Top cryptocurrencies have been on a strong rally since the US Federal Reserve (Fed) decided to cut the federal funds rate by 50 basis points on Wednesday. If this recovery trend turns into a sustained bull market, analysts predict that Ethereum will see a significant increase in on-chain activity.

Jasper De Maere, Head of Research at Outlier Ventures, believes that the market improvement will lead to an explosion in Ethereum's on-chain activity, driven largely by speculation and increased participation in decentralized applications (dApps).

“We will see a sharp increase in Ethereum on-chain activity whenever the market is volatile, with speculation being the main driver and dApps sustaining through airdrops as more companies hold TGE* and move to mainnet.”

De Maere also highlighted that many projects are in the pipeline for launch on Ethereum, promising to create a wave of new services when the market is favorable, driving development across many areas of cryptocurrency. He specifically noted that the DeFi sector has strong growth potential, with the return of smart money creating a price boost for Ethereum.

According to him, interest rate cuts, market dynamism and speculative activity are positively correlated.

“Product adoption really doesn’t depend much on market activity. In the short term, financial incentives may drive Ethereum adoption, but true user loyalty will come from the functional value of the product, not just the profit.”

In addition, he predicts that the pace of tokenization of real assets (RWA) may slow down, as much tokenization activity is currently focused on high-yielding assets such as US Treasury bonds. De Maere's view is also in line with a report by Steno Research, which found that history shows that Ether tends to rally strongly in extended market cycles, especially during the bull run from 2020 to 2021, when Ether's value outperformed bitcoin.

While Ether has underperformed Bitcoin and other major cryptocurrencies over the past few months — up just 11.62% on the year compared to Bitcoin’s 50.65% gain — recent signs suggest the second-largest cryptocurrency is recovering from a period of stagnation. Over the past 24 hours, ETH’s price has increased by 4.5% while Bitcoin’s price has remained largely unchanged.

*Token Generation Event (TGE): is an event where a blockchain project creates and distributes tokens to investors and users.

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