In the past month, Ethereum has reversed its previous downtrend and has been 'abnormally' strong.
On-chain activity for Ethereum remains quiet, and ETH continues to inflate. Aside from the Ethereum Foundation recently undergoing reforms and stating it will invest more resources in focusing on real applications, there have been no significant changes. Therefore, it can be confirmed that the reason for Ethereum's 'strength' is not due to positive ecological factors.
Regardless of how much the secondary market fluctuates, the underlying logic must be the flow of funds. Let's take a look at the fund flow situation for Ethereum: In the past month, Ethereum ETF funds have continued to see net inflows, while Bitcoin ETF has not been as strong. BlackRock even sold some Bitcoin to purchase Ethereum. From a risk-return perspective, ETF funds may believe that Ethereum currently offers better value for money.
Institutional funds' enthusiasm for purchasing Ethereum has suddenly surged in the past two months. From the funding path perspective, more and more listed companies are choosing to buy ETH or use enterprise-level staking services to boost stock prices. The 'Ethereum version of MicroStrategy' is quietly unfolding in the U.S. stock market. In recent years, institutional funds have participated in early investments in altcoin projects through VC investments. When tokens are listed on secondary markets, they could even achieve several dozen times their investment returns. However, due to slow ecological development, the number of altcoins has surged, and there is severe homogeneity and high market capitalization, as everyone wants to cash out and cut the leeks. The altcoin sector has entered a long bear market, and institutions have found no profit to be made.
Since the retail investors in the crypto space have been taken advantage of, the current thinking of institutions is to package crypto assets into listed companies and cut the leeks in the traditional capital market.
Traditional financial institutions in the U.S. also seem to be starting to pay attention to Ethereum. In recent months, the Trump administration has taken a special interest in the crypto market. First, the stablecoin bill was passed, and U.S. Treasury Secretary Yellen stated that stablecoins have a potential of $2 trillion and are important potential buyers of U.S. debt. Subsequently, the parent company of the second largest stablecoin, USDC, Circle, successfully went public and surged by 400%, attracting capital interest. The U.S. SEC has recently softened its stance on PoS staking and self-custody, releasing positive signals. SEC officials have clearly stated that miners, validators, or 'staking-as-a-service' providers do not fall under the regulatory scope of securities law. Meanwhile, the SEC is studying an 'innovation exemption' framework, which may open the door to the legalization of DeFi and on-chain finance.
This not only legally clears the regulatory uncertainties for Ethereum but also spiritually indicates that the 'on-chain finance' movement represented by Ethereum is essentially returning to the roots of American capitalism.
What do Wall Street institutions want to do?
The wave of RWA (Real World Asset tokenization) has arrived. Traditional financial assets worth trillions of dollars, whether tokenized bonds, on-chain funds, or the establishment of on-chain settlement systems, require sufficient security and a rich infrastructure. However, Bitcoin is digital gold and can only serve as a reserve asset, lacking smart contract functionality; while SOL has a strong gambling nature and lacks the capacity to support traditional financial assets. Ethereum is sufficiently secure and possesses complex smart contract functionality, making it a natural platform for custodial, trading, and settlement of RWA assets. It is the first choice for traditional financial institutions to deploy natively on-chain.
Whether Wall Street institutions can revitalize the RWA sector will determine whether the crypto industry can truly realize its potential and will also unleash the immense potential of Ethereum.
In today's society, we are in an era of uncontrolled fiscal deficits and impending debt crises. As the Federal Reserve's interest rate hikes no longer effectively curb deficit expansion, the prices of gold and Bitcoin decouple from actual interest rates, and U.S. government debt surpasses the private sector's credit growth rate, all of this indicates that traditional finance is facing a fundamental institutional dilemma.
Perhaps the crypto market is transitioning from Bitcoin's 'currency narrative' to Ethereum's 'institutional narrative' (RWA). This is a natural evolution of the bull market. When the flow of funds, regulatory environment, technological narratives, and institutional allocations all shift towards Ethereum, it signifies the onset of a new bull market.
If the above layout can be completed, it's time for Ethereum to take the lead in the bull market. Regardless of progress, in the short term, with the support of ETFs and institutional funds, Ethereum is likely to remain strong for a while. Long-term, it depends on whether Wall Street institutions can achieve large-scale deployment of RWA on Ethereum.
However, unlike previous cycles, the number of sectors that can benefit has decreased. In this rise, even Ethereum's ecological tokens are weak. L2 and some EVM-compatible projects are also not performing well. We need to follow the institutions and be prudent, observing changes quietly.
