biden years.
Mark Connors from Onramp says Ethereum suffered from “middle child syndrome” in 2024. Investors either went for Bitcoin’s proven value or Solana’s newer tech. Connors believes Trump’s presidency will drive Ethereum into a new era of price discovery.
Zach Pandl from Grayscale Investments agrees, saying Ethereum’s reliance on traditional finance makes regulatory clarity essential. Trump’s policies could position Ether as the backbone of global finance.
The stablecoin market shows how much Ethereum could benefit. Tether (USDT), the largest stablecoin, operates primarily on Ethereum. Since the election, the stablecoin market cap has surged 9.5% to over $180 billion, with USDT up 10% and USD Coin (USDC) rising 6%.
Experts like Matt Hougan from Bitwise Asset Management expect stablecoin legislation from Congress to push this market over $1 trillion within two years. Wall Street companies are already positioning themselves, and many are building on Ethereum.
The double-edged sword
Ethereum’s biggest challenge is competition from within. Layer-2 networks like Arbitrum and Optimism have exploded in popularity, handling transactions that used to happen directly on Ethereum. Layer-2 transactions are up 430% since March, while Ethereum’s fee revenue has plunged 87%.
These networks make Ethereum more scalable but take a cut of its economic activity. Max Resnick of Special Mechanisms Group calls this strategy risky, especially since Ethereum’s recent “Dencun” upgrade turned its supply inflationary.
The earlier “Merge” upgrade in 2022 was supposed to reduce supply and attract investors, but those gains are now in question. Resnick argues Ethereum’s roadmap is poorly communicated, leaving investors in the dark.
Despite these issues, Ethereum remains the leader in DeFi. It hosts over $72 billion in tokens locked into decentralized apps and $100 billion of the $190 billion stablecoin market. But cheaper and faster competitors like Solana are closing the gap.
Solana’s token has surged 300% in the past year, while Ethereum struggles to match Bitcoin’s recent highs. Ethereum creator Vitalik Buterin remains optimistic, emphasizing that Layer-2 developers are committed to the Ethereum ecosystem.
Still, Resnick warns that Ethereum is entering a “danger zone” and must scale quickly to maintain its dominance.
The long road ahead
While Bitcoin dominates the ETF market, Ethereum is making slow progress. Its ETFs saw a modest $242 million in inflows for all of 2024 so far, compared to $31 billion for Bitcoin’s. A Harris Poll for Grayscale revealed that nearly all respondents knew about Bitcoin, but only half were aware of Ethereum.
Hougan predicts this gap will close in 2025. He expects a wave of institutional interest, driven by Ether’s long-term growth potential. JPMorgan’s Ethereum-based blockchain, Onyx, shows how institutions are already using Ethereum for real-time cross-border payments.
As more firms adopt Ethereum for tokenization and DeFi, its role in the financial system could expand dramatically.
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