Following Donald Trump's victory in the presidential election, a broader rebound in decentralized finance (DeFi) has seen Ethereum (ETH) rise nearly 20% in the past two days.
Ethereum begins to regain momentum.
The second-largest cryptocurrency by market capitalization has lagged behind Bitcoin (BTC) and other smart contract platform tokens like Solana (SOL) for most of this year.
However, with Trump winning the Republican presidential nomination in the US, ETH has risen over 10% since yesterday. The token's rise has drawn attention to one of Ethereum's most innovative use cases to date—DeFi.
In a lengthy article on X, Arthur Arthur Cheong and Eugene Yap from the crypto investment firm DeFiance Capital pointed out that the total locked value (TVL) in Ethereum-based DeFi protocols is rebounding.
While analysts attribute part of this growth to rising cryptocurrency asset prices, they also emphasize that trading volumes on some DeFi platforms have 'almost returned to 2022 levels, proving that the recovery is real.'
Cheong and Yap outline several factors indicating that the DeFi ecosystem is moving towards a 'DeFi renaissance' era.
First, analysts point out that DeFi seems to be emerging from the 'valley of disillusionment.' For outsiders, disillusionment is a phase in the Gartner hype cycle where interest in a technology fades as initial expectations are not met.
As shown in the figure, DeFi is in the 'enlightenment slope' stage and may move towards a 'productivity plateau' as technology matures.
In addition, macroeconomic factors, including a low interest rate environment, are expected to drive the adoption of DeFi from two key aspects: lowering opportunity costs and reducing borrowing costs.
Due to the extremely low returns offered by treasury bills and traditional savings accounts, investors are increasingly turning to revenue-generating DeFi strategies, such as yield farming, staking, and liquidity mining.
Lower interest rates may also increase the supply of stablecoins by reducing borrowing costs, providing additional liquidity to drive the growth of DeFi.
What benefits does Trump's presidency bring to ETH?
Analysis emphasizes that the 2024 US presidential election could provide much-needed regulatory clarity for DeFi. Trump's presidency is expected to bring more favorable crypto regulations, which could boost investor confidence.
Therefore, ETH is expected to benefit from increased investor interest in DeFi. Analysis from cryptocurrency experts suggests that if ETH breaks through certain key resistance levels, it could rise to $3,400.
Activity among Ethereum whales has also significantly increased, indicating that mature and experienced ETH holders are accumulating tokens in anticipation of a potential price increase.
ETH faces fierce competition from rival smart contract platforms like Solana. According to a recent report, the TVL of the SOL DeFi ecosystem increased to $5.7 billion in Q3 2024.
As of the time of writing, ETH is trading at $2,806, up 7.1% in the past 24 hours, with a total market capitalization of $338.6 billion.
