Ethereum Surges 20% as DeFi Sector Recovers After Trump Victory
Ethereum (ETH) has increased nearly 20% in two days as the decentralized finance (DeFi) sector rallied following Donald Trump’s presidential victory.
Ethereum Regains Momentum
As the second-largest cryptocurrency by market cap, ETH has previously lagged behind Bitcoin (BTC) and other smart contract platforms like Solana (SOL). Following Trump's win as the Republican US presidential candidate, ETH rose over 10% since yesterday, highlighting Ethereum's innovative DeFi use cases.
Analysts from DeFiance Capital noted that the total value locked (TVL) in Ethereum-based DeFi protocols is rebounding. They attribute some growth to rising crypto asset prices but emphasize that trading volumes on DeFi platforms have nearly returned to 2022 levels, indicating a genuine resurgence.
They suggest several factors signaling a potential "DeFi renaissance." First, DeFi appears to be emerging from the “trough of disillusionment,” a phase in the Gartner Hype Cycle where interest wanes due to unmet expectations. The chart below illustrates DeFi progressing through the “slope of enlightenment” phase towards the “plateau of productivity” as technology matures.
Macroeconomic conditions, including low interest rates, are expected to enhance DeFi adoption by reducing opportunity costs and making loans more affordable. With minimal returns from treasury bills and traditional savings accounts, investors are increasingly exploring income-generating DeFi strategies such as yield farming, staking, and liquidity mining. Lower interest rates may also increase stablecoin supply, providing additional liquidity for DeFi expansion.
Trump Presidency's Impact on ETH
The analysis suggests that the 2024 US presidential elections could provide regulatory clarity beneficial for DeFi. Trump's presidency is anticipated to bring favorable crypto regulations, potentially boosting investor confidence in ETH. Analysts predict ETH could rise to $3,400 if it surpasses key resistance levels.
There has been a notable increase in Ethereum whale activity, indicating that experienced ETH holders are accumulating the token in anticipation of a rally. However, ETH faces competition from rival platforms like Solana, which reportedly saw its DeFi ecosystem's TVL reach $5.7 billion in Q3 2024.
As of now, ETH trades at $2,806, up 7.1% in the past 24 hours, with a total market cap of $338.6 billion.
