CoinShares: Some quick thoughts on recent Ethereum and altcoins

Author: Luke Nolan, CoinShares Ethereum Research Assistant; Compilation: Shaw, Bitchain Vision

Since early May, Ethereum and the entire market have undergone a lot of changes.On May 9, just after the Pectra upgraded, the initial catalyst appeared, and ETH began to rise and outperform other currencies.The upgrade itself does not suddenly change the basic value of ETH.ETH’s performance has been going on for quite some time, with market sentiment being very sluggish, and from a position point of view, ETH is the short side in many hedging transactions, or is directly short on the perpetual futures exchange.As shown, during the week of the upgrade implementation, many people were trapped and closed.

In that week alone, Binance liquidated about $400 million in short positions.The subsequent events were of great significance, and the United States drafted, voted and passed the GENIUS Act.

The significance of the GENIUS Act to Ethereum is that it provides clear regulatory approvals for U.S. banks and financial institutions to issue payment stablecoins and custody digital assets.While the bill does not directly authorize tokenized deposits or mandate blockchain-based ledgers, it lays the foundation for future innovation and may open the door to the future tokenization of large-scale government debt and money market funds on-chain.

As Ethereum already dominates the stablecoin settlement field, accounting for about $146 billion of the total stablecoin market capitalization of $280 billion, and currently accounts for about 52% of the tokenized real-world assets (RWA) market, the adoption of the GENIUS Act immediately shifts expectations to Ethereum as a major beneficiary.We have seen early signs of this trend, like JPMorgan’s JPMD project on Base, a tokenized deposit program that shows how banks are ready to leverage public Ethereum infrastructure for institutional settlement.

The market quickly digested the expectation that these new regulations will greatly affect on-chain activities, which will be conducted through Ethereum and its Layer2.But these practical quantifiable impacts and their timelines still require more in-depth analysis.

Below we can see the timeline visualization of these catalysts:

Supported by the above factors and their attractiveness as relative value trading, ETH is also expected to continue to benefit from the inflow of capital of structured exchange-traded funds (ETFs).From a technical point of view, the trends in ETH/USD and ETH/BTC remain good.

The ETH/BTC ratio is still well below the historical average, which has also had an impact on this rotational transaction.Historically, these uptrends are often very intense and usually last for several months before returning to the mean.Although some may say “this time is different”, there are clearer drivers behind this trend, rather than previous cycles that were primarily driven by emotions.

The market may expect the above-mentioned impact on Ethereum to be too high (the implementation of these measures takes time, requires trial and error, and their impact on block space is not achieved overnight), but from a momentum perspective, the path with minimal resistance is beneficial to ETH and seems to be expected to continue.Of course, corrections and volatility are expected to occur in the process, which are often conducive to increasing investment opportunities.

Ethereum treasury reserve companies are also aggravating short-term supply imbalances and are accumulating rapidly.Take Bitmine Immersion Technologies as an example:

This will support prices in the short term, but it should be noted that this is not a fundamental driver, and in the long run, if there is a sustained recession and the company may choose to cash in assets, this may bring some form of risk.

Finally, on the Ethereum side, the inflow of ETF/ETP continues to significantly exceed Bitcoin ETF/ETP.Since August, ETH has inflows of $4.196 billion, while Bitcoin has inflows of $218 million.This is a positive signal that ETH will continue to strengthen at least for the foreseeable future.

Are we in the “altcoin season”?

Is this a typical altcoin cycle?My answer is no.In previous altcoin cycles, you could buy almost any top 20 to 30 currency and outperform Bitcoin in weeks or months.This cycle is more cautious.There are more clear drivers behind the rise of these currencies.

Here are some (not all) short points:

Solana: In terms of decentralized exchange trading volume, it once replaced Ethereum and became a new place for retail investors and institutions to conduct fast and low-cost transactions.
Hyperliquid: Income-based decentralized perpetual futures platform, with daily transaction fees of US$2 million to US$5 million, of which 97% is used to repurchase tokens, creating basic value for the token itself.
Chainlink: Given that many public and private companies are creating their own blockchains or Ethereum Layer 2, Chainlink’s oracle network is critical to connecting these new chains to real-world data and liquidity.As more and more blockchains go online, the growing demand for reliable “data bridges” like Chainlink has made it a critical infrastructure layer.
Ethereum: The same reason as above.
XRP: The change in attitude of the Securities and Exchange Commission (SEC) has alleviated legal adverse factors, and Ripple’s lobbying stance in the United States has become more active.

I’m not recommending or endorsing these cryptocurrencies, I just want to point out that there are specific reasons why these currencies perform well in certain market periods.There have been some signs that the altcoin market will usher in a boom period when more types of currencies perform well, but none of these periods last more than a week or a few weeks.Therefore, it is too early to draw conclusions, but it seems that the market is diverging into different asset classes at the moment.

It is worth noting that Bitcoin’s dominance is declining: it has fallen by 5% in the past month, and we have seen this “stagnation” in the price movement of Bitcoin, while at the same time, some altcoins are rising.It is hard to predict how long this will last, but the above signal clearly shows that we are still in this rotation, and it is important that this rotation is limited to a few cryptocurrencies, not all.

Solana’s layout looks quite constructive

By the way, from a technical point of view, Solana looks quite attractive.The U.S. Securities and Exchange Commission (SEC) final deadline for spot ETFs is set in mid-October and may be approved, and the market appears to have begun to take this factor into consideration.Since January 2025, Solana has been fluctuating in a larger range, and this wide consolidation keeps its layout during the decision-making window.

At the bottom, multiple client upgrades have improved transaction throughput and efficiency.Verifiers are currently voting for the implementation of the new consensus client, alpenglow, which is expected to significantly improve finality (among other improvements) and slightly reduce validators’ operating costs by reducing voting fees.

The risk-rewards seem more attractive than some other assets that have seen a sharp rise in recent months.