Which Targets Are Worth Speculating on If the ETH ETF Is Successfully Approved

Original Author: Rì Yuè Xiǎo Chǔ

The bullish trends of BTC and ETH have brought optimism to the market and hope to the crypto community.

Last night, some news from the SEC significantly increased the probability of an ETF approval, triggering a surge in ETH.

If the ETH ETF is successfully approved, projects within the ETH ecosystem will also benefit, potentially seeing gains that surpass ETH itself. Therefore, we should pay close attention.

Within the ETH ecosystem, the most significant sectors and projects are as follows:

1 Layer2

Main Projects: ARB, OP, STRK, METIS, MANTA

As part of ETH's goal to become the world's computer, Layer2's role is to support the prosperity of the ETH ecosystem with high TPS and low GAS. Its importance and value are self-evident. Additionally, Layer2 is the highest market cap sector within the ETH ecosystem.

However, most projects are also typical examples of low circulation and high FDV institutional coins that have been criticized recently. ARB, OP, and STRK, three of the four major projects, all have FDVs exceeding $10 billion.

ARB has the highest TVL and the most Dapps among all projects. However, ARB's price movement has been relatively weak, and there have been significant unlocks recently.

OP's advantage lies in the OP Stack, which forms a superchain ecosystem, attracting numerous excellent projects and capital. Historically, OP's price movement has been stronger than ARB's, possibly due to capital preferences.

STRK is a ZK-core Layer2, with an ecosystem and user base not as strong as the first two. However, its circulating market cap is lower than ARB and OP, and it has been on a downward trend since listing, without a significant rebound.

METIS was a hot topic for a while, known for its decentralized sequencer. After listing on Binance, it also saw a significant pullback.

MANTA represents modular Layer2 creation, with a very diligent team and rapid ecosystem project development. Its circulating market cap is only $400 million, the lowest among these projects.

2 LSD

Main Projects: LDO, SSV, PRL

LSD protocols mainly provide staking services related to nodes after ETH's Shanghai upgrade from POW to POS. LDO is the largest service provider, with the highest TVL in the network and a circulating market cap of $2 billion.

SSV is an infrastructure setup for distributed nodes and has performed well recently.

3 DeFi

Main Projects: Pendle, UNI, AAVE, COMP, CRV, MKR

DeFi is probably the most familiar to everyone. As the biggest innovation sector in the last bull market, DeFi applications have permeated various aspects of on-chain daily activities. Core players include UNI, AAVE, COMP, CRV, MKR, representing Dex, lending, stablecoin trading, and stablecoin issuance, respectively.

Due to the maturity of DeFi, this cycle is mainly based on previous upgrades, with less innovation. The relatively novel project is Pendle, which separates tokens into principal and interest for trading future yields. Pendle recently saw a dual increase in TVL and token price.

4 Stablecoins Based on ETH Collateral

Main Projects: ENA, LBR

There are various ways to issue stablecoins, one of which is collateralized assets, with ETH being the largest collateral asset. With the advent of LSD and Restaking, project teams use collateralized ETH to gain liquidity yields. Such stablecoins naturally have yield rates. Additionally, project teams provide token incentives and dividends from minting and borrowing, resulting in very attractive annual yields.

LBR, which was popular in 2023, is one such example. This year, Binance's Launchpool project ENA is based on a similar concept, using hedging derivative positions to maintain the value of collateralized assets.

ENA's TVL is as high as $2.5 billion, and its current circulating market cap is already $1.3 billion.

5 Restaking

Main Projects: REZ, ETHFI

Restaking is the most promising aspect of this ETH cycle for me, for two reasons:

1) New sector, as market funds often prefer to speculate on new sectors

2) Small circulating market cap, with ETHFI's circulating market cap at $460 million and Renzo's at $150 million

3) Eigenlayer, as the leader, has already determined the airdrop quantity, and the listing time is not far off.

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