Ethereum
SEC Approval of ETH ETFs Paves Path for Ethereum Dominance
The SEC’s recent approval of ETH ETFs could eventually prove to be a bigger event for Ethereum than for Bitcoin. Bitcoin’s dominance, niche and value proposition as a store of value are well established and unlikely to be challenged in the near term. Ethereum, however, faces much stiffer competition, sometimes struggling to stand out among smart contract platform narratives – until recently.
We now know that there are two major crypto assets that are unlikely to be classified as securities by US regulators. This may not mean much to retail investors, especially outside the United States, but the removal of regulatory uncertainty will cause many institutional investors to consider using, building and investing in Chains.
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Ethereum will likely continue to dominate developer activity in the blockchain space, at least when it comes to large projects. According to Electric Capital’s developer report, Ethereum (and the EVM chain in general) attracted significantly more developers than all other chains last year. Potential capital inflows from ETFs, accessible institutional avenues like Coinbase’s BASE L2, and now that stamp of legitimacy could further solidify its dominance.
From a project perspective, the Ethereum chain has a robust pipeline including EigenLayer, Ethena, and BlackRock’s BUIDL. The Ethena Synthetic Dollar (USDe) alone accumulated the entire stablecoin market capitalization on Solana in just a few months, a staggering $3 billion. This doesn’t mean that other chains won’t host major crypto projects – they certainly will. But only Ethereum (for now) hosts protocols with the history and track record necessary for institutions to participate with meaningful capital. Think of AAVE or Uniswap, for example.
Finally, a higher ETH price could revive the Ethereum DeFi economy, triggering a powerful feedback loop. To take a simple example: on AAVE alone, there is around $9 billion in ETH-related collateral (between wETH, wstETH, weETH), plus around another $1 billion in L2. Of course, some of this collateral is used for delta-neutral strategies like recursive lending and point farming, but most of it probably isn’t.
A higher ETH price – and collateral value – could act as a stimulus package for its crypto-economy. This creates wealth effects, more spending, more investment, more leverage. Especially if altcoins linked to ETH follow higher.
It is too early to tell, but we could return to this moment when Ethereum establishes itself as the “Amazon” of the digital asset economy. If the scenario comes true (this is still a big “if”), it could relegate other layer 1 smart contracts to niche players (like “Etsy”), even if they still support communities flourishing. It’s unclear (at least to me) whether this is the best path for the industry; perhaps a more balanced multi-chain world would ultimately maximize adoption – we may never know. But at this point, Ethereum dominance certainly seems like the most likely outcome.
Note: The opinions expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.