Ethereum Leads Strong Rebound in Encryption Assets

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 its competitors.

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

In the short term, the valuation of encryption assets may experience adjustments, but we remain optimistic about the outlook for the next few months. Encryption assets provide investors with the opportunity to engage with blockchain innovation while potentially serving as a defense against certain risks associated with traditional assets, such as the ongoing weakness of the dollar. Therefore, Bitcoin, Ether, and many other digital assets are expected to continue to be favored by investors.

On July 18th, a bill providing a comprehensive regulatory framework for US stablecoins was officially signed. This marks the entry of the encryption asset class into a new phase: public blockchain technology is moving from the experimental stage to the core of a regulated financial system. The debate on whether blockchain technology can bring real value to ordinary users has come to an end, and regulators have now shifted to ensuring that the industry develops while incorporating appropriate consumer protection and financial stability mechanisms.

In July, the encryption market was buoyed by the passage of related legislation and supported by a favorable macroeconomic environment. Stock market indices rose in most parts of the world, 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. As market volatility decreased, related investment strategies also performed quite well.

The cryptocurrency market index rose by 15%, and the price of Bitcoin increased by 8%. Meanwhile, Ethereum's ETH became the star of the month, with a price surge of 49%, accumulating a rise of over 150% since the low point in early April.

The Advantages of Ethereum Are Once Again Highlighted

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 not been as strong as Bitcoin, and it has even lagged behind other smart contract platforms. This has led some people 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 example, including its Layer 2 networks, the Ethereum ecosystem holds over 50% of the stablecoin balances and processes about 45% of the stablecoin transactions (measured by USD 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 encryption projects, Ethereum has always been the preferred network.

The adoption of stablecoins and tokenized assets will benefit Ethereum and other smart contract platforms. Stablecoins are expected to disrupt certain areas of the global payments industry through lower costs, faster settlement times, and higher transparency.

The income related to stablecoins mainly comes from two aspects: first, the net profit margin earned by stablecoin issuers, and second, the transaction fees earned by the blockchain processing the transactions. Since Ethereum has already taken a leading position in the stablecoin sector, its ecosystem seems likely to benefit from higher transaction fees as stablecoin adoption grows.

Tokenization (the process of bringing traditional assets on-chain) is also showing a similar trend. The current market size for tokenized assets is relatively small (around $12 billion), but the growth potential is enormous. Tokenized U.S. Treasury bonds are currently the largest category of tokenized assets, while Ethereum is the market leader. In the alternative asset space, some large financial institutions have recently launched on-chain credit funds.

In addition, the tokenized equity market, though small, is growing: some trading platforms have launched tokenized shares of private companies, and there are platforms planning to tokenize stocks on Ethereum.

Demand for Ethereum Investment Products is Strong

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 reached $5.4 billion, 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 circulation. According to the CFTC's trader positioning report data, we estimate 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 tokens through equity instruments. The two largest "crypto asset management companies" holding ETH together hold over 1 million ETH, with a total value of 3.9 billion dollars.

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

Furthermore, Ethereum's share in the cryptocurrency derivatives market has increased this month, indicating a rising speculative interest in the asset. In the traditional futures listed on the Chicago Mercantile Exchange (CME), the open interest (OI) for ETH futures has risen to about 40% of Bitcoin (BTC) futures' open interest. In perpetual futures contracts, the open interest for ETH has grown to about 65% of Bitcoin (BTC)'s open interest. This month, the trading volume of Ether perpetual futures has also surpassed that of Bitcoin perpetual futures.

Despite the attention that ETH received for most of July, Bitcoin investment products have also continued to enjoy steady demand from investors. The net inflow of spot Bitcoin ETPs listed in the United States reached $6 billion, currently estimated to hold 1.3 million Bitcoins. Several publicly traded companies have also expanded their Bitcoin fund management strategies. Some companies have issued new types of preferred shares to purchase more Bitcoins.

In addition, some important figures in the Bitcoin industry have announced the establishment of a new Bitcoin fund management strategy company. These companies will use early adopters' Bitcoins as capital and will raise equity.

Encryption assets overall strengthen

In July, the valuations of various sectors in the crypto market have risen. From the perspective of the crypto asset sector, 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, many crypto assets saw an increase in futures open interest and financing rates (the cost of financing leveraged long positions), indicating that investors' risk appetite has increased and speculative long positions have grown.

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

Conclusion

Nevertheless, we remain very optimistic about the prospects of crypto assets in the coming months. First, even in the absence of legislation, the regulatory environment is still improving. 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 by 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, we expect the macro environment to continue to be favorable for encryption assets. These assets provide investors with the opportunity to engage with blockchain innovation, while also exhibiting a certain immunity to certain risks associated with traditional assets, such as the continued weakness of the dollar. In addition to the encryption-related legislation passed in July, the government has also signed a bill that locks in a massive federal budget deficit for the next decade.

The government has also clearly stated its hope to lower interest rates, emphasizing that a weaker dollar will benefit American manufacturing, and has increased tariffs on various products and trading partners. Large budget deficits and lower real interest rates may continue to suppress the value of the dollar, especially when supported implicitly by the government. Scarce digital commodities like Bitcoin and Ether may benefit from this and serve as partial hedging tools in portfolios facing the ongoing risk of dollar weakness.