After the bull market correction phase in the past few days, the price of ETH once again stood at $3,900. Looking back on the development of Ethereum over the past year, there are many complex factors and emotions. On the one hand, the Cancun upgrade was successfully completed, the spot ETF was officially approved, and the technology and fundamentals have ushered in a new bull market; but on the other hand, as Bitcoin , SOL, and BNB have successively exceeded all-time highs, and the price of ETH is still hovering at the $4,000 mark.

As can be seen from the price chart of ETH this year above, Ethereum has It has gone through three main stages, and the rise in the three stages corresponds to different reasons. At the beginning of the year, the Bitcoin spot ETF was passed, and the price of Ethereum followed market sentiment higher, once exceeding $4,100, but it also began to fall along with the broader market at the end of March. And because of the strong surge in SOL and its ecosystem, the Ethereum ecosystem is facing a massive exodus of liquidity.

In May, the Ethereum spot ETF was approved and the price briefly surged, but its demand was not as strong as Bitcoin. The initial market reaction to the launch of the Ethereum ETF was negative, as speculative investors who purchased the Grayscale Ethereum Trust in anticipation of its conversion to an ETF took profits, resulting in $1 billion in outflows, bringing downside to the Ethereum price pressure. In addition, ETH's narrative of being biased towards technological innovation products is less likely to impress the traditional market than BTC's "digital gold", and the SEC's prohibition on Ethereum spot ETFs from participating in the pledge function has objectively weakened its appeal.

After that, disputes over the Ethereum Foundation, the re-staking ecosystem, and the roadmap ensued, and Ethereum ushered in a dark moment.

In November, the US election was settled. The pro-encryption Republicans and Trump brought stronger confidence and liquidity injection to the entire encryption ecosystem. As a result, Ethereum ushered in its third wave of gains this year. This time the rise is different from the past. Institutions have entered the market with a clear name and the fundamentals of liquidity have improved. This market is using funds to tell us what institutions recognize and are optimistic about; and Ethereum is destined to continue its "world computer" ” original intention.

Improving liquidity fundamentals

Since December, the Ethereum spot ETF has seen net inflows of over US$2.2 billion for half a month in a row. Nate Geraci, President of The ETF Store, posted on social media The platform indicates that consultants and institutional investorsInvestors have just begun to pay attention to this area.

In the third quarter of this year, banks such as Morgan Stanley, JPMorgan Chase and Goldman Sachs significantly increased their holdings in Bitcoin ETFs, almost doubling their holdings quarter-on-quarter. , but their investment scope is not limited to Bitcoin. According to the latest 13F filings, these institutions have also begun to purchase Ethereum spot ETFs since then.

In addition, the Wisconsin Investment Commission and the Michigan Retirement System purchased Bitcoin spot ETFs in the first two quarters, and Michigan further purchased value in the third quarter. Over $13 million in Ethereum spot ETFs. This shows that pension funds, which symbolize low risk appetite and long-term investment, not only recognize Bitcoin’s role as a digital value store, but also value the growth potential of Ethereum.

When the Ethereum spot ETF was passed, JPMorgan Chase pointed out in a report that demand for the Ethereum spot ETF would be much lower than that of the Bitcoin spot ETF. However, the report Spot Ethereum ETFs are expected to attract up to $3 billion in net inflows over the remainder of the year, and that number could reach as high as $6 billion if staking is allowed.

Jay Jacobs, head of U.S. thematic and active ETFs at BlackRock, said at the "ETFs in Depth" conference, "We are currently optimistic about Bitcoin, especially Ethereum. Exploration is just the tip of the iceberg, with only a handful of clients holding it (IBIT and ETHA), so our current focus is on that rather than launching new altcoin ETFs

In a Blockworks Research In the survey report, the vast majority (69.2%) of the respondents currently hold ETH, 78.8% of which are investment companies or asset management companies, indicating that institutional interest in ETH pledges is driven by revenue generation and network security contributions. The willingness to participate has reached a critical mass

Institutions are actively participating in ETH. Staking, but participation levels and approaches vary, regulatory uncertainty has led to different attitudes, with some institutions proceeding cautiously while others are less concerned, and institutional players are concerned about operational aspects related to staking. and have a high awareness of risks

Tide Reversal

Since the FTX crash, Coinbase, Kraken, Ripple, etc. have been hit by S one after another.Due to severe crackdowns by U.S. regulatory agencies such as the EC, many crypto projects cannot even open accounts in mainstream U.S. banks. Traditional financial institutional investors who entered the market due to DeFi in the last bull market also suffered huge losses. Large funds such as Toma Bravo, Silver Lake, Tiger, and Cotu not only suffered setbacks on FTX, they also invested at high valuations. A number of crypto projects have failed to deliver on their grand promises, and the funds have yet to flow back.

In the second half of 2022, many DeFi projects were forced to move outside the United States. According to Alliance DAO Lianchuang qw, "Two years ago, about 80 % of crypto startups that meet the criteria are located in the United States, however, this proportion has continued to decline since then and is currently only around 20%.”

But On November 6, Trump won the election, giving the U.S. financial system the green light it had been waiting for.

Trump Saves the Currency Circle

Trump’s victory undoubtedly clears regulatory doubts for institutional adoption.

Establishing the Department of Government Efficiency, directly gathering a series of Wall Street financial elites such as Musk, Pete Thiel, and Marc Andreessen under its command, and also After appointing Paul Atkins as SEC Chairman, Trump appointed PayPal co-founder David Sacks as "White House Chief of Artificial Intelligence and Cryptocurrency Affairs." A series of measures show that Trump will create a new era of loose encryption regulation.

Related reading: "The White House Will Open an Encryption-Friendly Era: A breakdown of Trump's leadership "Cryptocurrency Group" under "

JPMorgan analysts said that several stalled cryptocurrency bills after Trump took office may be quickly approved. Includes the Financial Innovation and Technology for the 21st Century Act (FIT21), which clarifies that the SEC and CFTC regulatory responsibilities, potentially providing much-needed regulatory clarity to the crypto industry. And said that as the regulatory framework becomes clearer, the SEC's strategy of increased enforcement may evolve into a more collaborative approach, including its Staff Accounting Bulletin No. 121 that restricts banks from holding digital assets.SAB 121) may be repealed.

High-profile lawsuits against companies such as Coinbase may also be mitigated, settled or even dropped. Regulatory notices to companies like Robinhood and Uniswap could be reconsidered, reducing litigation risk for the broader crypto industry,

In addition to sector and bill reforms, Trump Trump's team is also considering slashing, merging or even eliminating the main bank regulators in Washington. According to people familiar with the matter, Trump advisers asked some Department of Efficiency staff about whether they could abolish the Federal Deposit Insurance Corporation (FDIC) when interviewing potential bank regulator candidates. Trump advisers also inquired about potential candidates for the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency. It also proposed plans to merge or overhaul the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the Federal Reserve.

As dividends are gradually released, larger institutional funds in the US market are expected to return to the encryption market.

DeFi renaissance is underway

More stable capital such as family offices, endowments, pension plans, etc. will not only deploy Ethereum spot ETFs, but will also enter the previous cycle again Proven DeFi field.

Compared with 2021, the total supply of stablecoins has reached its highest level, and more than a month after Trump won the election, stablecoins The total amount has been increased by nearly 25 billion U.S. dollars, and the current total market value of stablecoins reaches 202.2 billion U.S. dollars.

Coinbase, as the leader of U.S. crypto listed companies, will not only contribute money and efforts this year , has also made achievements in the DeFi field. On the one hand, it is the largest crypto ETF custodian, and on the other hand, it launched cbBTC.

Because cbBTC faces the same custody and counterparty risks as most Bitcoin ETFs, some traditional financial institutions may re-evaluate whether to continue paying fees to hold Bitcoin ETFs , and turned to participate in the DeFi ecosystem at almost zero cost. This shift could bring inflows to market-tested DeFi protocols, especially as DeFi offers more attractive yields compared to traditional finance.

Another major DeFi sector in this cycle is RWA. In March this year, BlackRock cooperated with the U.S. tokenization platform Securitize and issued the tokenization fund BUIDL (BlackRock USD Institutional Digital Liquidity Fund), officially entering the market in a quite high-profile manner. RWA track. Capital giants such as Apollo and Blackstone, which control huge capital pools, are also beginning to prepare to enter this market and bring in a large amount of liquidity.

After the Trump family launched the DeFi project, compliance DeFi has been a hot topic. Ethereum's established blue-chip DeFi projects such as Uniswap, Aave, and Lido immediately responded to their prices after Trump won the election, and all rose and broke through, while rising stars in the DeFi sector such as COW, ENA, and ONDO also reached new highs one after another.

At the same time, Trump’s encrypted DeFi project WLFI has also been trading very frequently recently. For Ethereum tokens, after converting 5 million USDC into 1,325 ETH in multiple transactions, its multi-signature address purchased another $10 million in ETH, $1 million in LINK, and $1 million in AAVE. There have been recent reports of giant whales increasing their holdings of ETH, suggesting that both institutions and whale accounts are returning to the Ethereum ecosystem.

WLFI multi-signature address position information

Needless to say, the recent performance of new and old projects on the DeFi track at the price level. Currently, the TVL of DeFi is approximately US$100 billion, and the current total of cryptocurrencies and related assets The value is approximately US$4 trillion, of which DeFi is truly active Funding in the space accounts for only 2%, which is still small compared to the size of the entire cryptocurrency market. This means that DeFi still has huge room for growth as regulatory trends change.

Aave is a typical beneficiary of this round of "fund reflow". Its price had broken through before Trump won the election. Since then, TVL and revenue have exploded. Growth: TVL surpasses October 2021 all-time high at $22 billion; The token price has been rising from the year's low of 80 USDT, breaking through the March high of 140 USDT in early September and accelerating its rise in late November; the protocol's total daily revenue exceeded the sub-peak in September 2021, and the weekly revenue set a record new high.

Although Aave has recently upgraded to V4, the innovation power at the technical level may not be enough to support such a large-scale increase, and the promotion from regulatory and financial levels It is obviously a more important logic, and even this push will spill over to the NFT track that also gained institutional favor in the last cycle.

The future of Ethereum

Ethereum encountered a series of controversies and discussions related to ecological development in the middle of this year. With the rise of Solana, new and old public chains began Seizing Ethereum’s developer and user base, the ecosystem began to falter, and Ethereum seemed to have forgotten its original goals. As the first blockchain to create smart contracts, Ethereum used its first-mover advantage to successfully get major institutional investors to pay for it in the last cycle. Whether it is DeFi, chain games, NFTs, or the Metaverse, there is no escape from Ethereum. Fang Ecology, its original intention of "World Computer" has been deeply rooted in the hearts of the people.

Although the current liquidity fundamentals of Ethereum have been optimistically improved, from the perspective of Ethereum itself, its average daily number of transactions, Gas fees, The data indicators on each necklace, such as the number of active addresses, have not increased significantly. This shows that the activity on the Ethereum chain has not increased simultaneously with its price, and the block space is still excessive.

Ethereum Gas fee level

< p style="text-align: left;">In the past few years, Ethereum has focused on building cryptocurrency infrastructure, providing the market with a large amount of cheap block space. On the one hand, this move improves Dapp's access performance to blocks and reduces the transaction costs of L2 expansion solutions. On the other hand, due to insufficient market liquidity and sluggish transaction demand, Ethereum's huge block space has not been fully utilized. .

However, this is not really a problem in the long term. As mentioned above, institutional funds are gradually returning and even starting to create exclusive blockchain use cases. For Ethereum, which has a secure and flexible architecture, to B is its advantage. Not only does it have overwhelming advantages in security, it is also compatible with many EVM projects, providing developers with an option that is almost "impossible to get fired."

Ethereum's long-term value will depend on the scarcity of its block resources, that is, the world's actual and ongoing demand for Ethereum block settlement. As institutions and applications continue to pour in, this scarcity will become increasingly prominent, thus laying a stronger value foundation for Ethereum. Ethereum is the world computer of an institution. Starting with DeFi, institutions will solve the problems of Ethereum’s excess blocks and roadmap disputes in the future.

In early December, Ethereum researcher Jon Charbonneau wrote a long article analyzing why Ethereum needs a clearer "North Star" goal. He also suggested that Ethereum should be The ecological power of the forum is gathered in the "world computer", just like Bitcoin's "digital gold" and Solana's "on-chain Nasdaq".

Ten years have passed, and Ethereum is no longer in its entrepreneurial stage. In the next decade, the future of Ethereum is clearly visible.