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Solana Dark Forest Rule: Unveiling How MEV Extractors Amassed $1.5 Billion Annually
Original Article Title: "Unveiling the MEV Game on Solana"
Original Article Author: Maggie
Over the past year, the Memecoin craze has turned Solana into a gold rush for traders. Countless individuals have chased meme coins' meteoric rises and falls, attempting to gain an edge using trading bots. However, few realize that the truly profitable business, where you can't lose, isn't flashing on the candlestick charts but is hidden deep in the blockchain's dark forest. This is MEV (Maximal Extractable Value). In contrast to the visible bot profits, MEV gains are often concealed within the blockchain's block construction and ordering mechanism, with those who control it typically holding the invisible hand of on-chain power and infrastructure.
Many are unaware because the system operates with high barriers to entry, extreme information asymmetry, and significant centralization among the controllers. While you may be using a bot to frontrun the mempool and sandwich trades, MEV extractors behind the scenes control transaction ordering to precisely capture arbitrage opportunities. As retail traders compete with speed and strategy, large institutions with staking advantages and node permissions have already secured the top of the revenue pyramid through structural advantages. On Solana, MEV is not just a trading opportunity; it represents infrastructure-level power—it is controlled by a select few, creating a high-barrier, high-monopoly, high-profit capital game.
Today, we will unveil the MEV game on Solana.
1. First, What Is MEV?
MEV stands for Miner Extractable Value, referring to the ability of miners to include, omit, and order transactions when packaging blocks to earn as much additional revenue as possible. Due to the Memecoin craze and DeFi activity, MEV has grown significantly. From a business perspective, MEV typically includes: liquidations, arbitrage, and sandwich attacks.
· Liquidations: Seizing rewards by liquidating undercollateralized loan positions. When borrowers fail to maintain the required collateralization ratio in their loan agreements, their positions become eligible for liquidation. MEV searchers monitor these undercollateralized positions on the blockchain and execute liquidations by repaying a portion or all of the debt in exchange for a portion of the collateral as a reward.
· Arbitrage: Simultaneously buying and selling on different DEXs to profit from price differences. The simplest form of arbitrage occurs when there are price variations for the same trading pair across two DEXs, allowing arbitrageurs to profit from the price differential with a single trade.
· Sandwich Attack: Buying before a target transaction and then selling to profit. A sandwich attack is an arbitrage strategy in the DeFi market, where the attacker achieves profit through three atomic bundled trades: first, conducting an unprofitable front-run transaction to drive up the asset's price to the highest level allowed by the victim's slippage tolerance, then the victim's trade is executed at the peak, further boosting the price, and finally, the attacker sells the asset at an inflated price through a back-run transaction, offsetting the initial cost and gaining net profit.
Behaviorally, it distinguishes between general front-running and back-running.
· Front-Running: Front-running refers to MEV searchers identifying another trader's buy or sell order in the mempool and placing the same order before that trader to profit from the price impact on the other trader's transaction.
· Back-Running: Back-running is the counterpart of front-running, a specific MEV strategy that exploits temporary price imbalances caused by another trade, usually due to improper routing. Once a user's trade is executed, the reverse trader balances the prices of different pools by trading the same asset to ensure profit.
Liquidations are all back-run, and most arbitrages are also back-run; the sandwich attack is front-run + back-run. For specific MEV cases, please refer to Helius' report, which provides detailed explanations and examples.
2. How Lucrative is MEV Business?
According to some unverified statistics, last year, trading bots made $1.1 billion, pump and dumps made $500 million, MEV made $1.5 billion, AMMs made $1 billion, celebrities and related parties made $500 million, with nearly $5 billion taken off-chain. On the Solana network, as the network's activity increased and the 2024 Memecoin craze arrived, MEV profits on Solana also surged.
As seen in Helius' report, Jito's arbitrage detection algorithm analyzed all Solana transactions, including trades outside of Jito's bundle. In the past year, the algorithm identified 90,445,905 successful arbitrage trades. The average profit per arbitrage was $1.58, with the highest single trade profit at $3.7 million. These arbitrages generated $142.8 million in profit, of which $126.7 million (88.7%) was denominated in SOL.
MEV is Big Business!
3. MEV on Solana is Particularly Severe, MEV King---Jito
MEV on Solana is more intense and centralized compared to ETH, stemming from the different design of their underlying chains.
Solana: High Performance--> Sacrifice Some Decentralization --> High Centralization--> High Centralization of Power Solana is known for its high performance, with a block time of only 400 milliseconds (compared to Ethereum's 12 seconds), but its design sacrifices some decentralization, leading to high centralization of power. As Solana does not have a mempool, other nodes must connect to the current block-producing validator nodes to fetch block data and submit transactions. This design gives the block-producing validator nodes significant power without a balancing mechanism, resulting in a severe MEV issue on Solana with monopolized and high profits.
In contrast, Ethereum's MEV market is more market-oriented. There is intense competition between MEV searchers and block builders, which lowers the overall MEV revenue. Jito is the MEV overlord of Solana. In August 2022, Jito launched the Jito-Solana client. In the first nine months, due to low network activity, the adoption rate of the Jito-Solana client remained below 10%, and MEV rewards were limited. Starting from the end of 2023, the adoption rate accelerated significantly, reaching 50% by January 2024. By the end of 2024, over 94% of Solana validators (by stake-weight) were using the Jito-Solana client, establishing absolute dominance.
How Does Jito Work?
The key difference between the Jito-Solana client and the official client is that it natively supports an MEV extraction mechanism, with its core function being to provide Bundles services. Validators running this client are essentially joining the Jito alliance. This alliance offers an external transaction priority execution channel, where traders submit bundles by paying tips to gain transaction sequencing advantages. Therefore, compared to the official client, the Jito client significantly improves the node's earning potential.
Jito Bundles allow traders to bundle transactions, pay fees, and prioritize the submission and execution of key transactions. This is not only applicable to MEV opportunities but is also commonly used for other purposes such as acceleration, batch transactions, and front-running prevention. The core process is as follows:
1. Transaction Assembly: Traders identify arbitrage opportunities and swiftly construct transactions.
2. Bundle Submission: Transactions are bundled and sent to Jito nodes with a fee to increase priority in sorting. These bundles are then relayed by Jito nodes to the block-producing Leader.
3. Priority Execution: If a Jito validator becomes the Leader for the current Slot, these transactions are prioritized for inclusion in a block and executed in a pre-order position. Rewards are distributed to the validator and Jito protocol according to the mechanism. As mentioned earlier, the more funds staked on a Jito node, the higher the Tips and MEV income. Therefore, Jito nodes need to attract more SOL to stake with them. The Jito protocol allows users to stake and share a portion of the node's staking rewards and MEV income with these users.
To further increase its staking volume, Jito has introduced a staking protocol that allows ordinary users to delegate SOL to Jito nodes and proportionally share block rewards and MEV income. Stakers receive rewards, nodes increase block production probability, traders gain priority execution opportunities, forming a complete MEV benefit loop. MEV's three key features are: information advantage, monopoly effect, and capital barrier.
MEV is an information warfare where the winner takes it all. On Solana, competing for MEV opportunities is about milliseconds-speed and sensitivity to on-chain information. The one who can swiftly identify arbitrage opportunities and accurately place transactions in the same/next Slot wins the earnings.
This relies on two factors: fast information synchronization, usually requiring connection to large Jito nodes' RPC services; fast on-chain transactions, prioritizing submission via Jito Bundles channel and paying sufficient Tips. Jito's bundle service is a monopolistic service. The key to MEV lies in "who is the block producer (Leader)." For Jito to provide a stable and reliable bundling service for traders, it must cover as many Leader Slots as possible. This requires its client's network coverage to be extremely high to ensure that most rounds are block-produced by Jito nodes.
Once a critical point is reached, the network effect self-reinforces: the more extensive the adoption, the more stable the service, and the harder it is for competitors to shake. This is also why Jito quickly consolidated 94% of the client share. Solana's MEV is a capital game as Solana is a PoS chain; the more staked, the higher the probability of becoming a Leader. Leaders have block sorting rights and naturally receive the most MEV and Tips.
This creates a highly concentrated capital barrier: large nodes stake more, have a higher block production frequency, and faster information synchronization. The more sensitive the information, the stronger the arbitrage ability. The RPC service of large nodes (even services in the same data center) experiences a surge in prices, becoming a scarce resource for information access.
Those who can earn MEV often can only do so through the most capital-rich large nodes.
4. Flow of MEV Revenue on Solana: Who Takes the Money?
As mentioned earlier, the MEV revenue on Solana is quite substantial. So, who ultimately benefits from this revenue? It mainly belongs to three core stakeholders: the Jito protocol itself, large high-stake nodes, and block space sales intermediaries.
· Jito Protocol: As the tax collector of the infrastructure, Jito has processed over 4.3 billion transaction bundles in the past year, generating a total of 5.51 million SOL in user-paid Tips. Calculated at a SOL price of $140, this means that about $7.7 billion in additional on-chain transaction value was guided by Jito infrastructure. The platform fee between Jito and validators is 3-5%, so the actual revenue of Jito itself in the past year is approximately 200K-270K SOL, equivalent to about $3.5M.
· High-Stake Nodes: As Solana is a PoS chain, the higher the staked amount, the higher the node's block production probability. These "top validators" not only continually receive base block rewards and inflation rewards but also get a significant amount of transaction Tips from Jito Bundles. The normal node's revenue is about 6%, and when the network activity is high, some node's annual returns can exceed 20%, significantly higher than regular nodes. Their income sources include: inflation rewards, block rewards, Jito Tips, and some revenue from selling SWQoS transaction on-chain permissions.
· Block Space Sales Intermediaries: Intermediaries facilitating on-chain transactions act as secondary block space sellers. Their operation logic is as follows: they establish partnerships with high-stake nodes to purchase SWQoS transaction on-chain permissions at a discounted market price; (Stake-Weighted Quality of Service SWQoS allows leaders to identify and prioritize transactions from staked validators.
In the case of network congestion, SWQoS ensures that transactions from high-stakes validators are less likely to be delayed or dropped) they bundle multiple users' transactions into a Jito Bundle, significantly increase Tips, to gain higher priority; the Tips paid by users are much higher than the fees intermediaries pay to validators, allowing intermediaries to earn the difference; simultaneously, they embed their own arbitrage transactions (such as Backrun) in the Bundle to further capture MEV revenue. For example, on DefiLlama, you can see some revenue data from bloXroute, showing that the Tips received are substantial. However, it is important to note that this data does not cover all of its receipt addresses, nor does it exclude the shares distributed to validators and order flow providers.
Overall, Solana has experienced a high degree of power centralization, with Jito's MEV revenue mostly captured by the Jito protocol, major validator nodes, and block space sale intermediaries.
5. Solana Client Landscape
Currently, there are over 1300 validator nodes on Solana, with over 94% of nodes being Jito nodes. The main client types include:
· Solana Node: This is the most basic node client, without any MEV optimization mechanisms. Nodes running this client have been largely marginalized as their earnings are much lower than those running Jito nodes.
· Jito Node: The Jito client is based on the official client but includes the Jito protocol and Bundles support, allowing nodes to accept bundled transactions and collect tips from them. Users looking to front-run, prevent sandwich attacks, or achieve fast on-chain execution can use the Jito Bundle service to submit transactions to validators with a tip to increase execution priority. Since nodes running the Jito client can earn additional tips, over 90% of nodes on the mainnet have switched to Jito nodes, making it the default choice.
· Paladin Node: Paladin is an improved version based on the Jito client, aiming to provide a more equitable transaction prioritization mechanism to address the "sandwich attack" issue in Jito bundle sorting (where malicious validators insert sandwich transactions without being penalized). According to community reports, the current adoption rate of the Paladin client is around 15%, and because it is still recognized by the network as a Jito client, it is included in the total statistic of 94%.
· Firedancer Node: Developed by Jump Crypto, Firedancer is a high-performance Solana client with an independent implementation designed to enhance network throughput, facilitating Jump's quantitative trading. The initial version did not support the Jito protocol, so it could not access tip revenue, resulting in very low adoption on the mainnet. However, as new versions started to be compatible with the Jito protocol, validators using Firedancer could also receive Jito Tips income. Although there are currently few deployments on the mainnet, most nodes on the testnet have adopted Firedancer, indicating that it may gain a larger market share on the mainnet in the future. The Solana Foundation has also supported it.
Competition Logic of These Node Clients:
Jito VS Paladin: Fairness Debate The Jito protocol has formed a de facto monopoly on MEV extraction due to its high centralization. However, the protocol currently lacks a mechanism to punish malicious behavior (such as validator sandwich attacks), leading to the possibility of users being sandwiched even when using a bundle. This has given an opportunity to clients like Paladin, which offers a more fair transaction priority on-chain through a bidding process. However, Paladin was originally a modification on top of Jito-solana, and if Jito enhances its mechanisms in the future, it may suppress Paladin's space for survival.
Firedancer VS Other Clients: Performance Succession Firedancer's major advantage is performance, claiming that TPS can reach 1 million (theoretically 1 million, actual performance is unknown). If the transaction volume on the Solana network continues to grow in the future, high-performance client nodes that can meet performance requirements will gain an advantage and squeeze out low-performance clients. Once high-performance nodes start packaging larger blocks, low-performance clients may fall behind in synchronization, affecting validation performance and ultimately being marginalized. Therefore, as the demand for TPS on Solana increases, the entire Solana network will naturally transition to high-performance clients.
Summary: In general, the vast majority
of nodes run the Jito-Solana client, and the Jito protocol has become part of the infrastructure. As the Firedancer client begins to be compatible with the Jito protocol, there may be an iterative upgrade of client performance on the mainnet in the future—from "running Jito to earn more money" to "running high-performance Jito to avoid elimination."
6. How Can Large Institutions Step by Step Become Power Players on Solana?
Solana's architecture inherently leans towards centralization of power, creating a favorable environment for large institutions to intervene and dominate the ecosystem. Entities such as Solana Foundation, Jito, Multicoin, Jump, Helius, Coinbase, Binance, Jupiter, among others, have significant governance rights on Solana. Many institutions are bullish on Solana's future prospects and aim to become one of the power players on Solana. Taking Sol Strategies, which has shown frequent recent developments, as an example, we can clearly see how large institutions are strategically infiltrating to become power players on Solana:
Step 1: Sol Strategies Expands Market Share and Ecosystem Dominance through Node Acquisitions, Emerging as a Key Player. Solana currently boasts a staking rate of up to 65.6% (with approximately 380 million SOL staked), controlling validator nodes, which means holding the network's consensus mechanism and voting power. Sol Strategies has aggressively acquired top nodes, swiftly entering the power core:
November 2024: Acquired Cogent Crypto, the operator of Solana, Sui, Monad, and ARCH network validator nodes, for $18 million (cash + stock), focusing on the SOL network. March 2025: Acquired leading Solana validator nodes Laine and Stakewiz.com for 35 million Canadian dollars (cash + equity), increasing staked SOL to 3.3 million tokens (worth approximately $3.88 billion) and appointing Laine's founder Michael Hubbard as Chief Strategy Officer.
Step 2: Attempt to Advance the Inflation Rate Adjustment Proposal SIMD-228 to Further Consolidate Their Power. (This proposal was ultimately not approved) SOL Strategies vigorously promoted the inflation mechanism adjustment proposal SIMD-228, which aimed to introduce a dynamic inflation mechanism to replace the current fixed deflationary model. If approved, Solana's annual inflation rate would have decreased from the fixed rate of 4.68% to 1% or even 0%. Although the proposal was not ultimately approved, the strategic intent behind it was very clear:
Stabilize SOL Value: Lowering inflation can reduce the issuance of new SOL, alleviate token dumping, and enhance long-term staker rewards; Suppress small nodes, consolidate the dominance of large nodes: Reduced inflation would compress the earnings of all validators, but smaller nodes have weaker risk resistance, making them easier to eliminate, thus promoting network concentration towards top validators.
Step 3: Interest Gaming on Solana. Advancing Solana ETF Listing, Crypto Asset Structuring, and Becoming an ETF Staking Provider. Sol Strategies became the staking provider for the 3iQ Solana Staking ETF and facilitated the listing of the 3iQ Solana Staking ETF. They aimed to further increase staking volume and compete for blockchain governance dominance.
Summary:
MEV is big business, especially on Solana. MEV on Solana is particularly intense and profitable. Protocols like Jito, with a strong winner-takes-all effect, dominate the MEV landscape. With high centralization of power on Solana, MEV gains are primarily captured by the Jito protocol, high-stake nodes, and block space sale brokers. There are now multiple clients on the Solana network, with the Jito-Solana client currently dominating the mainnet, and the Firedancer client, supporting the Jito protocol, potentially becoming a future high-performance upgrade. Solana is very conducive to institutional dominance. SOL Strategies, through node acquisitions, attempts to drive governance proposals, and promote ETF listings, have demonstrated how an institution can comprehensively penetrate Solana from technology and governance to the financial system, outlining a path to compete for blockchain governance sovereignty.
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$COIN Joins S&P 500, but Coinbase Isn't Celebrating
On May 13, S&P Dow Jones Indices announced that Coinbase would officially replace Discover Financial Services in the S&P 500 on May 19. While other companies like Block and MicroStrategy, closely tied to Bitcoin, were already part of the S&P 500, Coinbase became the first cryptocurrency exchange whose primary business is in the index. This also signifies that cryptocurrency is gradually moving from the fringes to the mainstream in the U.S.
On the day of the announcement, Coinbase's stock price surged by 23%, surpassing the $250 mark. However, just 3 days later, Coinbase was hit by two consecutive events: a hack where employees were bribed to steal customer data and a demand for a $20 million ransom, and an investigation by the U.S. Securities and Exchange Commission (SEC) into the authenticity of its claim of having over 100 million "verified users" in its securities filings and marketing materials. These two events acted as mini-bombs, and at the time of writing, Coinbase's stock had already dropped by over 7.3%.
Coincidentally, Discover Financial Services, being replaced by Coinbase, can also be considered the "Coinbase" of the previous payment era. Discover is a U.S.-based digital banking and payment services company headquartered in Illinois, founded in 1960. Its payment network, Discover Network, is the fourth largest payment network apart from Visa, Mastercard, and American Express.
In April, after the approval of the acquisition of Discover by the sixth-largest U.S. bank, Capital One, this well-established digital banking company of over 60 years smoothly handed over its S&P 500 "seat" to this emerging cryptocurrency "bank." This unexpected coincidence also portrayed the handover between the new and old eras in Coinbase's entry into the S&P 500, resembling a relay race scene. However, this relay baton also brought Coinbase's accumulated "external troubles and internal strife" to a tipping point.
Over the past decade, cryptocurrency exchanges have been the most stable "profit machines." They play a role in providing liquidity to the entire industry and rely on trading fees to sustain their operations. However, with the comprehensive rollout of ETF products in the U.S. market, this profit model is facing unprecedented challenges. As the leader in the "American stack," with over 80% of its business coming from the U.S., Coinbase is most affected by this.
Starting from the approval of Bitcoin and Ethereum spot ETFs, traditional financial capital has significantly onboarded users and funds that originally belonged to exchanges in a more cost-effective, compliant, and transparent manner. The transaction fee revenue of cryptocurrency exchanges has started to decline, and this trend may further intensify in the coming months.
According to Coinbase's 2024 Q4 financial report, the platform's total trading revenue was $417 million, a 45% year-on-year decrease. The contribution of BTC and ETH's trading revenue dropped from 65% in the same period last year to less than 50%.
This decline is not a result of a decrease in market enthusiasm. In fact, since the approval of the Bitcoin ETF in January 2024, the inflow of BTC into the U.S. market has continued to reach new highs, with asset management giants like BlackRock and Fidelity rapidly expanding their management scale. Data shows that BlackRock's iShares Bitcoin ETF (IBIT) alone has surpassed $17 billion in assets under management. As of mid-May 2025, the cumulative net inflow of 11 major institutional Bitcoin spot ETFs on the market has exceeded $41.5 billion, with a total net asset value of $1214.69 billion, accounting for approximately 5.91% of the total Bitcoin market capitalization.
Institutional investors and some retail investors are shifting towards ETF products, partly due to compliance and tax considerations. On one hand, ETFs have much lower trading costs compared to cryptocurrency exchanges. While Coinbase's spot trading fee rate varies annually in a tiered manner but averages around 1.49%, for example, the management fee for IBIT ETF is only 0.25%, and the majority of ETF institution fees fluctuate around 0.15% to 0.25%.
In other words, the more rational users are, the more likely they are to move from exchanges to ETF products, especially for investors aiming for long-term holdings.
According to multiple sources, several institutions, including VanEck and Grayscale, have submitted applications to the SEC for a Solana (SOL) ETF, with some institutions also planning to submit an XRP ETF proposal. Once approved, this may trigger a new round of fund migration. According to a report submitted by Coinbase to the SEC, as of April, the platform's trading revenue from XRP and Solana accounted for 18% and 10%, nearly one-third of the platform's fee revenue.
However, the Bitcoin and Ethereum ETFs passed in 2024 also reduced the fees for these two tokens on Coinbase from 30% and 15% to 26% and 10%, respectively. If the SOL and XRP ETFs are approved, it will further undermine the core fee revenue of exchanges like Coinbase.
The expansion of ETF products is gradually weakening the financial intermediary status of cryptocurrency exchanges. From their original roles as matchmakers and clearers to now gradually becoming mere "on-ramps and off-ramps" for funds, exchanges are seeing their marginal value squeezed by ETFs.
On May 12, 2025, SEC Chairman Paul S. Atkins gave a keynote speech at the Tokenization and Cryptocurrency Working Group roundtable. The theme of his speech revolved around "It is a new day at the SEC," where he indicated that the SEC would not approach enforcement and regulation the same way as before but would instead pave the way for cryptocurrency assets in the U.S. market.
With signs of cryptocurrency compliance such as the SEC's "NEW DAY" declaration, an increasing number of traditional brokerages are attempting to enter the cryptocurrency industry. One of the most representative cases is the well-known U.S. brokerage Robinhood, which began expanding its crypto business in 2018. By the time of its IPO in 2021, Robinhood's crypto business revenue accounted for over 50% of the company, with a significant boost from the Dogecoin "moonshot" promoted by Musk.
In Q1 2025 earnings report, Robinhood showcased strong growth, especially in revenue from cryptocurrency and options trading. Fueled by Trump's Memecoin, cryptocurrency-related revenue reached $250 million, nearly doubling year-over-year. Consequently, Robinhood Gold subscription users reached 3.5 million, a 90% increase from the previous year, with the rapid growth of Robinhood Gold providing the company with a stable source of income.
Meanwhile, RobinHood is actively pursuing acquisitions in the cryptocurrency space. In 2024, it announced a $2 billion acquisition of the long-standing European cryptocurrency exchange Bitstamp. Additionally, Canada's largest cryptocurrency CEX, WonderFi, which recently went public on the Toronto Stock Exchange, also announced its integration with RobinHood Crypto. After obtaining virtual asset licenses in the UK, Canada, Singapore, and other markets, RobinHood has taken a proactive approach in the compliant cryptocurrency trading market.
Furthermore, an increasing number of brokerage firms are exploring the same path. Futu Securities, Tiger Brokers, and others are also dipping their toes into cryptocurrency trading, with some having applied for or obtained the VA license from the Hong Kong SFC. Although their user bases are currently small, traditional brokerages have a natural advantage in user trust, regulatory licenses, and low fee structures. This could pose a threat to native cryptocurrency platforms in the future.
In April 2025, security researchers discovered that some Coinbase user data was leaked on the dark web. While the platform initially responded by attributing it to a "technical misinformation," it still raised concerns among users regarding its security and privacy protection. Just two days before Dow Jones Indexes announced Coinbase's addition to the S&P 500 Index, on May 11, 2025, Coinbase received an email from an unknown threat actor claiming to have obtained customer account information and internal documents, demanding a $20 million ransom to keep the data private. Subsequent investigations confirmed the data breach.
Cybercriminals obtained the data by bribing overseas customer service agents and support staff, mainly in "non-U.S. regions such as India." These agents abused their access to Coinbase's internal customer support system and stole customer data. As early as February this year, blockchain detective ZachXBT revealed on X platform that between December 2024 and January 2025, Coinbase users lost over $65 million to social engineering scams, with the actual amount potentially higher.
Among the victims was a well-known figure, 67-year-old Ed Suman, an established artist in the art world for nearly two decades, having been involved in the creation of artworks such as Jeff Koons' "Balloon Dog" sculpture. Earlier this year, he fell victim to an impersonation scam involving fake Coinbase customer support, resulting in a loss of over $2 million in cryptocurrency. ZachXBT critiqued Coinbase for its inadequate handling of such scams, noting that other major exchanges have not faced similar issues and recommending Coinbase to enhance its security measures.
Amidst a series of ongoing social engineering incidents, although there has not been any impact on user assets at the technical level so far, it has raised concerns among many retail and institutional investors. Especially institutions holding massive assets on Coinbase. Just considering the U.S. BTC ETF institutions, as of mid-May 2025, they collectively hold nearly 840,000 BTC, and 75% of these are custodied by Coinbase. If we price BTC at $100,000, this amount reaches a staggering $63 billion, which is equivalent to the nominal GDP of two Iceland in the year 2024.
In addition, Coinbase Custody also serves over 300 institutional clients, including hedge funds, family offices, pension funds, and endowments. As of the Q1 2025 financial report, Coinbase's total assets under management (including institutional and retail clients) reached $404 billion. The specific amount of institutional custodied assets was not explicitly disclosed in the latest report, but it should still be over 50% based on the Q4 2024 report.
Once this security barrier is breached, not only could the rate of user attrition far exceed expectations, but more importantly, institutional trust in it would undermine the foundation of its business. Therefore, after a hacking event, Coinbase's stock price plummeted significantly.
Facing a decline in spot trading fee revenue, Coinbase is also accelerating its transformation, attempting to find growth opportunities in derivatives and emerging assets. Coinbase acquired a stake in the options platform Deribit at the end of 2024 and announced the official launch of perpetual contract products in 2025. This acquisition fills in Coinbase's gap in options trading and its relatively small global market share.
Deribit has a strong presence in non-U.S. markets, especially in Asia and Europe. The acquisition has enabled Coinbase to gain a dominant position in bitcoin and ethereum options trading on Deribit, accounting for approximately 80% of the global options trading volume, with daily trading volume remaining above $2 billion.
Meanwhile, 80-90% of Deribit's customer base consists of institutional investors, with their professionalism and liquidity in the Bitcoin and Ethereum options market highly favored by institutions. Coinbase's compliance advantage, coupled with its already robust institutional ecosystem, makes it even more suitable. By using institutions as an entry point, it can face the squeeze from giants like Binance and OKX in the derivatives market.
Facing a similar dilemma is Kraken, which is attempting to replicate Binance Futures' model in non-U.S. markets. Since the derivatives market relies more on professional users, fee rates are relatively higher and stickiness is stronger, making it a significant source of revenue for exchanges. In the first half of 2025, Kraken completed the acquisition of TradeStation Crypto and a futures exchange, aiming to build a complete derivatives trading ecosystem to hedge the risk of declining spot transaction fee income.
With the surge of Memecoin in 2024, Binance, OKX, and various CEX platforms began massively listing small-market-cap, highly volatile tokens to activate active trading users. Due to the wealth effect and trading activity of Memecoins, Coinbase was also forced to join the battle, successively listing popular tokens from the Solana ecosystem such as BOOK OF MEME and Dogwifhat. Although these coins are controversial, they are frequently traded, with fee rates several times higher than mainstream coins, serving as a "blood-boosting" method for spot trading.
However, due to its status as a publicly traded company, this practice is a riskier endeavor for Coinbase. Even in the current crypto-friendly environment, the SEC is still investigating whether tokens like SOL, ADA, and SAND constitute securities.
In addition to the forced transformation strategies carried out by the aforementioned CEXs, they are also starting to lay out RWAs and the most talked-about stablecoin payment fields, such as the PYUSD launched through a collaboration between Coinbase and Paypal, Coinbase's support for the Euro stablecoin EURC by Circle that complies with EU MiCA regulatory requirements, or the USD1 launched through a collaboration between Binance and WIFL. In the increasingly crowded trading field, many CEXs have shifted their focus from just the trading market to the application field.
The golden age of transaction fees has quietly ended, and the second half of the crypto exchange platform game has silently begun.
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After Surging 40%, Has Ethereum Price Peaked Upon Exiting the Craze?
Whether you are an insider or an outsider, these days you must be familiar with the news about Ethereum. The reason is simple, causing Ethereum enthusiasts to sigh with emotion and almost throwing off-guard those who defend Ethereum, Ethereum, with a "3-day surge of 40%," climbed to the top of the Douyin Hot List.
As we all know, Ethereum launched the Pectra upgrade on May 7th. This most significant network upgrade since early 2024 integrates the Prague execution layer hard fork and the Electra consensus layer upgrade, significantly improving Ethereum's performance through 11 improvement proposals. The account abstraction feature (EIP-7702) allows users to flexibly manage wallets through social media accounts or multi-signature schemes, reducing the user threshold, attracting more users and developers. The staking mechanism optimization increases the validator ETH cap from 32ETH to 2048ETH and introduces a flexible withdrawal method, making it easier for institutions and individuals to participate in network security, enhancing the market's confidence in Ethereum's long-term value.
At the same time, Pectra optimized the interaction efficiency of Layer 2 networks such as Arbitrum and Optimism, making transactions faster and cheaper, leading to a surge in on-chain activity. As a crucial step for Ethereum's transition from "2G" to "5G," the Pectra upgrade not only enhances network vitality but also "recharges confidence" in the market, directly driving the price increase.
Related Reading: "Ethereum Skyrockets 22% in One Day, E Enthusiasts Rejoice"
It's not just Ethereum itself, as Wall Street also brought important bullish news.
The world's largest asset management company, BlackRock, proposed to the SEC allowing Ethereum ETFs for staking. This proposal is expected to elevate Ethereum ETFs from a mere investment tool to a bond-like "interest-bearing asset," bringing investors both capital appreciation and passive income, igniting market optimism about Ethereum's future potential.
Specifically, BlackRock has proposed to amend its S-1 filing to allow investors to create and redeem ETF shares directly with Ethereum instead of the U.S. dollar (i.e., in-kind redemption). This move, combined with its $2.9 billion BUIDL Fund launched in March 2024, aims to deepen the integration of traditional finance with blockchain. The BUIDL Fund is a tokenized fund operating on the Ethereum network, investing in traditional assets such as U.S. Treasury bonds. This setup is highly attractive to institutional investors, as they can not only benefit from Ethereum's price appreciation but also earn stable cash flow through staking.
Robert Mitchnick, BlackRock's Head of Digital Assets, stated in a CNBC interview in March 2025 that the addition of staking functionality will significantly enhance the appeal of the Ethereum ETF. He admitted that when the Ethereum spot ETF was launched in July 2024 without staking functionality, the market demand was lackluster, and staking could be the key to reversing this trend.
Meanwhile, the SEC's shifting stance on cryptocurrency regulation has also fueled this upward trend. During the tenure of the previous SEC chairman, the regulatory approach was tough, and staking was strictly viewed through the Howey test as a potential unregistered security. Therefore, when approving the Ethereum spot ETF in May 2024, staking functionality was explicitly prohibited.
However, with Trump back in the White House and Paul Atkins taking over the SEC, there has been a noticeable relaxation in crypto regulation. Apart from BlackRock, ETF issuers such as Invesco Galaxy, VanEck, WisdomTree, and 21Shares have also submitted applications for similar staking and in-kind redemption.
Related reading: "New Chairman Takes Office, SEC Transforms into 'Crypto Daddy' Within 48 Hours"
If staking ETFs are approved, the benefits are likely to go beyond price appreciation. The introduction of staking functionality could redefine the role of crypto assets, making them more similar to traditional financial products that provide returns and value appreciation, thereby driving Ethereum closer to mainstream finance.
Currently, the SEC still needs to address several decisions related to crypto ETFs, including whether to approve ETFs for Solana, XRP, Litecoin, and even Dogecoin. With the calls for an "altcoin season" growing louder, Ethereum's strong performance may just be the beginning of a larger crypto market frenzy.
In addition, the Trump family-related DeFi project WLFI is also bullish on this wave of rise, with frequent on-chain activities. According to on-chain data analyst @ai_9684xtpa's monitoring, a WLFI-related address is currently borrowing coins to go long on ETH, borrowing 4 million U from Aave to buy 1590 ETH at an average price of $2515 per ETH.
For this epic surge of Ethereum after half a year of silence, the community has indeed gained more confidence and hope, which has also led to a revival of the entire altcoin market. However, amidst the joy, there are also voices of pessimism. Below is a summary conducted by BlockBeats based on community discussions.
The optimists point out that the current market structure is similar to the eve of the bull markets in 2016 and 2020, predicting a life-changing surge in the next 3-6 months, where some altcoins may even achieve astonishing single-day gains of up to 40%.
@liuwei16602825 stated that this surge signifies the return of the bull market as a sure thing. There is no need to worry about a pullback. The driving force behind the surge uses a high-cost isolated operation, fearing a drop more than any retail investor and will definitely do everything to support the price.
Related Reading: "Ethereum Leads the Surge Triggering the 'Altcoin Season' Speculation, How Do Traders View the Future Market?"
The bears mainly believe that this surge is different from the bull market of 2021, as the current market lacks the confidence of large-scale retail investors entering and holding positions for the long term, with funds rotating too quickly.
@market_beggar observed that a Bitfinex E/B whale has started to close positions and believes that if this whale maintains its high-speed position-closing operation for the next few days, it can be inferred that the whale no longer sees the upside potential of ETH, preparing to take profits and exit. The closing time will be a key focus going forward.
@FLS_OTC stated that there are still many uncertainties at the macro level, and the liquidity cannot support a major bull market. At this stage, it is a "last hurrah," not a complete reversal, and will continue to remain in a short position.
@off_thetarget believes that after ETH transitioned from POW to POS, it lost the "gold standard" of mining machine power cost support. The staking economic model led to a breakdown in value anchoring. Additionally, the L2 ecosystem (such as Starknet, zkSync, etc.) suffered from liquidity fragmentation, failing to establish an effective capital inflow mechanism, causing the collapse of the split disc pattern. Furthermore, the ETH community's excessive pursuit of technical narratives divorced from real-world needs resulted in a weak ecosystem growth. Therefore, he believes that ETH's intrinsic value system has crumbled, and the price is bound to plummet to the 800-1200 range, with a decisive short position at 1800.
@Airdrop_Guard, based on the core logic of the "High Probability Trading Strategy," where three sets of underlying logic different trading systems (such as volume depletion, price supply-demand, long/short position funding rate, etc.) simultaneously issue a short signal at the same point (2580), creating a high-probability trading opportunity. He emphasizes that these systems must be based on different algorithms and logics (rather than mere technical indicator overlays). The current ETH trend aligns with the short conditions in multiple independent dimensions of his trading system, hence the decision to short.
Overall, Bitcoin still maintains over 54% market dominance, and institutional funds' continued preference for it may limit the altcoin's upward potential. The market's future direction will depend on multiple factors, such as Bitcoin's price trend, global macroeconomic conditions, and whether funds can effectively rotate from Bitcoin to the altcoin sector.
Although Ethereum's recent leadership in the market has brought about optimistic sentiment, investors still need to remain rational as different sectors of altcoins are likely to show divergence in trends. Whether this round of Ethereum's rise will usher in a true altcoin frenzy may require more time and conducive conditions.
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$COIN Joins S&P 500, but Coinbase Isn't Celebrating
On May 13, S&P Dow Jones Indices announced that Coinbase would officially replace Discover Financial Services in the S&P 500 on May 19. While other companies like Block and MicroStrategy, closely tied to Bitcoin, were already part of the S&P 500, Coinbase became the first cryptocurrency exchange whose primary business is in the index. This also signifies that cryptocurrency is gradually moving from the fringes to the mainstream in the U.S.
On the day of the announcement, Coinbase's stock price surged by 23%, surpassing the $250 mark. However, just 3 days later, Coinbase was hit by two consecutive events: a hack where employees were bribed to steal customer data and a demand for a $20 million ransom, and an investigation by the U.S. Securities and Exchange Commission (SEC) into the authenticity of its claim of having over 100 million "verified users" in its securities filings and marketing materials. These two events acted as mini-bombs, and at the time of writing, Coinbase's stock had already dropped by over 7.3%.
Coincidentally, Discover Financial Services, being replaced by Coinbase, can also be considered the "Coinbase" of the previous payment era. Discover is a U.S.-based digital banking and payment services company headquartered in Illinois, founded in 1960. Its payment network, Discover Network, is the fourth largest payment network apart from Visa, Mastercard, and American Express.
In April, after the approval of the acquisition of Discover by the sixth-largest U.S. bank, Capital One, this well-established digital banking company of over 60 years smoothly handed over its S&P 500 "seat" to this emerging cryptocurrency "bank." This unexpected coincidence also portrayed the handover between the new and old eras in Coinbase's entry into the S&P 500, resembling a relay race scene. However, this relay baton also brought Coinbase's accumulated "external troubles and internal strife" to a tipping point.
Over the past decade, cryptocurrency exchanges have been the most stable "profit machines." They play a role in providing liquidity to the entire industry and rely on trading fees to sustain their operations. However, with the comprehensive rollout of ETF products in the U.S. market, this profit model is facing unprecedented challenges. As the leader in the "American stack," with over 80% of its business coming from the U.S., Coinbase is most affected by this.
Starting from the approval of Bitcoin and Ethereum spot ETFs, traditional financial capital has significantly onboarded users and funds that originally belonged to exchanges in a more cost-effective, compliant, and transparent manner. The transaction fee revenue of cryptocurrency exchanges has started to decline, and this trend may further intensify in the coming months.
According to Coinbase's 2024 Q4 financial report, the platform's total trading revenue was $417 million, a 45% year-on-year decrease. The contribution of BTC and ETH's trading revenue dropped from 65% in the same period last year to less than 50%.
This decline is not a result of a decrease in market enthusiasm. In fact, since the approval of the Bitcoin ETF in January 2024, the inflow of BTC into the U.S. market has continued to reach new highs, with asset management giants like BlackRock and Fidelity rapidly expanding their management scale. Data shows that BlackRock's iShares Bitcoin ETF (IBIT) alone has surpassed $17 billion in assets under management. As of mid-May 2025, the cumulative net inflow of 11 major institutional Bitcoin spot ETFs on the market has exceeded $41.5 billion, with a total net asset value of $1214.69 billion, accounting for approximately 5.91% of the total Bitcoin market capitalization.
Institutional investors and some retail investors are shifting towards ETF products, partly due to compliance and tax considerations. On one hand, ETFs have much lower trading costs compared to cryptocurrency exchanges. While Coinbase's spot trading fee rate varies annually in a tiered manner but averages around 1.49%, for example, the management fee for IBIT ETF is only 0.25%, and the majority of ETF institution fees fluctuate around 0.15% to 0.25%.
In other words, the more rational users are, the more likely they are to move from exchanges to ETF products, especially for investors aiming for long-term holdings.
According to multiple sources, several institutions, including VanEck and Grayscale, have submitted applications to the SEC for a Solana (SOL) ETF, with some institutions also planning to submit an XRP ETF proposal. Once approved, this may trigger a new round of fund migration. According to a report submitted by Coinbase to the SEC, as of April, the platform's trading revenue from XRP and Solana accounted for 18% and 10%, nearly one-third of the platform's fee revenue.
However, the Bitcoin and Ethereum ETFs passed in 2024 also reduced the fees for these two tokens on Coinbase from 30% and 15% to 26% and 10%, respectively. If the SOL and XRP ETFs are approved, it will further undermine the core fee revenue of exchanges like Coinbase.
The expansion of ETF products is gradually weakening the financial intermediary status of cryptocurrency exchanges. From their original roles as matchmakers and clearers to now gradually becoming mere "on-ramps and off-ramps" for funds, exchanges are seeing their marginal value squeezed by ETFs.
On May 12, 2025, SEC Chairman Paul S. Atkins gave a keynote speech at the Tokenization and Cryptocurrency Working Group roundtable. The theme of his speech revolved around "It is a new day at the SEC," where he indicated that the SEC would not approach enforcement and regulation the same way as before but would instead pave the way for cryptocurrency assets in the U.S. market.
With signs of cryptocurrency compliance such as the SEC's "NEW DAY" declaration, an increasing number of traditional brokerages are attempting to enter the cryptocurrency industry. One of the most representative cases is the well-known U.S. brokerage Robinhood, which began expanding its crypto business in 2018. By the time of its IPO in 2021, Robinhood's crypto business revenue accounted for over 50% of the company, with a significant boost from the Dogecoin "moonshot" promoted by Musk.
In Q1 2025 earnings report, Robinhood showcased strong growth, especially in revenue from cryptocurrency and options trading. Fueled by Trump's Memecoin, cryptocurrency-related revenue reached $250 million, nearly doubling year-over-year. Consequently, Robinhood Gold subscription users reached 3.5 million, a 90% increase from the previous year, with the rapid growth of Robinhood Gold providing the company with a stable source of income.
Meanwhile, RobinHood is actively pursuing acquisitions in the cryptocurrency space. In 2024, it announced a $2 billion acquisition of the long-standing European cryptocurrency exchange Bitstamp. Additionally, Canada's largest cryptocurrency CEX, WonderFi, which recently went public on the Toronto Stock Exchange, also announced its integration with RobinHood Crypto. After obtaining virtual asset licenses in the UK, Canada, Singapore, and other markets, RobinHood has taken a proactive approach in the compliant cryptocurrency trading market.
Furthermore, an increasing number of brokerage firms are exploring the same path. Futu Securities, Tiger Brokers, and others are also dipping their toes into cryptocurrency trading, with some having applied for or obtained the VA license from the Hong Kong SFC. Although their user bases are currently small, traditional brokerages have a natural advantage in user trust, regulatory licenses, and low fee structures. This could pose a threat to native cryptocurrency platforms in the future.
In April 2025, security researchers discovered that some Coinbase user data was leaked on the dark web. While the platform initially responded by attributing it to a "technical misinformation," it still raised concerns among users regarding its security and privacy protection. Just two days before Dow Jones Indexes announced Coinbase's addition to the S&P 500 Index, on May 11, 2025, Coinbase received an email from an unknown threat actor claiming to have obtained customer account information and internal documents, demanding a $20 million ransom to keep the data private. Subsequent investigations confirmed the data breach.
Cybercriminals obtained the data by bribing overseas customer service agents and support staff, mainly in "non-U.S. regions such as India." These agents abused their access to Coinbase's internal customer support system and stole customer data. As early as February this year, blockchain detective ZachXBT revealed on X platform that between December 2024 and January 2025, Coinbase users lost over $65 million to social engineering scams, with the actual amount potentially higher.
Among the victims was a well-known figure, 67-year-old Ed Suman, an established artist in the art world for nearly two decades, having been involved in the creation of artworks such as Jeff Koons' "Balloon Dog" sculpture. Earlier this year, he fell victim to an impersonation scam involving fake Coinbase customer support, resulting in a loss of over $2 million in cryptocurrency. ZachXBT critiqued Coinbase for its inadequate handling of such scams, noting that other major exchanges have not faced similar issues and recommending Coinbase to enhance its security measures.
Amidst a series of ongoing social engineering incidents, although there has not been any impact on user assets at the technical level so far, it has raised concerns among many retail and institutional investors. Especially institutions holding massive assets on Coinbase. Just considering the U.S. BTC ETF institutions, as of mid-May 2025, they collectively hold nearly 840,000 BTC, and 75% of these are custodied by Coinbase. If we price BTC at $100,000, this amount reaches a staggering $63 billion, which is equivalent to the nominal GDP of two Iceland in the year 2024.
In addition, Coinbase Custody also serves over 300 institutional clients, including hedge funds, family offices, pension funds, and endowments. As of the Q1 2025 financial report, Coinbase's total assets under management (including institutional and retail clients) reached $404 billion. The specific amount of institutional custodied assets was not explicitly disclosed in the latest report, but it should still be over 50% based on the Q4 2024 report.
Once this security barrier is breached, not only could the rate of user attrition far exceed expectations, but more importantly, institutional trust in it would undermine the foundation of its business. Therefore, after a hacking event, Coinbase's stock price plummeted significantly.
Facing a decline in spot trading fee revenue, Coinbase is also accelerating its transformation, attempting to find growth opportunities in derivatives and emerging assets. Coinbase acquired a stake in the options platform Deribit at the end of 2024 and announced the official launch of perpetual contract products in 2025. This acquisition fills in Coinbase's gap in options trading and its relatively small global market share.
Deribit has a strong presence in non-U.S. markets, especially in Asia and Europe. The acquisition has enabled Coinbase to gain a dominant position in bitcoin and ethereum options trading on Deribit, accounting for approximately 80% of the global options trading volume, with daily trading volume remaining above $2 billion.
Meanwhile, 80-90% of Deribit's customer base consists of institutional investors, with their professionalism and liquidity in the Bitcoin and Ethereum options market highly favored by institutions. Coinbase's compliance advantage, coupled with its already robust institutional ecosystem, makes it even more suitable. By using institutions as an entry point, it can face the squeeze from giants like Binance and OKX in the derivatives market.
Facing a similar dilemma is Kraken, which is attempting to replicate Binance Futures' model in non-U.S. markets. Since the derivatives market relies more on professional users, fee rates are relatively higher and stickiness is stronger, making it a significant source of revenue for exchanges. In the first half of 2025, Kraken completed the acquisition of TradeStation Crypto and a futures exchange, aiming to build a complete derivatives trading ecosystem to hedge the risk of declining spot transaction fee income.
With the surge of Memecoin in 2024, Binance, OKX, and various CEX platforms began massively listing small-market-cap, highly volatile tokens to activate active trading users. Due to the wealth effect and trading activity of Memecoins, Coinbase was also forced to join the battle, successively listing popular tokens from the Solana ecosystem such as BOOK OF MEME and Dogwifhat. Although these coins are controversial, they are frequently traded, with fee rates several times higher than mainstream coins, serving as a "blood-boosting" method for spot trading.
However, due to its status as a publicly traded company, this practice is a riskier endeavor for Coinbase. Even in the current crypto-friendly environment, the SEC is still investigating whether tokens like SOL, ADA, and SAND constitute securities.
In addition to the forced transformation strategies carried out by the aforementioned CEXs, they are also starting to lay out RWAs and the most talked-about stablecoin payment fields, such as the PYUSD launched through a collaboration between Coinbase and Paypal, Coinbase's support for the Euro stablecoin EURC by Circle that complies with EU MiCA regulatory requirements, or the USD1 launched through a collaboration between Binance and WIFL. In the increasingly crowded trading field, many CEXs have shifted their focus from just the trading market to the application field.
The golden age of transaction fees has quietly ended, and the second half of the crypto exchange platform game has silently begun.
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After Surging 40%, Has Ethereum Price Peaked Upon Exiting the Craze?
Whether you are an insider or an outsider, these days you must be familiar with the news about Ethereum. The reason is simple, causing Ethereum enthusiasts to sigh with emotion and almost throwing off-guard those who defend Ethereum, Ethereum, with a "3-day surge of 40%," climbed to the top of the Douyin Hot List.
As we all know, Ethereum launched the Pectra upgrade on May 7th. This most significant network upgrade since early 2024 integrates the Prague execution layer hard fork and the Electra consensus layer upgrade, significantly improving Ethereum's performance through 11 improvement proposals. The account abstraction feature (EIP-7702) allows users to flexibly manage wallets through social media accounts or multi-signature schemes, reducing the user threshold, attracting more users and developers. The staking mechanism optimization increases the validator ETH cap from 32ETH to 2048ETH and introduces a flexible withdrawal method, making it easier for institutions and individuals to participate in network security, enhancing the market's confidence in Ethereum's long-term value.
At the same time, Pectra optimized the interaction efficiency of Layer 2 networks such as Arbitrum and Optimism, making transactions faster and cheaper, leading to a surge in on-chain activity. As a crucial step for Ethereum's transition from "2G" to "5G," the Pectra upgrade not only enhances network vitality but also "recharges confidence" in the market, directly driving the price increase.
Related Reading: "Ethereum Skyrockets 22% in One Day, E Enthusiasts Rejoice"
It's not just Ethereum itself, as Wall Street also brought important bullish news.
The world's largest asset management company, BlackRock, proposed to the SEC allowing Ethereum ETFs for staking. This proposal is expected to elevate Ethereum ETFs from a mere investment tool to a bond-like "interest-bearing asset," bringing investors both capital appreciation and passive income, igniting market optimism about Ethereum's future potential.
Specifically, BlackRock has proposed to amend its S-1 filing to allow investors to create and redeem ETF shares directly with Ethereum instead of the U.S. dollar (i.e., in-kind redemption). This move, combined with its $2.9 billion BUIDL Fund launched in March 2024, aims to deepen the integration of traditional finance with blockchain. The BUIDL Fund is a tokenized fund operating on the Ethereum network, investing in traditional assets such as U.S. Treasury bonds. This setup is highly attractive to institutional investors, as they can not only benefit from Ethereum's price appreciation but also earn stable cash flow through staking.
Robert Mitchnick, BlackRock's Head of Digital Assets, stated in a CNBC interview in March 2025 that the addition of staking functionality will significantly enhance the appeal of the Ethereum ETF. He admitted that when the Ethereum spot ETF was launched in July 2024 without staking functionality, the market demand was lackluster, and staking could be the key to reversing this trend.
Meanwhile, the SEC's shifting stance on cryptocurrency regulation has also fueled this upward trend. During the tenure of the previous SEC chairman, the regulatory approach was tough, and staking was strictly viewed through the Howey test as a potential unregistered security. Therefore, when approving the Ethereum spot ETF in May 2024, staking functionality was explicitly prohibited.
However, with Trump back in the White House and Paul Atkins taking over the SEC, there has been a noticeable relaxation in crypto regulation. Apart from BlackRock, ETF issuers such as Invesco Galaxy, VanEck, WisdomTree, and 21Shares have also submitted applications for similar staking and in-kind redemption.
Related reading: "New Chairman Takes Office, SEC Transforms into 'Crypto Daddy' Within 48 Hours"
If staking ETFs are approved, the benefits are likely to go beyond price appreciation. The introduction of staking functionality could redefine the role of crypto assets, making them more similar to traditional financial products that provide returns and value appreciation, thereby driving Ethereum closer to mainstream finance.
Currently, the SEC still needs to address several decisions related to crypto ETFs, including whether to approve ETFs for Solana, XRP, Litecoin, and even Dogecoin. With the calls for an "altcoin season" growing louder, Ethereum's strong performance may just be the beginning of a larger crypto market frenzy.
In addition, the Trump family-related DeFi project WLFI is also bullish on this wave of rise, with frequent on-chain activities. According to on-chain data analyst @ai_9684xtpa's monitoring, a WLFI-related address is currently borrowing coins to go long on ETH, borrowing 4 million U from Aave to buy 1590 ETH at an average price of $2515 per ETH.
For this epic surge of Ethereum after half a year of silence, the community has indeed gained more confidence and hope, which has also led to a revival of the entire altcoin market. However, amidst the joy, there are also voices of pessimism. Below is a summary conducted by BlockBeats based on community discussions.
The optimists point out that the current market structure is similar to the eve of the bull markets in 2016 and 2020, predicting a life-changing surge in the next 3-6 months, where some altcoins may even achieve astonishing single-day gains of up to 40%.
@liuwei16602825 stated that this surge signifies the return of the bull market as a sure thing. There is no need to worry about a pullback. The driving force behind the surge uses a high-cost isolated operation, fearing a drop more than any retail investor and will definitely do everything to support the price.
Related Reading: "Ethereum Leads the Surge Triggering the 'Altcoin Season' Speculation, How Do Traders View the Future Market?"
The bears mainly believe that this surge is different from the bull market of 2021, as the current market lacks the confidence of large-scale retail investors entering and holding positions for the long term, with funds rotating too quickly.
@market_beggar observed that a Bitfinex E/B whale has started to close positions and believes that if this whale maintains its high-speed position-closing operation for the next few days, it can be inferred that the whale no longer sees the upside potential of ETH, preparing to take profits and exit. The closing time will be a key focus going forward.
@FLS_OTC stated that there are still many uncertainties at the macro level, and the liquidity cannot support a major bull market. At this stage, it is a "last hurrah," not a complete reversal, and will continue to remain in a short position.
@off_thetarget believes that after ETH transitioned from POW to POS, it lost the "gold standard" of mining machine power cost support. The staking economic model led to a breakdown in value anchoring. Additionally, the L2 ecosystem (such as Starknet, zkSync, etc.) suffered from liquidity fragmentation, failing to establish an effective capital inflow mechanism, causing the collapse of the split disc pattern. Furthermore, the ETH community's excessive pursuit of technical narratives divorced from real-world needs resulted in a weak ecosystem growth. Therefore, he believes that ETH's intrinsic value system has crumbled, and the price is bound to plummet to the 800-1200 range, with a decisive short position at 1800.
@Airdrop_Guard, based on the core logic of the "High Probability Trading Strategy," where three sets of underlying logic different trading systems (such as volume depletion, price supply-demand, long/short position funding rate, etc.) simultaneously issue a short signal at the same point (2580), creating a high-probability trading opportunity. He emphasizes that these systems must be based on different algorithms and logics (rather than mere technical indicator overlays). The current ETH trend aligns with the short conditions in multiple independent dimensions of his trading system, hence the decision to short.
Overall, Bitcoin still maintains over 54% market dominance, and institutional funds' continued preference for it may limit the altcoin's upward potential. The market's future direction will depend on multiple factors, such as Bitcoin's price trend, global macroeconomic conditions, and whether funds can effectively rotate from Bitcoin to the altcoin sector.
Although Ethereum's recent leadership in the market has brought about optimistic sentiment, investors still need to remain rational as different sectors of altcoins are likely to show divergence in trends. Whether this round of Ethereum's rise will usher in a true altcoin frenzy may require more time and conducive conditions.
How to Get Rich in Crypto Without Relying on Luck? Financial Veteran Raoul Pal's Macro Insights and Investment Path
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