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Ethereum (ETH) has jumped nearly 20 percent over the past two days as the decentralized finance (DeFi) sector celebrates following Donald Trump’s presidential victory.
Ethereum Begins to Gain Momentum
The second largest cryptocurrency by market cap has lagged behind Bitcoin (BTC) and other smart contract platform tokens like Solana (SOL) for most of the year.
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However, following the victory of Trump as the Republican president of the US, ETH has seen an increase of more than 10% since yesterday. The token’s rise has brought attention to one of Ethereum’s newest use cases to date – DeFi.
In long form posted on X, Arthur Arthur Cheong & Eugene Yap from crypto investment firm DeFiance Capital noted that the total value locked (TVL) in Ethereum-based DeFi protocols is increasing.
While analysts attribute some of this growth to high crypto asset prices, they also highlight that trading volumes on other DeFi platforms are “almost back to 2022 levels, proving that the resurgence is real.”
Cheong and Yap point out several factors that indicate that the DeFi ecosystem is heading towards an era of “DeFi innovation.”
First, analysts note that DeFi appears to be emerging from “disappointment.” For the uninitiated, disillusionment is the stage in the Gartner Hype Cycle where interest in a technology wanes as initial expectations are not met.
As shown in the chart below, DeFi is moving through the “enlightenment trend” phase, which may head towards the “production plateau” as the technology matures.
Additionally, macroeconomic factors, including a low interest rate environment, are expected to boost DeFi adoption in two critical ways: lowering opportunity costs and making debt more affordable.
With treasury bills and traditional savings accounts offering low returns, investors are increasingly turning to income-generating DeFi techniques such as reward farming, staking, and liquidity mining.
Lower interest rates may also increase the supply of stablecoins by making loans cheaper, thus providing more capital to fuel DeFi growth.
How Bullish is the Trump Presidency for ETH?
The analysis emphasizes that the 2024 US presidential election can provide DeFi with the necessary legal clarity. Trump’s presidency is expected to bring favorable crypto regulations, which could boost investor confidence.
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Therefore, ETH is expected to benefit from any increase in investor interest in DeFi. Crypto expert analysis suggests that ETH could rise to $3,400 if it clears certain key resistance levels.
There was also something important increase in Ethereum whale activity, indicating that sophisticated and experienced ETH holders are hoarding the token in anticipation of a potential rally.
ETH is facing strong competition from smart social networks like Solana. According to the latter reportthe SOL DeFi ecosystem saw its TVL increase to $5.7 billion in Q3 2024.
At press time, ETH is trading at $2,806, up 7.1% in the last 24 hours, with a market cap of $338.6 billion.
Featured image from Unsplash, Charts from X.com and Tradingview.com
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