Ethereum Strong Rebound, Stablecoins and Asset Tokenization Become Focus

In July 2025, the price of ETH on the Ethereum network surged nearly 50%. Investors' attention is focused on stablecoins, asset tokenization, and institutional adoption, which are the core advantages of Ethereum as one of the earliest smart contract platforms compared to other competitors.

The passage of legislation related to stablecoins is an important milestone for the entire cryptocurrency industry. Although it may take some time for market structure-related legislation to be passed in Congress, regulatory agencies can continue to support the development of the digital asset industry through other policy adjustments, such as approving staking features in crypto investment products.

In the short term, the valuation of crypto assets may undergo adjustments, but industry insiders remain optimistic about the industry's prospects in the coming months. Crypto assets provide investors with opportunities to access blockchain innovations while potentially hedging against certain risks associated with traditional assets. Therefore, Bitcoin, Ether, and many other digital assets are expected to continue to be favored by investors.

On July 18, a bill providing a comprehensive regulatory framework for US stablecoins was signed. This marks a new phase for the cryptocurrency asset class: blockchain technology is moving from the experimental stage to the core of a regulated financial system. The debate over whether blockchain technology can bring real value to mainstream users has come to a close, and regulators have now turned to ensuring that the industry grows while incorporating appropriate consumer protection and financial stability mechanisms.

In July, the cryptocurrency market experienced heightened sentiment due to the passage of relevant legislation, while also being supported by favorable macro market conditions. Stock market indices rose in most parts of the world, with returns in the fixed income market led by high-risk sectors such as U.S. high-yield corporate bonds and emerging market bonds. As market volatility decreased, related investment strategies also performed quite well.

A market capitalization-weighted investable digital asset index rose by 15%, while the price of Bitcoin increased by 8%. However, Ethereum's ETH became the star of the month, with a price surge of 49%, accumulating a growth of over 150% since the low point in early April.

The Advantages of Ethereum Reemerge

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 has lagged far behind Bitcoin and even other smart contract platforms. This has led some to question Ethereum's development strategy and its competitive position in the industry.

The renewed focus on Ethereum and ETH may reflect the market's emphasis on stablecoins, asset tokenization, and institutional blockchain adoption—areas where Ethereum excels. For instance, the Ethereum ecosystem, including its Layer 2 networks, holds over 50% of stablecoin balances and processes approximately 45% of stablecoin transactions (measured by dollar value).

Ethereum is still the home of about 65% of the locked value in decentralized finance (DeFi) protocols and nearly 80% of tokenized U.S. Treasury products. For many institutions building crypto projects, including several well-known companies, Ethereum has always been the preferred network.

The adoption of stablecoins and tokenized assets will benefit Ethereum and other smart contract platforms. Industry insiders believe that stablecoins are expected to disrupt certain areas of the global payment industry with lower costs, faster settlement times, and higher transparency.

There are two types of income related to stablecoins: one is the net interest margin (NIM) earned by stablecoin issuers, and the other is the transaction fees earned by the blockchain processing the transactions. Since Ethereum has already taken a leading position in the stablecoin field, its ecosystem seems set to benefit from the growth of stablecoin adoption through higher transaction fees.

Tokenization (the process of putting traditional assets on the blockchain) is no different. The current market size for tokenized assets is relatively small (around $12 billion), but the growth potential is enormous. Tokenized U.S. Treasuries are currently the largest category of tokenized assets, and Ethereum is the market leader. In the alternative asset space, some large institutions have recently launched on-chain credit funds.

In addition, the tokenized equity market is small but growing: some platforms have launched tokenized shares of private companies, and others plan to tokenize stocks on Ethereum.

ETH Trading Products in High Demand

Investor interest in Ethereum has led to a significant net inflow into spot ETH exchange-traded products (ETPs). In July, the net inflow into U.S.-listed spot ETH ETPs was $5.4 billion, marking the largest single-month net inflow since these products were launched last year.

Currently, the ETH ETP holds approximately $21.5 billion in assets, equivalent to nearly 6 million ETH, accounting for about 5% of the total circulating supply. According to trader position report data, it is estimated that only $1 billion to $2 billion of the net inflow into the ETH ETP comes from hedge funds' "basis trading," with the remainder being long-term capital.

Some listed companies have also begun to accumulate ETH in order to gain access to the use of tokens through equity instruments. The two largest "crypto asset management companies" holding ETH together hold over 1 million ETH, worth a total of 3.9 billion dollars.

Another publicly listed company stated in late July that it plans to raise $2 billion through the issuance of common and preferred stock for additional purchases of ETH (the company currently holds about 70,000 ETH, valued at approximately $250 million). In addition to the net inflow of the ETH ETP product, buying pressure from Ethereum enterprise funding management companies may also have driven the price increase.

In addition, Ethereum's share in the cryptocurrency derivatives market has increased this month, indicating that market speculation interest in this asset is rising. In traditional futures listed on some exchanges, the open interest of ETH futures has risen to about 40% of the open interest of Bitcoin futures. In perpetual futures contracts, the number of open contracts for ETH has risen to about 65% of the open contracts for Bitcoin. This month, the trading volume of Ether perpetual futures has also surpassed that of Bitcoin perpetual futures.

Despite the attention ETH received for most of July, investment products for Bitcoin also continued to see stable demand from investors. The net inflow of spot Bitcoin ETP listed in the U.S. reached $6 billion, with an estimated holding of 1.3 million Bitcoins. Several publicly listed companies have also expanded their Bitcoin fund management strategies. Market leaders issued $2.5 billion in new preferred shares to purchase more Bitcoins.

In addition, a Bitcoin early pioneer and CEO of a certain company announced the establishment of a new Bitcoin fund management strategy company. The company will use his and other early adopters' Bitcoins as capital and will raise equity. The company's transaction is very similar to the SPAC (Special Purpose Acquisition Company) transaction organized by a certain financial services company for another capital company earlier.

The comprehensive rise of crypto assets

In July, valuations across various sectors of the crypto market saw an increase. From the perspective of crypto assets, the best performer was the smart contract sector (benefiting from a 49% increase in ETH), while the worst performer was the artificial intelligence sector, dragged down by the weakness of a few tokens. During July, the open interest and financing rates (the cost of financing leveraged long positions) of many crypto assets rose, indicating an increased risk appetite among investors and a rise in speculative long positions.

After experiencing strong returns, valuations may undergo a certain degree of correction or consolidation. The passage of legislation related to stablecoins is a significant boon for the cryptocurrency asset class, driving substantial and risk-adjusted returns. Congress is also considering legislation on cryptocurrency market structure, with a relevant bill from the House having gained bipartisan support and passed on July 17. However, the Senate is reviewing its own version of market structure legislation, and no significant progress is expected before September. Therefore, in the short term, there may be fewer legislative catalysts to support the rise in cryptocurrency asset valuations.

Conclusion

Nevertheless, industry insiders remain very optimistic about the prospects for crypto assets in the coming months. First, even without legislation, regulatory tailwinds still exist. For example, the White House recently released a detailed report on digital assets, proposing 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 joint action between Congress and regulatory agencies). With the support of regulatory agencies, crypto investment products (such as staking features or broader spot crypto ETPs) may attract new capital into this asset class.

Secondly, the macro environment is expected to continue to favor crypto assets. These assets provide investors with the opportunity to engage with blockchain innovation, while demonstrating a certain immunity to specific risks associated with traditional assets, such as the ongoing weakness of the dollar. In addition to the crypto-related legislation passed in July, Trump also signed a bill locking in large federal budget deficits for the next decade.

He also explicitly stated his hope to lower interest rates, emphasizing that a weaker dollar would benefit U.S. manufacturing, and increased tariffs on various products and trading partners. The large budget deficit and lower real interest rates may continue to depress the dollar's value, especially when receiving implicit support from the government. Scarce digital commodities like Bitcoin and Ether may benefit from this and serve as partial hedging instruments in portfolios facing the ongoing risk of a weakening dollar.