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Ethereum (ETH) has jumped nearly 20% over the past two days as the broader decentralized finance (DeFi) sector surges following Donald Trump’s presidential win.
Ethereum is starting to regain momentum
The second-largest cryptocurrency by reported market capitalization 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 Trump’s victory as the US Republican presidential candidate, ETH has seen a rise of more than 10% since yesterday. The rise of the token has drawn attention to one of Ethereum’s most innovative use cases to date – DeFi.
In long form mail On X, Arthur Arthur Cheung and Eugene Yap of cryptocurrency investment firm DeFiance Capital noted that the total value locked (TVL) in Ethereum-based DeFi protocols is rising.
While analysts attribute some of this growth to rising crypto asset prices, they also highlight that trading volumes on some DeFi platforms have “almost recovered to 2022 levels, proving that the resurgence is real.”
Cheong and Yap identify several factors that indicate that the DeFi ecosystem is heading towards an era of “The renaissance of decentralized finance“.
First, analysts note that DeFi appears to be emerging from the “trough of disillusionment.” For starters, disillusionment is a stage in the Gartner Hype Cycle when interest in a technology wanes as initial expectations are not met.
As shown in the chart below, DeFi is moving through the “Slope of Enlightenment” phase, and will likely move toward a “Plateau of Productivity” as the technology matures.
Additionally, macroeconomic factors, including the low interest rate environment, are expected to boost DeFi adoption in two critical ways: reducing opportunity costs and making loans more affordable.
As traditional Treasuries and savings accounts offer minimal returns, investors are increasingly turning to income-generating DeFi strategies such as yield farming, warehousing, and liquidity mining.
Lower interest rates will also likely increase the supply of stablecoins by making loans cheaper, thus providing additional liquidity to drive DeFi growth.
How optimistic is a Trump presidency for ETH?
The analysis underscores that the 2024 US presidential election could provide DeFi with much needed regulatory clarity. A Trump presidency is expected to bring more crypto-friendly regulations, which could boost investor confidence.
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Thus, ETH is expected to benefit from any increase in investor interest in decentralized finance. Analysis by crypto experts suggests That ETH could rise to $3,400 if it crosses certain key resistance levels.
There was also great importance He increases In Ethereum whale activity, suggesting that experienced and seasoned ETH holders are accumulating the token in anticipation of a potential rally.
ETH faces stiff competition from competing smart contract platforms like Solana. According to a hadith a reportThe SOL DeFi ecosystem saw its total value increase to $5.7 billion in Q3 2024.
At press time, Ethereum is trading at $2,806, up 7.1% over the past 24 hours, with a total market cap of $338.6 billion.
Featured image from Unsplash, charts from X.com and Tradingview.com