Author: Grayscale Research
Translated by: Plain Blockchain
In July 2025, the price of Ethereum surged nearly 50%. Investors are focusing on stablecoins, asset tokenization, and institutional adoption—areas where Ethereum, as the oldest smart contract platform, distinguishes itself from other competitors.
The passage of the (GENIUS Act) is a milestone moment for stablecoins and the entire cryptocurrency asset class. Although market structure-related legislation may still take time to pass in Congress, U.S. regulators can continue to support the development of the digital asset industry through other policy adjustments, such as approving staking functions in cryptocurrency investment products.
In the short term, cryptocurrency asset valuations may experience consolidation, but we remain very optimistic about the outlook for this asset class over the coming months. Cryptocurrency assets provide investors with the opportunity to engage with blockchain innovations while potentially offering immunity to some risks associated with traditional assets (such as the ongoing weakness of the dollar). Therefore, Bitcoin, ETH, and many other digital assets are expected to continue to be favored by investors.
On July 18, President Trump signed the (GENIUS Act), providing a comprehensive regulatory framework for stablecoins in the U.S. This marks the 'end of the beginning' for the cryptocurrency asset class: public blockchain technology is moving from the experimental phase to the core of a regulated financial system. The debate over whether blockchain technology can bring real benefits to mainstream users has ended, and regulators are now focused on ensuring the industry's growth while incorporating appropriate consumer protection and financial stability mechanisms.
In July, the cryptocurrency market was buoyed by the passage of the (GENIUS Act) and supported by favorable macro market conditions. Stock market indices in most regions of the world rose, while returns in the fixed income market were led by high-risk sectors such as U.S. high-yield corporate bonds and emerging market bonds (see Chart 1). As market volatility decreased, related investment strategies also performed quite well.
The FT/Grayscale Cryptocurrency Market Index (a market-cap-weighted investable digital asset index) rose by 15%, while the price of Bitcoin increased by 8%. Meanwhile, Ethereum's ETH became the star of the month, skyrocketing by 49%, with a cumulative increase of over 150% since the low point in early April.
Chart 1: Ethereum Shines Strongly in the Cryptocurrency Asset Performance in July, Also Known as the 'Return of the King.'
Ethereum is the largest smart contract platform by market capitalization and serves as the infrastructure for blockchain finance. However, until recently, the price performance of ETH lagged far behind Bitcoin and even other smart contract platforms like Solana. This has led some to question Ethereum's development strategy and its competitive position in the industry (see Chart 2).
Chart 2: Ethereum Outperformed Bitcoin Since May.
The renewed enthusiasm for Ethereum and ETH may reflect the market's focus on stablecoins, asset tokenization, and institutional blockchain adoption—areas where Ethereum excels (see Chart 3). For instance, including its Layer 2 networks, the Ethereum ecosystem hosts over 50% of stablecoin balances and processes about 45% of stablecoin transactions (measured in dollar value).
Ethereum also houses about 65% of the locked value in decentralized finance (DeFi) protocols and nearly 80% of tokenized U.S. Treasury bond products. For many agents building cryptocurrency projects, including Coinbase, Kraken, Robinhood, and Sony, Ethereum has always been the preferred network.
Chart 3: Ethereum is the Leading Blockchain for Stablecoins and Tokenized Assets.
The increased adoption of stablecoins and tokenized assets will benefit Ethereum and other smart contract platforms. Grayscale Research believes that stablecoins can disrupt certain areas of the global payments industry through lower costs, faster settlement times, and greater transparency (for more context, see (Stablecoins and the Future of Payments)).
Stablecoin-related income comes from two sources: first, the net interest margin (NIM) earned by stablecoin issuers (like Tether and Circle), and second, transaction fees earned by the blockchain processing transactions. Since Ethereum has established a leading position in the stablecoin space, its ecosystem seems poised to benefit from the growth in stablecoin adoption through higher transaction fees.
Tokenization (the process of putting traditional assets on-chain) is similarly promising (for more context, see (Public Blockchains and the Tokenization Revolution)). Currently, the market size for tokenized assets is relatively small (around $12 billion), but it has tremendous growth potential. Tokenized U.S. Treasury bonds are currently the largest category of tokenized assets, with Ethereum as the market leader. In the alternative asset space, Apollo Global recently partnered with Securitize to launch an on-chain credit fund.
Furthermore, while the tokenized equity market is small, it is growing: Robinhood has launched tokenized shares of private companies like SpaceX and OpenAI, and eToro also plans to tokenize stocks on Ethereum. Apollo's products are available on multiple blockchains, while Robinhood and eToro's tokenized equity products are within the Ethereum ecosystem.
ETP Boom and More Trends
Investor interest in Ethereum has led to significant net inflows into Ethereum spot ETPs. In July, the net inflow of Ethereum spot ETPs listed in the U.S. reached $5.4 billion, the largest single-month net inflow since these products were launched last year (see Chart 4).
Currently, Ethereum ETPs hold approximately $21.5 billion in assets, equivalent to nearly 60 million ETH, accounting for about 5% of the total circulating supply. According to the CFTC's trader holdings report data, we estimate that only $1 billion to $2 billion of net inflows into ETH ETPs come from hedge funds' "basis trading," with the rest being long-term capital.
Chart 4: Net Inflows into ETH ETPs Exceed $5 Billion.
Some publicly listed companies are also beginning to accumulate ETH to gain access to the tokens through equity instruments. The two companies holding the most ETH among 'crypto fund management companies' are Bitmine Emersion Technologies ($BMNR) and SharpLink Gaming ($SBET). Together, these two companies hold over 1 million ETH, worth a total of $3.9 billion.
The third publicly listed company, BTCS ($BTCS), announced in late July plans to raise $2 billion through the issuance of common and preferred shares for additional purchases of ETH (BTCS currently holds about 70,000 ETH, valued at approximately $250 million). Aside from the net inflows into ETH ETP products, buying pressure from Ethereum enterprise fund management companies may also have driven the price increase.
Additionally, Ethereum has seen an increase in its share of the cryptocurrency derivatives market this month, indicating a rising speculative interest in the asset. In traditional futures listed on the Chicago Mercantile Exchange (CME), the open interest (OI) for ETH futures has risen to about 40% of the open interest for Bitcoin (BTC) futures (Chart X). In perpetual futures contracts, the number of open contracts for ETH has increased to about 65% of the number of open contracts for Bitcoin (BTC). This month, the trading volume of Ethereum perpetual futures also exceeded that of Bitcoin perpetual futures.
Chart 5: Open Interest in ETH Futures Increased.
Although ETH was in the spotlight for most of July, Bitcoin investment products also continued to see stable demand from investors. The net inflow of spot Bitcoin ETPs listed in the U.S. reached $6 billion, with current estimates holding 1.3 million Bitcoins. Several publicly traded companies have also expanded their Bitcoin fund management strategies. Market leader Strategy (formerly MicroStrategy) issued $2.5 billion in new preferred shares to purchase more Bitcoin.
Additionally, Bitcoin pioneer and Blockstream CEO Adam Back announced the establishment of a new Bitcoin fund management strategy company—Bitcoin Standard Fund Management ($BSTR). The company will use Bitcoin from Back and other early adopters as capital and will raise equity. The BSTR transaction is very similar to the earlier SPAC (Special Purpose Acquisition Company) transaction organized by Cantor Fitzgerald for Twenty One Capital—another large Bitcoin fund management strategy company backed by Tether and SoftBank.
Cryptocurrency Asset Boom
In July, the valuations of all segments of the cryptocurrency market increased. From the perspective of cryptocurrency asset sectors, the best performer was the smart contract sector (benefiting from the 49% rise in ETH), while the worst performer was the artificial intelligence sector, dragged down by the weakness of a few tokens (see Chart 6). During July, the open interest in many cryptocurrency assets and the financing rates (the cost of financing leveraged long positions) both increased, indicating a rise in investor risk appetite and increased speculative long positions.
Chart 6: All Cryptocurrency Market Sectors Rose in July.
After experiencing strong returns, valuations may undergo some degree of pullback or consolidation. The passage of the (GENIUS Act) is a significant positive for the cryptocurrency asset class, driving absolute and risk-adjusted returns. Congress is also considering cryptocurrency market structure legislation, with the House's (CLARITY Act) passing with bipartisan support on July 17. However, the Senate is deliberating its version of market structure legislation, and no significant progress is expected before September. Therefore, there may be fewer legislative catalysts supporting the rise in cryptocurrency asset valuations in the short term.
Summary
Nevertheless, we remain very optimistic about the outlook for cryptocurrency assets in the coming months. First, even in the absence of legislation, regulatory tailwinds are still present. For example, the White House recently released a detailed report on digital assets that proposed 94 specific recommendations to support the development of the U.S. digital asset industry. Of these, 60 fall under the jurisdiction of regulatory agencies (the remaining 34 require action from Congress or collaboration between Congress and regulators). With regulatory support, cryptocurrency investment products (such as staking features or broader spot cryptocurrency ETPs) may attract new capital into this asset class.
Secondly, we expect the macro environment to continue to favor cryptocurrency assets. These assets provide investors with opportunities to engage with blockchain innovation while offering some immunity to certain risks associated with traditional assets (such as the ongoing weakness of the dollar). In addition to the cryptocurrency-related legislation passed in July, President Trump also signed the (One Big Beautiful Bill Act), locking in large-scale federal budget deficits for the next decade.
He also explicitly expressed a desire for the Federal Reserve to lower interest rates, emphasizing that a weaker dollar would benefit U.S. manufacturing and raised tariffs on various products and trade partners. Large budget deficits and lower real interest rates could continue to suppress the value of the dollar, especially when he has implicit support from the White House. Scarce digital goods like Bitcoin and ETH may benefit from this and serve as partial hedges in portfolios facing ongoing dollar weakness risks.
(The above content is excerpted and reprinted with permission from partner PANews, original link | Source: Plain Blockchain)
"Grayscale Research: Institutional Influx and Regulatory Release, Multiple Benefits Behind Ethereum's Strong Rise" This article was first published on (Blockcast).