Ethereum tokens are soaring. What’s next for the ecosystem?

Many Ethereum-related tokens surpass ETH during the latest market rally.

Market rallies after Fed hike

Macro conditions may still look bleak, but that won’t stop the crypto market from rising today.

Ethereum-related tokens are the big winners of the latest market rally, defying another week of bad market news in which the Federal Reserve announced its fourth 75 basis point rate hike of the year.

Although the market was briefly shaken by Wednesday’s aggressive update from the US Federal Reserve, Loopring, Polygon, Lido DAO and other tokens posted double-digit gains today.

By far the strongest performer among crypto’s top assets is Loopring, whose LRC token has 49.5% won on the day. Loopring is a Layer 2 solution that uses ZK-Rollups, technology that Ethereum creator Vitalik Buterin and others have touted as key to helping crypto become the best smart contract network. Alongside other ZK-Rollup solutions such as StarkNet and zkSync, Loopring is believed to be one of the top contenders to help Ethereum achieve its ambition of mass crypto adoption.

Polygon, which launched as an Ethereum scaling solution but has since spawned a sprawling ecosystem of its own, has seen its MATIC token jumped 21.6% in the last 24 hours. Lido DAO, another Ethereum product that has grown in popularity over the past year thanks to its liquid staking offering, has also risen, with LDO increase 17% Today.

Curve’s CRV and Aave’s AAVE, two of the most popular Ethereum DeFi tokens on the market, have also gained double digits in the past 24 hours.

As is often the case with market upswings like this, Ethereum is lagging behind many assets with lower market caps. ETH has jumped 6.6% to around $1,650, which could increase the global cryptocurrency market cap by 4.8%.

The future prospects for the Ethereum ecosystem

As crypto approaches one year since the market peaked in November 2021, investors and traders alike have been looking for stories and tokens that could lead to the next bullish market cycle.

While it can be difficult to predict which direction the market will move, a popular strategy for determining future winners is to identify bear market outperformers. For example, Cosmos and its Cosmos-based network Osmosis have shown strength in recent months during adverse market conditions, giving so-called “Cosmonauts” hope for an upcoming rally when the market turns. Cosmos revamped its ATOM token in September and is focusing on cross-chain interoperability, leading many to believe it could see a surge as interest rates return to the market. Other, lesser-known projects such as GMX have also achieved high peaks in utility and token performance despite the ongoing crypto winter.

Ethereum has also been highlighted as a potential leader of the next market cycle. While Ethereum’s ETH is unlikely to outperform the strongest bull market outliers due to its $199 billion market capitalisation–it underperformed many assets, such as the leaders of the 2021 “alternative Tier 1” boom–iIt is perhaps the second most likely crypto asset to survive the coming months and any further market turmoil next to Bitcoin. Furthermore, Ethereum underwent a major technological upgrade in September in the form of ‘the Merge’. While the merger reduced ETH issuance by about 90%, but ETH is still trading nearly 70% lower than its highs, Ethereum’s most fervent believers have argued that the event is not yet “priced in” due to the bearish market environment.

Similar to the previous crypto bull cycle, if ETH rebounds, many other prominent tokens in the Ethereum ecosystem are likely to benefit and even surpass it. Rapid developments in the Layer 2 space have fueled the narrative that Layer 2 tokens could have high upside potential in the next bull market, which could bode well for assets like Optimism’s OP and Loopring’s LRC. zkSync will share further details about its upcoming token this month, StarkNet has confirmed its own token and Arbitrum is widely expected to launch one as well.

Other Ethereum-related tokens such as Polygon and Lido DAO could also benefit from an ETH spike in the future. Polygon has made many notable partnerships this year, including a recent collaboration with Starbucksand Meta this week announced support for Polygon NFTs on Instagram. Lido DAO has received a lot of attention since the Ethereum merger, but the project will need to overcome concerns that it centralizes Ethereum.

Ethereum fans have also been wondering when DeFi will take a break after 18 months of sluggish price action since the space underwent a significant correction in May 2021. While many DeFi tokens are trading significantly lower than their peaks, Ethereum is home to crypto’s strongest DeFi ecosystem. . Should the technology attract new users in the future, projects like Aave, Curve and Uniswap could see the benefits.

The global cryptocurrency market capitalization currently stands at $1.1 trillion. It is down about 63% from the peak of $3 trillion recorded in November 2021.

Disclosure: At the time of writing, the author of this piece owned ETH, MATIC, LRC, CRV, AAVE, ATOM, and several other cryptocurrencies.