Written by: Grayscale
Translation: Plain Language Blockchain
In July 2025, the price of ETH on the Ethereum network surged nearly 50%. Investors are focusing on stablecoins, asset tokenization, and institutional adoption—these are the areas where Ethereum, as the oldest smart contract platform, differentiates itself from competitors.
The passage of the (GENIUS Act) is a milestone moment for stablecoins and the entire cryptocurrency asset class. While market structure-related legislation may take time to pass through 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 crypto investment products.
In the short term, cryptocurrency asset valuations may undergo consolidation, but we remain very optimistic about the outlook for this asset class in the coming months. Crypto assets provide investors with the opportunity to engage with blockchain innovation while potentially being somewhat immune to certain risks of traditional assets (like 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 U.S. stablecoins. 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 deliver real benefits to mainstream users is over, and regulators have now turned to ensuring that the industry grows while incorporating appropriate consumer protection and financial stability mechanisms.
In July, the crypto market rejoiced at the passage of the (GENIUS Act) while also being supported by favorable macro market conditions. Stock market indices rose in most parts of the world, and returns in fixed income markets 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 15%, while Bitcoin's price increased by 8%. Ethereum's ETH was the star of the month, soaring 49%, with a cumulative increase of over 150% since the low in early April.
Chart 1: Ethereum Shines in the Strong Performance of Cryptocurrency Assets in July
Also known as the 'Return of the King'
Ethereum is the largest smart contract platform by market cap and serves as the infrastructure for blockchain finance. However, until recently, ETH's price performance 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—these are Ethereum's strengths (see Chart 3). For example, including its Layer 2 networks, the Ethereum ecosystem holds over 50% of the stablecoin balance and processes approximately 45% of stablecoin transactions (measured by dollar value).
Ethereum is still home to about 65% of the locked value in decentralized finance (DeFi) protocols, as well as nearly 80% of tokenized U.S. Treasury products. For many institutions building crypto projects, including Coinbase, Kraken, Robinhood, and Sony, Ethereum has remained 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 have the potential to disrupt certain areas of the global payments industry through lower costs, faster settlement times, and greater transparency (more background information can be found in (Stablecoins and Future Payments)).
Stablecoin-related income comes from two sources: the net interest margin (NIM) earned by stablecoin issuers (like Tether and Circle) and transaction fees earned by the blockchain handling the transactions. Since Ethereum has a leading position in the stablecoin space, its ecosystem seems set to benefit from increased transaction fees resulting from the growth in stablecoin adoption.
Tokenization (the process of bringing traditional assets onto the blockchain) is also similar (more background information can be found in the (Public Blockchain and Tokenization Revolution)). The current market size for tokenized assets is relatively small (around $12 billion), but the growth potential is huge. Tokenized U.S. Treasuries 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.
Moreover, 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 substantial net inflows into spot ETH exchange-traded products (ETPs). In July, net inflows into U.S.-listed spot ETH ETPs reached $5.4 billion, the largest single-month net inflow since these products were launched last year (see Chart 4).
Currently, ETH ETPs hold approximately $21.5 billion in assets, equivalent to nearly 6 million ETH, which is about 5% of the total circulating supply. According to the CFTC's trader position report data, we estimate that only $1 billion to $2 billion of the net inflow into ETH ETPs comes from hedge funds' 'basis trading', with the rest being long-term capital.
Chart 4: Net Inflows into ETH ETP Exceed $5 Billion
Some listed companies have also begun accumulating ETH to secure token usage rights through equity instruments. The two companies holding the most ETH, 'Crypto Fund Management Companies', are Bitmine Emersion Technologies ($BMNR) and SharpLink Gaming ($SBET). Together, these two companies hold over 1 million ETH, totaling $3.9 billion in value.
The third listed company, BTCS ($BTCS), announced in late July that it plans to raise $2 billion through the issuance of common and preferred stock for additional purchases of ETH (BTCS currently holds about 70,000 ETH, valued at approximately $250 million). In addition to the net inflow of ETH ETP products, buying pressure from Ethereum corporate fund managers may also have driven the price increase.
Moreover, Ethereum's share in the cryptocurrency derivatives market has increased this month, indicating a rising speculative interest in this asset. In traditional futures listed on the Chicago Mercantile Exchange (CME), the open interest (OI) of ETH futures has risen to about 40% of Bitcoin (BTC) futures open interest (see Chart X). In perpetual futures contracts, the open interest of ETH has increased to about 65% of the open interest of Bitcoin (BTC). This month, the trading volume of Ethereum perpetual futures also surpassed that of Bitcoin perpetual futures.
Chart 5: Increase in ETH Futures Open Interest
Despite ETH being in the spotlight for most of July, Bitcoin investment products also continued to see steady demand from investors. Net inflows into U.S.-listed spot Bitcoin ETPs reached $6 billion, with an estimated holding of 1.3 million Bitcoins. Several listed companies have also expanded their Bitcoin fund management strategies. Market leader Strategy (formerly MicroStrategy) issued $2.5 billion in new preferred shares to purchase more Bitcoin.
Additionally, Bitcoin early pioneer and Blockstream CEO Adam Back announced the establishment of a new Bitcoin fund management strategy company—Bitcoin Standard Asset Management ($BSTR). The company will use Bitcoin from Back and other early adopters as capital and will raise equity. The trading of BSTR is very similar to the SPAC (Special Purpose Acquisition Company) transaction organized by Cantor Fitzgerald for Twenty One Capital—another large Bitcoin fund management strategy company supported by Tether and SoftBank.
The Boom of Crypto Assets
In July, valuations across various sectors of the crypto market rose. 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 specific weakness of a few tokens (see Chart 6). During July, the open interest and financing rates (the cost of financing leveraged long positions) of many crypto assets increased, indicating an enhanced risk appetite among investors and an increase in speculative long positions.
Chart 6: All Cryptocurrency Market Sectors Rose in July
After experiencing strong returns, valuations may undergo some degree of correction or consolidation. The passage of the (GENIUS Act) is a significant positive for the cryptocurrency asset class, boosting absolute and risk-adjusted returns. Congress is also considering legislation on the structure of the crypto market, with the House's (CLARITY Act) having bipartisan support and passing on July 17. However, the Senate is reviewing its own version of market structure legislation, and no significant progress is expected before September. Therefore, legislative catalysts supporting the rise in cryptocurrency asset valuations may be limited in the short term.
Summary
Nevertheless, we remain very optimistic about the outlook for cryptocurrency 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 U.S. digital asset industry. Of these, 60 fall under the jurisdiction of regulators (the remaining 34 require action from Congress or joint action between Congress and regulators). With support from regulators, crypto investment products (such as staking functions or broader spot crypto ETPs) could attract new capital into this asset class.
Secondly, we expect the macro environment to continue favoring crypto assets. These assets provide investors with the opportunity to engage with blockchain innovation while having some immunity to certain risks of traditional assets (such as the ongoing weakness of the dollar). In addition to the crypto-related legislation passed in July, President Trump also signed the (One Big Beautiful Bill Act), locking in a massive federal budget deficit for the next decade.
He also clearly stated his desire for the Federal Reserve to lower interest rates, emphasizing that a weaker dollar would benefit U.S. manufacturing and would raise tariffs on various products and trading partners. A large budget deficit and lower real interest rates may continue to depress the value of the dollar, especially with implicit support from the White House. Scarce digital commodities like Bitcoin and ETH may benefit from this and serve as partial hedging tools in portfolios facing the ongoing risk of a weak dollar.
