The measure of Bitcoin’s market capitalization relative to the total cryptocurrency market — has long been a key indicator for understanding capital flows in the crypto space. Historically, when BTC dominance is high, Bitcoin tends to outperform altcoins as investors seek safety in the market’s most established asset. Conversely, when BTC dominance declines, capital often rotates into altcoins, with Ethereum (ETH) typically leading the charge due to its broad ecosystem and utility. This interplay between BTC and ETH is crucial in gauging which asset might take the lead in a bull run, and in 2025, many analysts believe Ethereum may be poised to challenge Bitcoin’s dominance.
Why ETH Is Poised to Benefit from Stablecoin Regulation and Dencun ?
Ethereum is well positioned to be a major beneficiary of the next wave of crypto adoption in 2025. Two powerful, interconnected forces are at work: clearer regulation for payment stablecoins under the GENIUS Act and technical upgrades (notably Dencun/proto-danksharding) that materially lower transaction costs on the Ethereum network. Together, these developments could accelerate on-chain volume, institutional activity, and DeFi growth—giving ETH a structural edge this cycle.
Stablecoins: the institutional on-ramp to Ethereum
Ethereum hosts the largest share of stablecoin liquidity in the market, with major tokens such as USDC and USDT concentrated on the chain. This concentration makes Ethereum the natural rails for fiat-like digital money and for institutions seeking fast, programmable settlement. Recent data show Ethereum accounting for roughly half of global stablecoin supply, underscoring its central role in tokenised payments and DeFi.
The passage and signing of the GENIUS Act in the United States creates a clear federal framework for payment stablecoins. By defining issuer requirements, reserve standards and disclosure rules, the legislation reduces legal uncertainty for large financial institutions and payment firms that have previously been cautious about using stablecoins at scale. In practice, that clarity lowers the regulatory friction for on-chain dollar flows—flows that predominantly run through Ethereum.
Dencun: cheaper transactions, L2 growth, and network effects
The Dencun upgrade (including EIP-4844 / proto-danksharding) significantly expands data availability and reduces the cost of Layer-2 rollup transactions. Lower settlement costs make it more economical for payment processors, DeFi platforms and high-frequency applications to build on Ethereum and its Layer-2s, improving user experience and increasing throughput. In short: cheaper transaction rails attract more activity—and more activity begets liquidity and developer interest.
Layer-2 networks are the critical scaling layer that turn Ethereum from a high-fee settlement chain into an efficient payment and application platform. With Dencun reducing the marginal cost of rollup data, Layer-2s gain a competitive advantage for everything from stablecoin payments to real-time DeFi primitives. That strengthens ETH’s narrative as both a settlement asset and the base unit of value for the broader ecosystem.
Why this combination matters for ETH price action
When regulated stablecoins are easier for institutions to issue, custody and use, demand for on-chain settlement capacity rises. Because Ethereum already hosts a large share of stablecoin liquidity and a vibrant DeFi economy, it stands to capture much of that institutional volume. Academic and industry studies—along with recent market moves—suggest that tokenised cash and compliant stablecoins can materially increase transaction volumes and embedded liquidity on host chains.
Moreover, on-chain indicators such as declining exchange reserves and stronger long-term holder accumulation historically precede bullish price discovery. If the GENIUS Act drives institutional adoption and Dencun keeps gas economics favourable for everyday use, these supply-and-demand dynamics create a tailwind for ETH relative to other chains.
What to watch next
Stablecoin flows and issuer announcements. Look for major banks, payment networks or fintechs launching GENIUS-compliant stablecoins and routing liquidity onto Ethereum.
Layer-2 TVL and transaction growth. Rising Total Value Locked and active addresses on Arbitrum, Optimism, Base and others would confirm the scaling thesis.
On-chain demand metrics. Exchange reserve trends and long-term holder accumulation for ETH and stablecoins will indicate whether liquidity is being withdrawn into custody and settlement uses.
Regulatory roll-out and guidance. How quickly US regulators and the Fed operationalise GENIUS will affect timing and scale.
Final take
Ethereum’s unique combination of hosting the majority of stablecoin liquidity and benefiting from meaningful protocol upgrades gives it a credible path to lead parts of the 2025 bull market. The GENIUS Act reduces regulatory uncertainty for stablecoins—removing a major adoption barrier—while Dencun improves the economic case for mass usage on Ethereum and its Layer-2 ecosystem. Together, these forces could tilt capital and product development toward ETH, making it a focal point for institutional and retail activity in the months ahead.
