The following analysis is provided by Shane Neagle, Editor In Chief at The Tokenist.
While the Terra (LUNA) implosion in May 2022 created ripples, the FTX exchange’s downfall delivered a more significant blow, effectively marking the end of the crypto bull run. Since then, enthusiasm has shifted towards artificial intelligence, overshadowing blockchain. Furthermore, the digital asset sphere faced considerable scrutiny and financial restrictions under the current administration.
This period demanded resilience, advancement, and recovery from the overextended market crashes witnessed in 2022. Encouragingly, a more supportive environment for crypto is emerging, presenting a viable path towards a blockchain-driven decentralized finance (DeFi) future. The increasing capital flowing into decentralized applications (dApps) suggests this is already underway.
With the total value locked (TVL) in DeFi now at $156 billion, the sector is nearing levels last seen in the first half of 2022. Similarly, Ethereum (ETH) has outperformed Bitcoin (BTC) significantly in recent weeks, boasting a +53% gain compared to Bitcoin’s -1%. This strongly suggests the beginning of an altcoin rally. The question is, which leading Layer-1 blockchains should investors focus on for long-term growth?
Ethereum (ETH)
As the premier DeFi platform and second-largest blockchain, Ethereum naturally stands out. Its prominence should not be a reason to dismiss it, though certain factors merit attention. Ethereum offers key advantages for DeFi investment.
Ethereum benefits from being first to market. This resulted in a robust developer community, significant ecosystem growth, and enhanced scalability via Layer-2 solutions such as Base, Polygon, Unichain, Optimism, and Arbitrum.
With the introduction of the EIP 1559 token-burning mechanism, Ethereum’s inflation rate is now similar to Bitcoin’s (after the 4th halving) at approximately 0.75%. Even though Bitcoin’s inflation will further decrease with future halvings, ETH could be considered a robust monetary alternative to the US dollar, which aims for a 2% inflation target.
Put differently, even with a flexible token supply generated through staking compared to Bitcoin’s set supply, it compensates via a self-regulating mechanism. As dApp activity increases on the mainnet, more ETH is burned. After the Pectra upgrade which improved L2 network efficiency with Blob Space, burn rates doubled.
Combined with account abstraction and continued scaling initiatives like sharding, Ethereum is preparing to handle future DeFi volume while keeping transaction costs low. This aligns with the broader stablecoin movement facilitated by legislative efforts like the GENIUS Act.
Ethereum hosts the most diverse stablecoin ecosystem, holding $138.6 billion in stablecoins. This represents half of the total $272.6 billion stablecoin market capitalization, according to data from DeFiLlama. As the primary means of connecting traditional currency with digital assets, stablecoins allow for wider DeFi adoption.
Furthermore, Circle’s announcement of its ARC blockchain for stablecoin transfers, which is an EVM-compatible L1 network, is important.
At first glance, this may appear negative for Ethereum, as stablecoin transactions could shift away. However, it’s ultimately a positive sign, highlighting Ethereum’s expanding role in institutional-grade liquidity across multiple chains and within its own Layer-2 network.
These trends are contributing to increased Ether accumulation across various treasuries. The Strategic ETH Reserve tracker shows holdings of 3.57 million ETH, valued at around $16.58 billion. Ether treasuries could impact ETH’s price similar to how spot Bitcoin ETFs impacted BTC’s price.
Does this mean investors should allocate all their assets to ETH? Existing ETH holders should consider securing some profits in the coming months. Historically, when Ethereum’s Market Value to Realized Value ratio (MVRV) exceeds 3.0, it signals a potential peak before a sell-off.
Following the likely interest rate cut from the Federal Reserve in September, Ethereum’s MVRV ratio will probably increase to that level. After the anticipated market correction, new investors should consider gaining exposure to ETH. FundStrat forecasts ETH to potentially reach $10,000 by year-end.
Avalanche (AVAX)
Since launching in 2020, Avalanche (AVAX) has distinguished itself with its innovative blockchain architecture. Avalanche achieves optimal workload distribution by dividing tasks: the X-Chain handles asset exchange, the C-Chain executes EVM-compatible smart contracts, and the P-Chain manages subnets, validators, and staking.
This unique design enables simple porting of Ethereum dApps as well as the creation of custom subnets. Organizations needing financial privacy can tailor governance and consensus rules within a unique subnet, opening new potential uses in banking, healthcare, supply chain management, and private funds.
For example, FIFA selected Avalanche in May for its NFT initiatives. More recently, the Avalanche Foundation introduced a $50 million accelerator program to promote blockchain gaming.
Concerning tokenomics, 90% of the 458.1 million total AVAX supply has been unlocked, deriving from an initial mint of 360 million AVAX. In Q2 2025, the annualized inflation rate was 3.8% following a dynamic model based on AVAX staked and staking duration.
Though this makes AVAX inflationary in relation to Ethereum or Bitcoin, AVAX has a fixed maximum supply of 720 million tokens.
The AVAX token price could increase as more services launch on the network, including Euler Finance for lending, Nexpace (MapleStory N), VanEck’s VBILL treasury fund, Watr for commodity trading, and Dinari for tokenized securities.
According to Messari data, this flurry of activity contributed to a 210% increase in average daily active addresses quarter-over-quarter. AVAX is currently trading at $25 per token, a gain of 18% in the past month. The potential for gains is substantial, as AVAX hit multiple $50 peaks throughout 2024, during a period of less supportive crypto regulation.
Cardano (ADA)
Following a research-driven approach to blockchain, Cardano has ties to Ethereum’s origins, since co-founder Charles Hoskinson started Cardano due to diverging perspectives on the organizational structure of Ethereum. Cardano has at times been viewed as falling behind other blockchains, with Solana (SOL) gaining prominence as an Ethereum rival.
However, Cardano’s development continues, and its ecosystem is gradually growing. In early 2024, Cardano introduced its own USDM stablecoin, issued by fully compliant Moneta and conforming to Europe’s stringent MiCA standards. The Norwegian Block Exchange (NBX) also listed USDM.
Cardano enhanced scaling through Hydra Layer-2 for off-chain transactions and launched Mithril to streamline node synchronization. Ouroboros Peras is expected to reduce transaction settlement times significantly by the end of the year. Coupled with Ouroboros Leios, Cardano could achieve transaction throughput comparable to Solana’s.
Zero-knowledge (ZK) smart contracts are also scheduled for launch on the mainnet in late 2025, adding privacy, scalability, and interoperability to Cardano. In addition to the privacy-centric Midnight project, Cardano benefits from positive developments.
From a monetary perspective, Cardano’s inflation rate is close to Ethereum’s. In Q1, it was 0.7% annually with a downward trend. This is due to the interplay between five-day 0.3% expansion epochs, a hard cap of 45 billion ADA tokens, transaction fees, and staking participation.
Year-to-date, ADA has increased by 2.5% and remains below one dollar per token. In September 2021, ADA hit its all-time high of $3.10. This makes it a potentially undervalued blockchain investment. As Cardano has been previously overlooked, its potential upside is increased if its roadmap succeeds. Dividend growth investing in the stock market reflects a comparable approach, prioritizing patience and compounding.