How Ethereum Got Its Groove Back

Users, investors and the Ethereum community have been critical of the blockchain’s progress and place in the crypto ecosystem this year. Often dubbed the "digital oil" due to its utility in fueling decentralized applications, its price performance had been lackluster for a significant period, causing many to lose conviction. The digital oil of the crypto ecosystem seemed to have lost its shine, until last week. All of a sudden, it broke $3,000 USD and quickly climbed to almost $3,900 within a matter of days. 

Ethereum’s dominance (measured by relative market cap) was below 9% as of July 1 after a steady decline from 21% in 2021. Its previous peak was over 31% in 2017. By July 20th, it climbed by almost 30% to 11.4% market dominance. Most of the upwards move occurred in five days. This sudden price movement and subsequent renewed interest revealed a profound transformation that had been underway for years, quietly repositioning ETH not just as a transactional utility token but as a robust, yield-bearing store of value and the next institutional-grade crypto asset. Ethereum, like the forgotten middle crypto child between its Bitcoin and Solana siblings, was simply waiting to be truly understood.

Ethereum Powers the Decentralized Economy

Just like how oil fuels cars and factories, Ethereum fuels decentralized applications. It is the settlement layer and execution environment for everything from decentralized finance (DeFi) platforms and NFT marketplaces to DAOs and gaming ecosystems. If Bitcoin is digital gold, Ethereum is the infrastructure, the programmable layer, that enables developers to build real-world functionality into crypto. This is similar to the way app stores give functionality to mobile phones. Most major crypto innovations have either launched on Ethereum or been inspired by its model.

Ethereum's core architecture is also evolving. The Layer 2 ecosystem has exploded in recent months, with current L2 solutions garnering a Total Value Locked (TVL) of over $51.5 billion through extraordinary recent growth. Its Layer 1 (L1) is transitioning from a direct transactional engine to primarily a capital base and final settlement layer. While Layer 2 solutions now handle the bulk of daily transactions (exceeding L1 by 12.7x) and active addresses (5x L1), the Total Value Locked (TVL) on L1 paradoxically rose by 33%. This massive capital accumulation demonstrates that while transaction activity migrates to L2s for efficiency, the underlying value remains anchored to Ethereum's mainnet for security.

The Institutional Capital Tsunami

One of the most potent catalysts for Ethereum's resurgence has been the rapid influx of institutional capital. Bitcoin paved the way for institutional adoption, especially with the bitcoin ETFs, but now ETH is following suit and unlocking massive capital pools. The momentum has reached fever pitch in July 2025, with institutional demand far exceeding expectations.

Assets under management in ETH exchange-traded funds soared by 20% quarter-over-quarter to 4.1 million ETH, representing 3.4% of the total supply. The momentum has continued building through July 2025, with Ethereum ETFs now showing cumulative inflows totaling $8.32 billion since their debut.

The institutional appetite accelerated into the summer. On July 16, US-listed spot Ethereum ETFs experienced their largest day of inflows, exceeding $726 million, absorbing over 200,000 ETH, more than 100 times the amount the network issued that day. This record was quickly followed by another strong showing on July 22, with $533.87 million in net inflows marking the third-largest single-day total since the ETFs launched.

Fidelity's FETH continues as a significant driver of these inflows, while BlackRock's surge has been particularly notable, with Ethereum ETFs growing 100% to $3.1 billion in assets under management. BlackRock's decision to amend its filing to allow staking within its spot ETH ETF signals not just participation but a deeper commitment to integrating with Ethereum's infrastructure and earning yield. This represents a fundamental shift from viewing crypto as speculative assets to treating them as productive, yield-generating holdings.

Corporate Treasuries: The New Arms Race

ETH held in corporate treasuries experienced a massive 5,829% surge, reaching 1.98 million ETH. The competitive landscape has intensified dramatically, with companies racing to become "the MicroStrategy of ether." Notable players include SharpLink Gaming, which added 216,000 ETH (including purchases directly from the Ethereum Foundation), and Bit Digital, which acquired 100,600 ETH.

Leading this charge is Ether Machine, which is planning to go public with a $1.5 billion ETH treasury, positioning itself explicitly as the MicroStrategy equivalent for Ethereum with a strategic focus on generating yield through staking. Joseph Lubin and Peter Thiel have also thrown their weight behind this trend, fueling what industry insiders describe as a "horse race" of ETH treasury companies aiming to accumulate ETH at "Michael Saylor-Strategy levels." 

This competition is driving unprecedented corporate demand, with companies viewing ETH not just as a treasury asset but as a strategic moat in the emerging digital economy.

Staking a Deflationary Asset: The Yield Revolution

Since the transition to Proof of Stake in the 2022 Merge, ETH has become more than just a utility token. It now generates staking yield for validators who secure the network. And thanks to EIP-1559, which burns a portion of transaction fees, ETH supply can actually shrink over time. 

Further reinforcing its monetary characteristics, staking has emerged as Ethereum's primary mechanism for transforming ETH into a yield-bearing store-of-value asset. Staked ETH reached an all-time high of 35.6 million ETH, or 29.5% of the supply. Remarkably, 88% of validator rewards now come from issuance rather than transaction fees, positioning ETH more like a yield-bearing treasury instrument than a speculative commodity. Even with a slight net inflation of 0.73% annualized, holders are treating ETH as a value-preserving asset, demonstrating its structural maturity.

This transformation aligns with institutional preferences for yield-generating assets. Unlike Bitcoin's fixed supply model, Ethereum's staking mechanism provides a native yield that appeals to pension funds, endowments, and corporate treasuries seeking productive returns on their digital asset allocations.

From Digital Oil to the Next Digital Gold

Ethereum's groove is back because it is no longer just the digital oil that keeps the decentralized machine running. It is also becoming a new digital gold standard, a foundational, yield-bearing asset that institutions are actively hoarding. As institutional adoption accelerates and the competitive race among ETH treasury companies intensifies, Ethereum is positioning itself not just as the indispensable infrastructure layer of decentralized finance, but as a premier store of value in the digital asset ecosystem for both DeFi and TradFi.