Ethereum Leads the Encryption Asset Boom, the "GENIUS Act" Paves the Way for Industry Development

In July 2025, the ETH price on the Ethereum network surged nearly 50%. Investors are focusing on areas such as stablecoins, asset tokenization, and institutional adoption, which are the core advantages that set Ethereum apart from its competitors as one of the earliest smart contract platforms.

The passage of the "GENIUS Act" is an important milestone for stablecoins and the entire encryption asset class. Although it may take some time for market structure-related legislation to pass in Congress, U.S. regulators can continue to promote the development of the digital asset industry through other policy adjustments, such as approving staking features in encryption investment products.

In the short term, the valuation of crypto assets may experience fluctuations, but the long-term outlook remains optimistic. Crypto assets provide investors with the opportunity to engage with blockchain innovation, while potentially offering some resilience against certain risks associated with traditional assets. Therefore, Bitcoin, Ether, and various other digital assets are expected to continue to be favored by investors.

On July 18, the "GENIUS Act" was officially signed, providing a comprehensive regulatory framework for stablecoins in the United States. This marks a new phase for the cryptocurrency asset class: public 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 ended, and regulators have now turned to ensuring that the industry grows while incorporating appropriate consumer protection and financial stability mechanisms.

In July, the encryption market was buoyed by the passage of the GEN Act and supported by favorable macro market conditions. Stock indices rose in most parts of the world, and 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.

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

Ethereum is the largest smart contract platform by market value and serves as the infrastructure for blockchain finance. However, until recently, the price performance of ETH has been far inferior to that of Bitcoin and even lagged behind other smart contract platforms. This has led some to begin questioning Ethereum's development strategy and its competitive position in the industry.

The renewed enthusiasm for Ethereum and ETH may reflect the market's focus on stablecoins, asset tokenization, and institutional blockchain adoption. For example, the Ethereum ecosystem, including its Layer 2 networks, holds over 50% of stablecoin balances and processes about 45% of stablecoin transactions (measured in 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 encryption 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. Stablecoins are expected to disrupt certain areas of the global payments industry through lower costs, faster settlement times, and greater transparency.

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

Tokenization (the process of bringing traditional assets onto 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. Treasury bonds are currently the largest category of tokenized assets, with Ethereum being the market leader. In the alternative asset space, some large financial institutions are launching on-chain credit funds.

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

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

Currently, ETHETP holds approximately $21.5 billion in assets, equivalent to nearly 6 million Ether, accounting for 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 ETHETP comes from hedge funds' "basis trading", with the rest being long-term capital.

Some listed companies have also begun to accumulate Ether to gain access to tokens through equity instruments. The two largest "encryption fund management companies" holding Ether together possess over 1 million Ether, with a total value of 3.9 billion dollars.

In addition, 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 of ETH futures has risen to about 40% of the open interest of Bitcoin (BTC) futures. 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 Ether perpetual futures has also surpassed that of Bitcoin perpetual futures.

Despite the significant attention ETH received for most of July, Bitcoin investment products have also maintained stable demand from investors. The net inflow of spot Bitcoin ETPs listed in the U.S. reached $6 billion, currently estimated to hold 1.3 million Bitcoins. Several listed companies have also expanded their Bitcoin fund management strategies.

In July, the valuations of various sectors in the encryption market have risen. From the perspective of the crypto asset sector, the best performer is the smart contract sector (benefiting from a 49% increase in Ether), while the worst performer is the artificial intelligence sector, dragged down by the weakness of a few tokens. During July, the futures open interest and financing rates (the cost of financing for leveraged long positions) of many crypto assets have increased, indicating a heightened risk appetite among investors and an increase in speculative long positions.

After experiencing strong returns, valuations may see a certain degree of pullback or consolidation. The passage of the "GENIUS Act" is a significant boon for the encryption asset class, driving absolute and risk-adjusted returns. Congress is also considering legislation on encryption market structure, and the House's "CLARITY Act" was passed with bipartisan support 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, there may be fewer legislative catalysts supporting the rise in encryption asset valuations in the short term.

Nevertheless, the outlook for crypto assets in the coming months remains optimistic. First, even in the absence of 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 collaboration 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 encryption assets. These assets provide investors with the opportunity to access blockchain innovations while having a certain immunity to some risks of traditional assets. In addition to the encryption-related legislation passed in July, there is also a bill that locks in a massive federal budget deficit for the next decade.

In addition, there are signs that suggest hopes for the Federal Reserve to lower interest rates, emphasizing that a weaker dollar will benefit U.S. manufacturing and raise tariffs on various products and lending partners. Large budget deficits and lower real interest rates may continue to depress the value of the dollar. Scarce digital commodities like Bitcoin and Ether may benefit from this and serve as partial hedging tools in portfolios facing the ongoing risk of a weak dollar.