Ethereum Strong Rebound: In-depth Analysis of the Growth Potential of Leading Ecological Projects

Recently, the price of Ethereum has surged significantly, with a rise of 48% over the past month, driving up the prices of projects within the entire Ethereum ecosystem. Historical data shows that during rising cycles, high-quality projects within the Ethereum ecosystem typically exhibit a multiplier effect. A well-known DEX project is one of the high-quality assets in the Ethereum ecosystem that we are closely monitoring, with a rise of 28% over the past month. If the market trend continues, this project may have further upside potential. In addition to following the overall trend of Ethereum, this project also possesses some unique growth potentials, including a potentially relaxed regulatory environment, the project's business data maintaining a leading position, and the structural upward momentum of token prices.

1. Overview of the Regulatory Environment

From September 2021 to August 2023, the regulatory environment was ambiguous. The U.S. Securities and Exchange Commission ( SEC ) launched an investigation into the project, focusing on its marketing strategies and investor services. The SEC chairman stated multiple times that DeFi platforms may involve securities regulations and that oversight needs to be strengthened. This investigation sparked widespread discussion in the industry, particularly regarding whether the project and similar governance tokens should be regarded as securities, which became a focal point of crypto regulation. At the end of August 2023, the project won a class-action lawsuit, with the court dismissing the allegations and determining that the protocol was primarily used for legitimate purposes.

From April 2023 to May 2024, regulatory pressure increased. The SEC issued a Wells notice to the project, accusing it of potentially operating as an unregistered securities exchange, its interface and wallet possibly acting as unregistered securities brokers, and the tokens potentially being considered investment contracts. The project team subsequently submitted a detailed response document refuting the SEC's accusations.

Starting from February 2025, the regulatory environment began to loosen. The SEC announced the termination of its investigation into the project and will no longer pursue enforcement actions. This decision is seen as a "major victory for DeFi." Subsequently, the SEC invited the project and other companies to participate in a cryptocurrency roundtable to discuss the regulation of cryptocurrency trading. The U.S. Congress also began to advance a new regulatory framework for cryptocurrency, aimed at providing clearer legal definitions and regulatory guidance for digital assets.

Currently, with the new government in power, cryptocurrency regulation is developing in a more flexible and adaptive direction. The project has played an important advisory role in this process. After the regulatory environment is fully relaxed, there may be more favorable policies in the future.

2. Project Business Situation

1. Excellent business data

This project is one of the earliest and largest DEX protocols in the crypto market. Currently, the total locked value ( TVL ) is $5.12 billion, with a trading volume of $84.5 billion in the last 30 days, ranking second in the market. The annual revenue reaches $929 million, ranking seventh. If calculated simply using traditional valuation methods, its price-to-earnings ratio is about 4.5-6.4, far lower than other tech giants like Apple and Tesla. If it can activate the "fee switch" or expand financial application scenarios in the future, considering its profitability, the current market value may be severely undervalued.

According to the financial report for the first quarter of 2025, as of the end of March, the project foundation holds $53.4 million in USD and stablecoins, 15.8 million tokens, and 257 ETH. Based on the closing price on May 28, this amounts to $150 million in tokens. The funds are expected to last until January 2027, and the financial situation is good.

2. Innovation in Token Economics Models

The project has been trying to optimize its token economic model. In the past, tokens were mainly used for liquidity mining and governance voting, but holding them directly did not generate any returns. The project team has repeatedly proposed activating the "fee switch" but has not been able to implement it due to regulatory risks. The latest fee switch proposal was restarted in February 2024, and on-chain voting is expected to take place in the second half of 2025.

In addition, the newly launched Layer 2 solution of the project provides new application scenarios for the token. This Layer 2, based on Optimism's OP Stack framework, is set to officially launch in February 2025. It uses the project's token as the validator staking token, and stakers can earn a share of the on-chain income. Although the official has not disclosed the specific staking scale, it is expected to attract more token holders to participate in staking as the ecosystem expands.

III. Token Market Performance

Currently, the project's token circulating market value is $4.2 billion, with a fully diluted valuation of $6.7 billion. All tokens are in circulation, with approximately 37% in staking lock-up.

The contract market has a position volume of $448 million, with the value of open contracts accounting for approximately 10.6% of the market capitalization. Comprehensive exchange data shows a slight bullish bias in the long-short ratio. Since the rise of Ethereum, the open contract volume of this token has also been gradually increasing, and the derivatives market is active.

In the spot market, the price trend of the token is similar to that of Ethereum. During the Ethereum rise cycle in November last year, the token's volatility was about 2-3 times that of Ethereum. However, in the Ethereum rise in April this year, the token's increase temporarily lagged behind Ethereum. If the market continues, the token may have further momentum to catch up with the rise.

IV. Conclusion

With the new US government in power, the regulatory direction of the cryptocurrency industry has become a focal point of attention. As one of the largest DEX protocols currently, the regulatory handling of this project may set a benchmark for the entire industry. The project team is also actively participating in the formulation of regulatory rules. Combined with the rise effect of Ethereum, this project may welcome structural favorable opportunities.

Considering the project's excellent business data, substantial profits, and sound financial condition, along with the newly launched Layer 2 solution and the potential activation of fee switches, all of which could bring new value drivers to the token. For investors optimistic about the future market, this project is one of the quality assets in the Ethereum ecosystem worth paying attention to.