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ethereum (eth) is up nearly 20% over the past two days as the broader decentralized finance (DeFi) sector rebounds following Donald Trump's presidential victory.
ethereum begins to regain momentum
The second-largest cryptocurrency by reported market cap has lagged behind bitcoin (btc) and other smart contract platform tokens like Solana (SOL) for much of the year.
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However, following Trump's victory as the US Republican presidential candidate, eth has seen an increase of over 10% since yesterday. The token's rise has drawn attention to one of ethereum's most innovative use cases to date: DeFi.
in long format x.com/Arthur_0x/status/1845844922085335457?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1845844922085335457%7Ctwgr%5E8c031c537af05fca16d12edd1f1e2a33c0de36e8%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fwww.coindesk.com%2Fmarkets%2F2024%2F11%2F07%2Fether-surges-10-as-trump-victory-brings-back-defi-bullishness%2F” target=”_blank” rel=”nofollow”>mail On x, Arthur Arthur Cheong and Eugene Yap of cryptocurrency investment firm DeFiance Capital noted that the total value locked (TVL) in ethereum-based DeFi protocols is recovering.
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 outline several factors that indicate the DeFi ecosystem is heading into the era of “DeFi Renaissance.”
First, analysts note that DeFi appears to be breaking out of the “trough of disillusionment.” For the uninitiated, disillusionment is a phase of Gartner's hype cycle in which interest in a technology wanes as initial expectations are not met.
As shown in the chart below, DeFi is going through the “enlightenment slope” phase, and is likely heading towards the “productivity plateau” as the technology matures.
Additionally, macroeconomic factors, including a low interest rate environment, are expected to drive DeFi adoption in two critical ways: by reducing opportunity costs and making borrowing more affordable.
With traditional Treasury bills and savings accounts offering minimal returns, investors are increasingly turning to income-generating DeFi strategies such as yield farming, staking, and liquidity mining.
Lower interest rates are also likely to increase the supply of stablecoins by making borrowing cheaper, thus providing additional liquidity to fuel DeFi growth.
Why Trump Presidency Is Bullish for eth?
The analysis emphasizes that the 2024 US presidential election may offer DeFi much-needed regulatory clarity. The Trump presidency is expected to bring more favorable crypto regulations, which could boost investor confidence.
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Consequently, eth is expected to benefit from any increase in investor interest in DeFi. Analysis by crypto experts suggests that eth could rise to $3,400 if it breaks certain key resistance levels.
There has also been an important increase in ethereum whale activity, indicating that sophisticated and experienced eth holders are hoarding the token in anticipation of a possible rally.
eth faces stiff competition from rival smart contract platforms like Solana. According to a recent 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 total market capitalization of $338.6 billion.
Featured image from Unsplash, charts from x.com and Tradingview.com
