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Where Cryptocurrency Angel Investors Should Invest Capital After Ethereum ETF Approval
The following is a guest post by Tim Haldorsson, CEO of Lunar Strategy.
In nine short years, Ethereum has gone from pioneering on-chain smart contracts and programmable cryptocurrencies to becoming the backbone of decentralized finance and blockchain infrastructure. The SEC’s recent approval of ETH ETFs is just a single step in this journey, albeit a significant milestone that has solidified Ethereum’s status as a mature asset class worthy of serious investment consideration.
This editorial will highlight the most promising sectors within the Ethereum ecosystem that I believe angel investors should watch closely to take advantage of this economic momentum.
Layer 2 Decentralized Finance (DeFi)
Ethereum pioneered the emergence of decentralized on-chain markets, planting the seeds that have blossomed into a global DeFi sector with a market capitalization of $104.55 billion. DeFi is a complex rabbit hole filled with unique financial mechanisms that are unparalleled in traditional finance. However, they rely on the security, speed, and decentralization offered by Ethereum smart contracts. Level 2 networks as Base, Refereeand zkSync emerged to address Ethereum’s scalability issues, reducing usage costs and increasing transaction speed without sacrificing privacy or security. These improvements make Ethereum technology more accessible and perfect for DeFi activities.
In the DeFi space, projects such as lending and borrowing platforms, futures and perpetual trading platforms, token seeding and launching platforms, and centralized and decentralized exchanges have proven to be immensely successful. Even in the days when ETH attracted the attention of only a small niche of market participants, these technologies have been transformed into myriad business models that have demonstrated real demand for large-scale DeFi solutions. Some major DeFi protocols have even grown to multi-billion dollar valuations, underscoring the strength of this industry.
As Ethereum becomes a recognized commodity, the potential for further growth in DeFi becomes even more certain, making it a profitable area for angel investors to deploy capital into.
Artificial intelligence
Artificial intelligence it is one of the most important technologies of our time, comparable to the impact of blockchain technology. The world needs AI technologies that are reliable and free from centralized control.
Blockchain enables secure, private, decentralized structures for AI services, crucial for preventing monopolies on scarce computing resources and providing broader access to decentralized machine learning networks. By leveraging the Ethereum blockchain for AI projects, developers are already creating AI services that remain secure and decentralized.
This intersection of AI and blockchain represents an interesting playing field for investments, as demand for decentralized and secure AI solutions continues to grow. Ethereum-based AI projects have already reached multibillion-dollar market capitalizations, showing keen observers that it is a tinderbox of explosive growth. The recent approval of ETH ETFs could be the spark that triggers the next phase of expansion this sector is ready for.
Decentralized Physical Infrastructure (DePIN)
DePIN is one of the exciting blockchain-dependent industries that have emerged thanks to the miracle of smart contracts. Simply put, it combines physical infrastructure with digital networks of decentralized participants and facilitates the global exchange of limited but in-demand resources such as sensors, data storage, or wireless connectivity in exchange for cryptographic tokens.
DePINs offer decentralized governance, peer-to-peer infrastructure sharing, tokenization, and increased security and privacy for traditional and digital industries.
As demand for DePIN grows, the market for these assets will also increase, leading to token appreciation and market expansion. Ethereum powers the smart contracts that manage these DePINs, making it a crucial component of this ecosystem. With the recent approval of ETH ETFs, more angel investors are likely to turn their attention to DePINs, recognizing their potential for high returns and significant real-world impact.
ETH remake
Bet it is a key aspect of securing decentralized networks like Ethereum through economic game theory. Validators, who operate the nodes that power the blockchain, are required to stake ETH. If they follow the rules, they earn rewards; if they try to cheat, they lose their ETH stake. Over $100 billion worth of ETH is currently staked– this is how important this mechanism is for the functioning of blockchain networks.
Retaking takes this concept further by applying the same game theory to secure any protocol on the blockchain. This allows smaller participants to maintain high levels of security through proof-of-stake mechanisms that would otherwise be unattainable. Retaking helps create a more resilient network for multiple protocols, making it cost-prohibitive to attack every single participant within the larger Proof-of-Stake pool.
Liquid restake services further simplify the process for those looking to stake tokens without dealing with complex validators. These services issue Liquid Retaking tokens, which accrue yield and interest from validator rewards and can be exchanged or restaking to generate additional rewards. The growth of this sector highlights its importance as a security pillar for blockchains, making it an attractive area for angel investors.
Conclusion
The approval of ETH ETFs confirmed Ethereum as a major investment vehicle. The Ethereum ecosystem offers many exciting opportunities for angel investors, from DeFi and Layer 2 AI integration, to DePINs and retaking.
It is important to study these sectors and understand both their key narratives and growth catalysts. This way, investors can deploy smart capital while contributing to the growth of Ethereum.