Grayscale Research Institute: Influx of institutions and regulatory release, multiple benefits behind Ethereum's strong rise

Written by: Grayscale  

Translated by: Ba Hua 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—core advantages that distinguish Ethereum, the oldest smart contract platform, from its competitors.  

The passage of the *GENIUS Act* marks a milestone for stablecoins and the broader crypto asset class. While market structure legislation may take time to pass through Congress, U.S. regulators can continue supporting the digital asset industry through other policy adjustments, such as approving staking features in crypto investment products.  

In the short term, crypto asset valuations may consolidate, but we remain highly optimistic about the asset class’s prospects over the coming months. Crypto assets offer investors exposure to blockchain innovation while potentially insulating them from certain risks in traditional assets (e.g., sustained U.S. dollar weakness). As a result, Bitcoin, ETH, and many other digital assets are expected to continue gaining investor favor.  

On July 18, President Trump signed the *GENIUS Act*, establishing a comprehensive regulatory framework for U.S. stablecoins. This signals the "end of the beginning" for the crypto asset class: public blockchain technology is transitioning from experimentation to the core of the regulated financial system. Debates over whether blockchain can deliver tangible benefits to mainstream users have subsided; regulators now focus on ensuring the industry grows with appropriate consumer protections and financial stability mechanisms.  

In July, crypto markets celebrated the *GENIUS Act*’s passage, supported by favorable macroeconomic conditions. Equity indices rose across most global regions, while fixed-income returns were led by high-risk segments such as U.S. high-yield corporate bonds and emerging market bonds (see Chart 1). Strategies benefiting from reduced market volatility also performed well.  

The FTSE/Grayscale Crypto Asset Market Index (a market-cap-weighted index of investable digital assets) rose 15%, and Bitcoin gained 8%. Ethereum’s ETH stole the spotlight, surging 49% for the month and over 150% from its early April low.  

**Chart 1: Ethereum Shines in a Strong July for Crypto Assets**  

### Not Just a "Comeback"  

Ethereum, the largest smart contract platform by market cap, serves as infrastructure for blockchain-based finance. However, until recently, ETH significantly underperformed Bitcoin and even lagged behind other smart contract platforms like Solana. This sparked questions about Ethereum’s strategy and competitive position (see Chart 2).  

**Chart 2: Ethereum Has Outperformed Bitcoin Since May**  

Renewed enthusiasm for Ethereum and ETH likely reflects market focus on stablecoins, asset tokenization, and institutional blockchain adoption—areas where Ethereum excels (see Chart 3). For example, including its Layer 2 networks, the Ethereum ecosystem hosts over 50% of stablecoin balances and processes approximately 45% of stablecoin transactions (by U.S. dollar value).  

Ethereum also accounts for ~65% of total locked value in decentralized finance (DeFi) protocols and nearly 80% of tokenized U.S. Treasury products. For institutions building crypto projects—including Coinbase, Kraken, Robinhood, and Sony—Ethereum remains the network of choice.  

**Chart 3: Ethereum Leads in Stablecoins and Tokenized Assets**  

Growing adoption of stablecoins and tokenized assets will benefit Ethereum and other smart contract platforms. Grayscale Research believes stablecoins could disrupt segments of the global payments industry through lower costs, faster settlement times, and greater transparency (see *Stablecoins and the Future of Payments* for more context).  

There are two stablecoin-related revenue streams: net interest margins (NIM) earned by issuers (e.g., Tether, Circle) and transaction fees earned by blockchains processing trades. With its leading position in stablecoins, Ethereum’s ecosystem is poised to benefit from growing stablecoin adoption via higher transaction fees.  

The same logic applies to tokenization—the process of onboarding traditional assets to blockchains (see *Public Blockchains and the Tokenization Revolution* for more context). The current tokenized asset market is small (~$12 billion) but has significant growth potential. Tokenized U.S. Treasuries are the largest category, with Ethereum as the market leader. In alternative assets, Apollo Global recently partnered with Securitize to launch an on-chain credit fund.  

Additionally, the tokenized equity market, though small, is growing: Robinhood introduced tokenized shares of private companies like SpaceX and OpenAI, while eToro plans to tokenize stocks on Ethereum. Apollo’s product is multi-chain, but Robinhood and eToro’s tokenized equity offerings live within the Ethereum ecosystem.  

### ETP Frenzy and Beyond  

Investor interest in Ethereum drove significant inflows into spot ETH exchange-traded products (ETPs). In July, U.S.-listed spot ETH ETPs saw $5.4 billion in net inflows—the largest monthly inflow since these products launched last year (see Chart 4).  

ETH ETPs now hold ~$21.5 billion in assets, equivalent to nearly 6 million ETH (about 5% of total circulation). Based on CFTC Commitments of Traders data, we estimate only $1–2 billion of these inflows stem from hedge fund "basis trades," with the rest representing long-term capital.  

**Chart 4: ETH ETP Inflows Surpass $5 Billion**  

Some public companies are also accumulating ETH to offer token exposure via equity instruments. The two largest "crypto treasury companies" holding ETH are Bitmine Emersion Technologies ($BMNR) and SharpLink Gaming ($SBET). Together, they hold over 1 million ETH, worth $3.9 billion.  

A third public company, BTCS ($BTCS), announced in late July plans to raise $2 billion via common and preferred stock offerings to purchase additional ETH (BTCS currently holds ~70,000 ETH, worth ~$250 million). Beyond ETP inflows, buying pressure from Ethereum corporate treasuries likely contributed to price gains.  

Ethereum’s share of the crypto derivatives market also grew this month, indicating rising speculative interest. In traditional futures listed on the Chicago Mercantile Exchange (CME), ETH futures open interest (OI) rose to ~40% of Bitcoin (BTC) futures OI (Chart X). In perpetual futures, ETH OI reached ~65% of BTC OI. ETH perpetual futures trading volume also surpassed Bitcoin’s in July.  

**Chart 5: Rising Open Interest in ETH Futures**  

Despite ETH’s spotlight in July, Bitcoin investment products continued to see steady demand. U.S.-listed spot Bitcoin ETPs saw $6 billion in net inflows, with holdings now estimated at 1.3 million BTC. Several public companies expanded their Bitcoin treasury strategies: market leader Strategy (formerly MicroStrategy) issued $2.5 billion in new preferred stock to buy more Bitcoin.  

Additionally, Bitcoin pioneer and Blockstream CEO Adam Back announced a new Bitcoin treasury firm, Bitcoin Standard Treasury Company ($BSTR). The company will use Bitcoin holdings from Back and other early adopters as capital and raise equity. BSTR’s structure mirrors an earlier SPAC (special purpose acquisition company) deal organized by Cantor Fitzgerald for Twenty One Capital—another major Bitcoin treasury firm backed by Tether and SoftBank.  

### Crypto Asset Surge  

Valuations rose across all crypto market segments in July. By sector, smart contract platforms performed best (fueled by ETH’s 49% gain), while AI-focused tokens lagged due to idiosyncratic weakness in select coins (see Chart 6). Futures open interest and funding rates (the cost of leveraged long positions) rose for many crypto assets in July, indicating increased investor risk appetite and growing speculative long positions.  

**Chart 6: All Crypto Market Sectors Rose in July**  

After strong returns, valuations may experience some correction or consolidation. The *GENIUS Act* provided a major tailwind for crypto assets, driving absolute and risk-adjusted returns. Congress is also considering crypto market structure legislation: the House-passed *CLARITY Act* gained bipartisan support on July 17. However, the Senate is debating its own version, with little progress expected before September. Thus, legislative catalysts for crypto valuations may be limited in the short term.  

### Conclusion  

Nonetheless, we remain highly optimistic about crypto assets over the coming months. First, regulatory tailwinds persist even without legislation. For example, the White House recently released a detailed report on digital assets, outlining 94 specific recommendations to support the U.S. digital asset industry. Sixty fall under regulators’ purview (the remaining 34 require congressional or joint action). With regulatory support, crypto investment products (e.g., staking features or broader spot crypto ETPs) could attract new capital to the asset class.  

Second, we expect the macroeconomic environment to remain favorable for crypto assets. These assets offer exposure to blockchain innovation while insulating investors from certain risks in traditional assets (e.g., sustained U.S. dollar weakness). Beyond crypto-related legislation in July, President Trump signed the *One Big Beautiful Bill Act*, locking in massive federal budget deficits over the next decade.  

He has also explicitly called for Federal Reserve rate cuts, emphasizing that a weaker dollar would benefit U.S. manufacturers, and raised tariffs on various products and trading partners. Large budget deficits and low real interest rates could continue to depress the dollar’s value, especially with implicit White House support. Scarce digital commodities like Bitcoin and ETH may benefit, serving as partial hedges in portfolios exposed to sustained dollar weakness.  

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