Original Title: "Trend Research: On the Cusp of a Surge, Why We Are Bullish on ETH"

Source: Trend Research

Yesterday, ETH and blue-chip projects within its ecosystem experienced a significant price surge. ETH rose by 6.4%, while UNI, which we highlighted in our previous research report, increased by 24.4%. AAVE was up 13.1%, and ENA climbed 6.6%. In this round, Trend Research epitomizes the mantra of aligning knowledge with action. We began accumulating ETH at $1400 and have held a bullish view ever since, even increasing our exposure to relevant ETH assets. Recently, we also purchased ETH call options, establishing ourselves as one of the earliest institutional investors to openly support ETH, publicly disclose holdings, and operate a transparent wallet address on the blockchain.

Our bullish stance on ETH continues to be based on the following core reasoning: The Trump administration is actively working to establish a stablecoin ecosystem, leveraging blockchain's decentralized and on-chain characteristics to absorb M2 liquidity from other countries worldwide, effectively increasing demand for U.S. Treasury bonds. To achieve this, the Trump administration has relaxed macro-level regulations on crypto and is expediting the implementation of regulatory frameworks. These measures aim to standardize crypto operations and attract greater capital inflows. Ethereum serves as the critical infrastructure for stablecoins and on-chain finance (DeFi). The inflow of stablecoins and the continuous evolution of RWA (Real World Assets) are expected to further fuel DeFi's expansion, increase Ethereum's utility and gas fee income, and consequently drive its market capitalization higher.

1. Optimism Around Crypto Regulation

(1) Shift in Crypto Regulatory Philosophy

The Trump administration has demonstrated a friendly stance toward crypto. The incoming SEC Chair, John Atkins, who assumed his role in April 2025, has explicitly outlined plans for transformative regulatory shifts in crypto asset oversight.

1. Public Statements Emphasizing Simplified Processes

· Rules Over Enforcement: Atkins has criticized the previous "compliance through litigation" approach and emphasized the need for clear, predictable rules to reduce uncertainty within the crypto industry.

· Classification-Based Regulatory Framework: The SEC plans to release token classification standards within 90 days and establish a "safe harbor" framework for compliant projects.

2. Long-Term Policy Trajectory

· Regulatory Integration of On-Chain Securities: In May 2025, Atkins proposed exploring the "listing of securities on on-chain trading platforms," which could fundamentally restructure the issuance and trading processes.

· Cross-department Collaboration: Plans to work with the CFTC and FTC to establish a joint regulatory framework, reducing jurisdictional conflicts.

DeFi aligns with core American values, and an "Innovation Exemption" framework will be introduced.

(II) Further Refinement and Relaxation of the Crypto Regulatory Bill Framework

1. The "CLARITY Act"

The "CLARITY Act" aims to establish a structural regulatory framework for the crypto market, effectively addressing the regulatory needs of the $3.3 trillion digital asset market. Its regulatory goals are twofold: first, to define asset classifications, distinguishing between security tokens (regulated by the SEC), commodity tokens (regulated by the CFTC), and licensed payment stablecoins, thereby resolving the long-standing "security or commodity" debate. Second, to standardize institutional oversight by requiring financial institutions that custody digital assets to meet capital reserve and customer fund segregation requirements, thus preventing risks similar to those of FTX. On June 11, 2025, the bill passed the U.S. House of Representatives Committee with 47 votes in favor and 6 against, and it will move to the House Committee on Financial Services for the next stage of review.

Under this bill, mainstream cryptocurrencies like Bitcoin and Ethereum are classified as commodity tokens, while company equity tokens (representing ownership of a company and conferring voting or dividend rights), bond tokens (promising fixed interest returns), and revenue-sharing DeFi governance tokens (which depend on ongoing operation by their project teams) are classified as security tokens. This clarity will address the previously ambiguous and inconsistent enforcement landscape, fostering a more predictable environment that benefits the prosperity of DeFi platforms.

Tokens like SOL, a mainstream infrastructure token, are increasingly likely to be classified as commodities. On June 11, the SEC required potential Solana ETF issuers to submit revised S-1 forms within the following week. The SEC has stated it will provide feedback on the S-1 forms within 30 days of submission. This indicates that regulators are relaxing and expediting the classification process for crypto commodities.

2. The "Genius Act"

The "Genius Act" seeks to fill the regulatory void for stablecoins, strengthen the U.S. dollar's status as the world's reserve currency, and address the U.S. Treasury bond demand dilemma. This is the first comprehensive federal framework for stablecoin regulation, outlining clearly the qualifications for issuers, reserve requirements, and operational standards. It mandates a 1:1 peg between stablecoins and the U.S. dollar, promoting the dollar's penetration into the global crypto economy and cross-border payment ecosystems through stablecoins, thereby reinforcing the dollar's dominance in international finance. By enforcing reserve rules (requiring reserve assets to consist of short-term U.S. Treasury bonds or cash), the Act creates structural demand for U.S. Treasury bonds, alleviating fiscal pressures on the U.S. government.

In recent years, stablecoins like USDT and USDC have repeatedly faced regulatory risks and redemption risks, leading to de-pegging by over 10%. If incorporated under federal regulation, it would undoubtedly enhance the safety and credibility of stablecoins. Moreover, once there's clarity in federal legislation, more issuers are likely to participate in stablecoin issuance, attracting more capital into the crypto market. Standard Chartered Bank predicts that after the legislation is passed, the stablecoin market could grow to $2 trillion by 2028.

3. Relaxed Regulatory Stance on Crypto Asset Issuance, Custody, and Trading

SEC Chairman Atkins mentioned in his speech that the SEC is set to adopt a more relaxed regulatory approach in three key areas of crypto assets: issuance, custody, and trading.

**Issuance:** The SEC plans to establish clear and reasonable guidelines for the issuance of crypto assets under securities or investment contract frameworks. To date, only four crypto asset issuers have issued securities under Regulation A, a simplified exemption mechanism introduced by the SEC for smaller projects, allowing issuers below a certain threshold to issue stocks and bonds. The primary policy hurdle for crypto asset issuance is the ambiguity about whether a particular asset qualifies as a security and, if so, what type of security it is. This uncertainty has deterred many issuers from utilizing this framework out of fear of violating relevant laws. Chairman Atkins has called on SEC staff to consider measures such as business guidance, registration exemptions, and safe harbor provisions to streamline the process of issuing crypto assets within the U.S.

**Custody:** The SEC will allow registrants greater autonomy in determining how crypto assets are held. Investment advisors and fund companies can adopt self-custody solutions that are more advanced than current custodian technologies to store crypto assets. This shift is primarily due to the fact that traditional custodians, due to historical constraints, lack the technological infrastructure to effectively cater to the demands of blockchain.

**Trading:** The SEC supports allowing investors to trade a broader range of assets on trading platforms. These platforms will be permitted to offer trading in securities, non-securities, and even provide other financial services. SEC staff have been instructed to explore whether specific guidelines or rules are needed to facilitate the listing and trading of crypto assets on national securities exchanges.

4. DeFi May Gain "Innovation Exemption"

SEC Chairman Paul S. Atkins explicitly stated at the roundtable "DeFi and the American Spirit" on June 9, 2025: "The core principles of DeFi (economic liberty, private property rights, and disintermediation) align closely with American core values. Blockchain technology is a revolutionary innovation, and the SEC should not impede its development."

The SEC is formulating conditional exemption rules targeting DeFi to quickly enable registered and non-registered entities to bring on-chain products and services to market. These innovative exemptions could position the U.S. as the "global crypto capital" by encouraging developers, entrepreneurs, and other companies willing to comply with specific conditions to engage in on-chain technology innovation within the U.S.

UNI has previously faced challenges related to compliance. Despite being the most important on-chain DEX, its token price has performed poorly. If the innovative exemption rules are quickly implemented, UNI could potentially become one of the first beneficiaries. This is also one of the key reasons for the significant price surges of leading DeFi tokens following the roundtable discussion.

5. Anticipation of Ethereum ETF Approval for Staking

On May 29, 2025, the SEC’s Division of Corporation Finance issued a statement clarifying that certain staking activities on proof-of-stake (PoS) blockchain protocols do not constitute securities transactions. During the “DeFi and the Spirit of America” roundtable, Atkins further emphasized, “Voluntary participation in proof-of-work or proof-of-stake networks as a ‘miner,’ ‘validator,’ or ‘staking-as-a-service’ provider does not fall under federal securities laws.” He also indicated that related regulations would be developed to support this framework. This means that Ethereum staking activities (including self-staking or staking through service providers) would not be considered securities transactions under specific conditions, thereby paving the way for staking through approved Ethereum ETFs.

If the SEC approves an Ethereum ETF that includes staking rewards, institutional investors will be able to earn ETH staking yields through ETFs. ETH could then become the "bond" of the crypto sector, allowing significant inflows of traditional institutional capital into ETH in a regulatory-compliant manner. On the one hand, large quantities of ETH would be staked and locked, further enhancing the decentralization and security of on-chain finance. On the other hand, the legalization of on-chain yields would significantly increase ETH demand, driving its price higher.

In summary, the regulatory environment under the Trump administration appears to be moving toward a more systematic and adaptive framework for crypto assets and markets. Regulations are becoming clearer and more lenient, encouraging blockchain innovation to attract more capital into the crypto space.

II. Ethereum Remains the Most Critical Infrastructure for On-Chain Finance

The implementation of the "DeFi" declarations and corresponding legislation will break the barriers of compliance in the future, paving a channel for traditional capital to enter the sector. Trillions of incremental funds are expected to flow into on-chain finance in the form of stablecoins. Ethereum, as the largest and most secure "soil" for on-chain finance, will play a pivotal role in this transformation.

(1) Ethereum Foundation Advocates for "Defipunk"

The Ethereum Foundation's 2030 plan explicitly states its intention to promote the establishment of a "Defipunk" evaluation framework and facilitate the associated transformation of DeFi projects. The core concept of "Defipunk" revolves around the construction of a DeFi ecosystem aligned with Cypherpunk principles. Its aim is to ensure user autonomy, privacy, and censorship resistance through the use of technological tools.

The fundamental principles of Defipunk include: First, security—prioritizing battle-tested, immutable, and open-source technology architectures while avoiding reliance on centralized trust mechanisms (such as multi-signature wallets or legal recourse). Second, financial sovereignty—emphasizing users' full control over their assets, supporting permissionless self-custodial wallets and on-chain transactions, and reducing reliance on intermediaries. Third, trust through technology—leveraging cryptographic tools and smart contracts to achieve trust minimization, such as using zero-knowledge proofs to enhance privacy. Fourth, open-source and composability—encouraging transparent code development, ensuring interoperability between protocols, and fostering innovation through modular design.

The Ethereum Foundation holds high expectations for the development of DeFi, and the Ethereum ecosystem is extensively expanding its DeFi-related initiatives. Ethereum is well-positioned to become the foundation of the next-generation on-chain financial paradigm.

(2) The Current Landscape of Stablecoin Issuance and Distribution

1. Total Supply of Stablecoins

Since Trump took office, the total supply of stablecoins has grown by approximately $76 billion, with a 40% increase over the span of 7 months. This growth rate significantly surpasses the total increase and growth rate of stablecoins during the market recovery and bull run of 2023. In September 2023, the total supply of stablecoins hit a nearly four-year low at approximately $123.7 billion. By November 2024, this figure had risen to $173.7 billion—an increase of $50 billion over 13 months, marking a 40% growth.

2. Current On-Chain Distribution of Stablecoins

Approximately 50% of stablecoins are circulating on Ethereum, 31% on TRON, 4.5% on the Solana blockchain, and 4% on the BSC blockchain. Ethereum accounts for half of the liquidity in the stablecoin market.

3. Ecosystem Status of Major Blockchains and Stablecoins in DeFi

From the comparison in the chart above, it can be observed that over 50% of funds on Ethereum are locked in DeFi protocols, giving Ethereum the largest scale DeFi TVL. Although Tron holds a significant amount of stablecoins, these are primarily used for payment purposes due to the ecosystem having a limited number of protocols, with DeFi TVL accounting for only 6.5%. While Solana and BSC have relatively higher DeFi TVL proportions, their absolute values remain small, indicating a moderate level of DeFi infrastructure development. Based on the above, once the stablecoin legislation is passed, Ethereum is most likely to attract the largest inflow of capital.

(2) New Stablecoin Flow Directions

It is currently speculated that new stablecoins will flow into the following four directions:

1. Flowing into native crypto markets, offering higher-yield DeFi opportunities

The high volatility of crypto creates many DeFi protocols that deliver significantly higher yields than traditional financial markets while remaining highly accessible. With incremental stablecoin inflows into on-chain ecosystems, a portion of funds will naturally prioritize smarter, more efficient, and yield-driven investment opportunities. Ethereum's high degree of decentralization, security, and scalability makes it the top choice for such incremental capital allocation. Among these, UNI, as the largest on-chain DEX, and AAVE, as the largest on-chain lending protocol, are essential blue-chip assets to consider. Smaller-cap DeFi protocols such as COMP, which demonstrate strong business metrics, also warrant close attention.

In the DEX arena, UNI currently holds a clear advantage with a TVL of $5.1 billion, 7-day trading volume of $17.6 billion, and 7-day fee revenue of $19.26 million. Its TVL significantly surpasses other DEXs. Notably, PancakeSwap displays some unique characteristics with a 7-day trading volume of $33.4 billion and 7-day fee revenue of $56.81 million. Its trading volume is substantially higher than UNI, primarily aided by Binance alpha's wash trading activity.

In the lending sector, AAVE holds an absolute leading position, with a TVL of $26.4 billion, 7-day fees of $11.68 million, and 7-day protocol revenue of $1.49 million. The TVL of other lending markets remains under $5 billion.

2. Flowing into the RWA market dominated by U.S. regulatory-compliant institutions

Many traditional funds entering the blockchain space are unlikely to participate heavily in altcoin activity. Instead, they are expected to flow into the RWA (Real World Assets) market developed by leading U.S. financial innovators, such as the BUILD Fund issued on-chain by BlackRock. The BUIDL fund primarily invests in:

· Cash: High-liquidity cash or cash equivalents, ensuring fund stability and immediate redemption capability;

· U.S. Treasury Bonds: Short-term U.S. Treasury bonds serve as low-risk, high-credit-rating assets, providing a stable source of returns.

· Repo Agreements: Short-term borrowing agreements, usually collateralized with treasuries, ensuring fund liquidity and returns.

The composition of these assets aims to maintain the stable value of BUIDL tokens (targeting $1/token), while distributing dividends to investors through daily accrued income, issued monthly in the form of new tokens. The fund is managed by BlackRock Financial Management, with custody provided by BNY Mellon, and the tokenization platform is Securitize. The platform has experienced rapid growth in TVL over the past three months; in March 2025, TVL had just surpassed $1 billion, but it has now grown to $2.87 billion, an increase of 187%. Of this, $2.687 billion is on Ethereum, accounting for 93% of the total.

Native crypto projects are also closely monitoring the RWA (Real-World Asset) market. USDC issuer Circle has acquired Hashnote, the issuer of U.S. YieldCoin (USYC), to address its business shortcomings in the RWA space. Hashnote is a startup incubated with a $5 million investment from Cumberland Labs, focusing on tokenized U.S. Treasury products. Its flagship product, USYC (U.S. YieldCoin), is anchored to short-term U.S. Treasury bonds and had reached a scale of $1.3 billion at the time of acquisition. Circle has deeply integrated USYC with USDC to create a "cash + yield-generating assets" closed-loop system, catering to institutional demands for both on-chain collateral and income-generating tools.

In addition to BUIDL and Circle, other major RWA projects include ENA and ONDO. The challenge for ENA lies in its primary use case—funding rate arbitrage for crypto token contracts. This market is constrained by the scale of trading activity and involves a learning curve for non-crypto-native capital, which has limited its growth over the past six months. Meanwhile, ONDO has grown from $600 million to $1.3 billion since early 2025, an increase of approximately 116%. This suggests that despite stablecoin legislation not being fully passed, debt tokenization is already gaining traction. Furthermore, Chainlink plays a critical role in RWAs, serving as the largest oracle for bringing off-chain assets on-chain and integrating them with on-chain DeFi.

3. Flows into Payment Solutions Enhancing Traditional Financial Efficiency

The conversion of traditional funds into stablecoins, entering the blockchain, has a critically important use case: solving payment challenges. This includes optimizing the traditional SWIFT payment system and increasing transaction efficiency. For instance, JPMorgan's Kinexys platform (formerly Onyx) specializes in wholesale payments, cross-border payments, forex trading, and securities settlements. It supports multi-currency cross-border payments, reducing intermediaries and settlement time. Additionally, it offers tokenization of digital assets, exploring payment scenarios for stablecoins and tokenized bonds. Kinexys is built on the Ethereum tech stack, leveraging its smart contracts and distributed ledger technology. As of now, Kinexys sees a daily transaction volume exceeding $2 billion.

4. Flowing into speculative crypto-native markets

A small portion of incremental funds will quickly flow into speculative altcoin markets.

In summary, compared to other on-chain ecosystems, Ethereum and its on-chain DeFi ecosystem are the key destinations for stablecoin inflows. On-chain DeFi could experience a new "DeFi Summer" in 2025, along with increased demand for network security driven by staking. Additionally, the SEC's June 10th "DeFi" statement could pave the way for ETH staking in ETFs. If this is successfully approved in the future, ETH may become the "bond" of the crypto market, triggering massive purchases. A series of changes could push ETH into a deflationary state again (currently, its annual inflation rate is at 0.697%).

III. New high in derivatives market open interest, bearish sentiment remains; spot ETFs continue to see inflows, bullish options dominate

1. Record-high open interest, active funds

Currently, ETH is about 40% away from its all-time high (ATH), but the total open interest in the futures market has reached a new record of $37 billion, indicating highly active liquidity in the derivatives market.

2. Market sentiment yet to peak

Meanwhile, current market sentiment has not yet peaked. The Fear and Greed Index has just shifted from neutral to greed, and the internal market sentiment high has not arrived yet. Additionally, incremental funds from outside the market have not yet started flowing in.

3. Increase in short positions on trading platforms

From the long-short ratio of open interest on trading platforms, the ratio of long to short positions is continuously declining, with more traders taking short positions. At the same time, open interest is continually increasing. Therefore, the total short position is also on the rise. However, the long-short ratio remains relatively balanced, with funding rates staying relatively stable.

4. ETH Spot Holdings on Some Exchanges are Lower Than Contract Positions

When the market-wide trend reversal report was published in April, we observed that certain exchanges had ETH holdings significantly lower than their contract positions. This disparity persists. Bybit's contract holdings amount to 1.44 million ETH, while its exchange wallet balance is 316,000 ETH—4.5 times the balance. Gate has 1.96 million ETH in contract holdings versus a wallet balance of 166,000 ETH, or 11.8 times the balance. Bitget's contract holdings are at 1.52 million ETH, but the wallet balance remains undisclosed for now.

5. CME Open Interest Hits New High

According to CME data, while ETH trading volume on CME hasn’t reached new highs, the open interest (OI) has climbed close to historical peak levels. From a long-short perspective, non-commercial traders hold 18,699 long positions and 19,572 short positions, resulting in a net short position of 873 contracts, indicating strong bearish sentiment among speculators in the futures market. If 30%-40% of the non-commercial short positions are hedged, this leaves 60%-70% as naked shorts. At a price of $2,750 per ETH, the naked short positions from speculators on CME amount to approximately $1.6–$1.8 billion.

6. AAVE’s ETH Borrowing Reaches $6.8 Billion

Based on data from AAVE, the largest lending protocol on-chain, the current borrowing of ETH on-chain stands at approximately $6.8 billion. According to general market logic, these borrowings wouldn't be fully hedged, and a significant portion might be used for leveraged shorting. We estimate that the amount of naked short positions from this portion is no less than $1 billion.

7. Spot ETFs See Continued Net Inflows, Options Market Turns Bullish

Based on futures derivatives data, we believe the bearish sentiment in the market persists, with billions in naked short positions. However, the options and spot markets exhibit signs of a bullish setup. In the spot market, ETH ETFs have reversed from their previous weak trend and have seen continuous net inflows over the past 15 days. On June 10 alone, the net inflow reached $125 million, with a total of $450 million flowing in during June. Among these, BlackRock bought $360 million worth of ETH ETFs, making it the primary buyer and reinforcing the bullish sentiment.

The changes in BlackRock's ETH Spot ETF holdings are as follows, showing a continuous increase since May 2025.

BlackRock is selling off a portion of its BTC spot holdings and reallocating into ETH spot.

According to Deribit, the current open interest in options shows a far higher volume of call options compared to put options. While the difference is minimal for options expiring before June 20, the number of call options trading after June 20 significantly exceeds the put options.

Liquidation monitoring indicates that $2.1 billion worth of ETH short positions will be liquidated at the $3,000 price level. The market is likely to squeeze these shorts, potentially driving ETH to $3,000 in the short term.

8. Ethereum Vault SBET Brings New Demand

In a crypto-friendly and relatively relaxed regulatory environment, several publicly traded companies on the US stock market are adopting a model similar to MSTR by purchasing BTC, ETH, SOL, and other major tokens as underlying assets.

Ethereum co-founder and ConsenSys founder and CEO Joe Lubin announced that he will serve as the Chairman of the Board for SharpLink Gaming (Ticker: SBET) and lead its $425 million Ethereum Vault strategy. The Ethereum Vault will be an active vault that not only benefits from token price appreciation but also stakes the majority of its ETH tokens, actively contributing to network security. Investors will also earn at least 2% in staking rewards. This model is expected to bring new demand for ETH.

9. Crypto Companies Rush to Go Public, Igniting Sustained Funding Hype

Stablecoin issuer Circle debuted on Nasdaq in early June, soaring over 200% on its first trading day and sparking intense market enthusiasm for crypto-related stocks. Several crypto companies have revealed plans to go public on Nasdaq. These include crypto asset trading platform Bullish Global, which is backed by Peter Thiel, legacy trading platform Kraken, crypto asset management firm Galaxy Digital, institutional crypto custody and services provider Bitgo, and crypto mining equipment manufacturer Bgin Blockchain, among others, some of which have already filed listing applications. The successive listings of these projects will create continuous funding hotspots, directing more capital into the crypto asset space and boosting participation.

In summary, we believe that the open interest for ETH contracts remains at a high level, indicating active capital movement; market sentiment is heating up but has not yet reached the extreme greed stage. While the number of bearish traders on exchanges is increasing, there is no significant imbalance between longs and shorts. Spot ETH continues to flow into the market steadily, and options are leaning bullish. The price has broken through the key support-resistance flip zone and further breached short-term resistance levels, potentially allowing the buildup of long-standing short positions to further fuel an upward trend. Combined with the easing of cryptocurrency regulations, the gradual increase in stablecoin market capitalization, the growing adoption of Ethereum vault strategies in U.S. equities markets, and the improved acceptance of crypto companies in traditional equity markets, ETH could potentially break through $14,000 in the mid to long-term.

4. Conclusion

The United States is pushing for more systemic, standardized, and clarified regulations on cryptocurrencies. This includes simplifying the processes for issuance, custody, and trading of crypto assets, promoting stablecoin issuance, and exploring innovative asset types like DeFi and RWA. These initiatives will expand the scale of crypto assets overall. Ethereum, with its most mature on-chain financial ecosystem, is the most likely candidate to absorb the capital inflows driven by stablecoin regulatory compliance. DeFi projects and RWA projects based on Ethereum are also set to benefit from this, paving the way for long-term growth.

This article was submitted by a contributor and does not represent the views of BlockBeats.

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