Major Cryptocurrency Gains

Major cryptocurrencies have gained since the U.S. Federal Reserve announced a 50 basis-point cut to the Federal Funds rate on Wednesday. If this market recovery evolves into a sustained bull market, analysts predict a significant increase in Ethereum’s on-chain activity.

Increased On-Chain Activity

Outlier Ventures Research Lead, Jasper De Maere, indicated that as market conditions improve, there will likely be a significant increase in on-chain activity for Ethereum. Speaking to The Block, he suggested that this activity will be driven primarily by speculation and increased engagement in decentralized applications.

“We’ll see on-chain Ethereum activity spike as markets move, so obviously there is speculation and then dApp activity driving on-chain activity. I would say it will still be speculation driving and dApp activity will be sustained by airdrops as many companies will have token generation events (TGE) and go mainnet,” De Maere said.

Pent-up Demand and New Offerings

De Maere noted considerable pent-up demand from projects looking to launch on Ethereum, indicating that, as market conditions improve, a wave of new offerings could emerge, driving activity across various cryptocurrency sectors.

DeFi Growth Potential

Regarding renewed adoption of the Ethereum network following the Federal Reserve’s rate cut, De Maere highlighted DeFi as an area primed for growth. “The smart money that operates on-chain will move back to DeFi, which could be bullish for Ethereum,” he said.

De Maere stressed a positive correlation between rate cuts, market activity, and ultimately, speculation. “True product adoption stands separate from market activity. While financial incentives could drive short-term adoption of Ethereum, the real sticky users come from the functionality of the product and not for financial gains,” he added.

Potential Slowdown in RWA Tokenization

He also pointed out that one potential casualty of improved liquidity and heightened risk appetite, fueled by anticipated further rate cuts from the Fed, could be a slowdown in the adoption of real-world asset (RWA) tokenization. “This is largely because most tokenization has occurred in yield-bearing assets, such as U.S. Treasury bills.”

De Maere’s perspective aligns with a recent report from Steno Research, which emphasized historical trends showing that ether, the native token of the Ethereum network, tends to see substantial gains during prolonged bull markets. In the last bull market from 2020 to 2021, against the backdrop of the COVID-19 pandemic, cryptocurrencies experienced unprecedented growth, with ether more than doubling in value relative to bitcoin.

Despite underperforming compared to bitcoin and other major cryptocurrencies in recent months, showing only an 11.62% year-to-date increase against bitcoin’s 50.65% rise, there are tentative signs today that ether, the second-largest digital asset by market cap, is starting to recover from months of stagnation. In the past 24 hours, ether has outperformed bitcoin, rising by around 5% while bitcoin has traded flat.