Much of the ICO boom in 2017 was driven by massive surges in ETH prices — with scammers, aspiring technologists choosing the Ethereum protocol to issue their tokens, and reap some profits off the frenzy.
At the time, currently available stablecoins were either not popular or didn’t exist, meaning token holders had to sell their holdings to either ETH or BTC, and then convert to USD to fully cash out.
The above, among other reasons, form part of why stablecoins have killed the narrative for Ethereum to be used as an onboarding currency of choice — in terms of both currency and technology aspects.
Stablecoins killing the ETH narrative
Messari analyst Ryan Watkins said Wednesday that no “direct reason” exists why ETH must rise as DeFi tokens surged. The latter, in all regards, is already showing signs of ICO-like returns, with some rather unknown tokens surging up to 10,000 percent in the past week.
Watkins quoted Qiao Wang, an ex-Messari product lead-turned-investor, who said back in 2019 that stablecoins had “killed the chance” for some platforms to be significant to profit-seekers:
First the short story.
Last year, @QWQiao was one of the first people to argue why this is the case when he argued that stablecoins (crypto dollars), allow investors to bypass native cryptoassets like ETH for their speculative fervor. https://t.co/56vhp1O28N
Watkins notes some DeFi tokens, like Compound or Balancer, can be purchased straight from Coinbase or Uniswap for USD, eliminating the Ethereum bridge that was required in 2017. The below graphic explains:
Exchange data reflects this falling demand. Metrics show trading volumes for Ethereum-based products, such as spot, futures, and derivatives, have decreased significantly since 2017. Instead, stablecoins like Tether have gained prominence, despite all the criticism and controversy surrounding USDT:
ETH’s rising utility
Not all is lost for ETH. For one, Watkins noted the sheer progress of DeFi applications, presumably from both a tech and institutional standpoint, were proof of Ethereum’s “product-market fit.” He added:
“In the past two years, Ethereum has developed from a piggy bank for ICO projects to a burgeoning digital economy.”
Watkins notes utility is a core driver for any currency; such as how the U.S. dollar is more valuable than the Venezuelan Bolivar for reasons like an overall utility, worldwide acceptability, and underlying value.