Bobby’s Crypto Aggregate (May 2025): Ethereum's Rebound

GM frens,

I take a break from (mostly) talking about Trump in this month’s aggregate, as the crypto market defied the “sell in May” adage this year to post a strong performance. Bitcoin stormed to a new ATH of $111,814 on May 22, and stayed above $100k for almost the entire month.

The real story of May though was the resurgence of ETH, after what has been a pretty lacklustre bull cycle where it has faced intense criticism from both outside and within its core community. There is a general perception that the chain has fallen behind its growing competitors due to its perceived slow pace of development, and its Layer 2 scaling approach has failed to accrue value for its token. 

Ethereum Mounts Rebound

When Ethereum put in place its Layer 2 scaling approach during the 2020 / 2021 bull cycle, it was with the promise of launching a fleet of Layer 2s which would effectively be able to endlessly scale throughput for the entire ecosystem. However as different Layer 2s came to market in subsequent years, some of the drawbacks of this approach also became evident. The hodgepodge patch of Layer 2s led to fragmentation of attention and liquidity, while the user experience of switching and bridging remained a mess. It also didn’t help that Layer 2s ultimately didn’t turn out to be that much synergistic with the Ethereum Layer 1, and some would say L2s are even parasitic to L1, drawing attention and transactions away from mainnet. This led to gas fees, and the price of ETH to be depressed. 

The emergence of Solana, which went down the monolithic scaling blockchain route, only served to bring all these setbacks into sharp focus. While most ETH-maxis would decry Solana as just a casino, it was clear that the chain has garnered an even higher mindshare during this bull cycle amongst users and even developers. 

Electric Capital’s Developers’ Report last year noted that Solana gained the highest number of new developers in 2024. The launch of US Spot ETFs barely moved the needle for the price of ETH, as BTC seems to have been the darling of institutional investors thus far. Facing criticism and competition from all corners, it was clear that changes were required to refocus on the Layer 1, and refresh the narrative for Ethereum. 

After falling to this cycle’s lowest nadir of $1,421.85 at the start of April, a string of changes instituted at the Ethereum Foundation (EF), coinciding with bullish external events, have seen the price almost double by the end of May. Here’s a quick summary to catch up:

• Changes at EF’s leadership at the start of the year, with previous Executive Director Aya Miyaguchi transitioning to be President, and Tomasz Stańczak and Hsiao-Wei Wang named as Co-Executive Directors. 

• Tomasz announced on April 22 a shift in focus for the EF towards L1 scaling, support for L2 scaling, and significant UX improvements, bringing ahead items that have been widely requested by community members, but were years out in the original roadmap.

• April 22 also coincided with the start of a largely uninterrupted long streak of inflows for US Spot ETH ETFs, as institutions seemingly began to pre-position before the upcoming Pectra upgrade. Since April 22 the ETH ETFs have experienced ~$1.5 billion in inflows. 

• The Pectra upgrade goes live successfully on May 8, touted as the largest upgrade to Ethereum since the Merge. The upgrade brought improved scalability and account abstraction capabilities to mainnet. 

• The positivity from the Pectra upgrade rolled into broader macroeconomic relief as the US and China announced a temporary trade deal on May 12 after meetings in Switzerland. Financial markets rallied hard on the news, propelling ETH upwards.

• Consensys announced a $425 million investment into Nasdaq-listed SharpLink Gaming, Inc, on May 27 to be used to build an ETH treasury for the company. Shares of SharpLink, which were trading at ~$3 before the announcement, reached a high of $124 (+313%) before falling back to ~$30 now. 

• US SEC issues staff statement on May 29 stating that protocol staking activities does not involve the “offer and sale of securities”, essentially staying outside of the ambit of Securities Laws, and potentially opening the door for ETH ETFs to offer a staking component.

• SEC Chairman Paul Atkins, during an SEC Roundtable on DeFi on June 10, provided positive remarks on DeFi, and promised an “innovation exemption” for DeFi operators.

While this price rebound has been cheered on by ETH supporters, it remains to be seen whether it is “too little too late”. Current price levels, even after this rally, are still miles away from last cycle’s ATH of $4,878. While it is still a powerhouse in DeFi and RWA, most innovations seem to be happening outside of Ethereum mainnet itself. 

As it pivots its roadmap, other competitors are not resting on their laurels, and competition will only become more fierce as time passes. In the run up to Ethereum’s 10th anniversary in July, the ecosystem still has a lot to do to win back user and developer attention and mindshare, and while OGs will remember its glory days, it needs to move faster to avoid being a relic of the past. 

Saylor’s Strategy Comes with Risks

While we talk about innovation, there’s been a fair bit of ingenious financial engineering going on on the TradFi side, with public listed companies popping up left, right, and center to accumulate crypto for their company treasuries, thanks to the valuation premium such a move seems to command. For example, Strategy’s ($MSTR) market cap is currently trading at ~70%+ higher than the size of its Bitcoin treasury, while Japan’s Metaplanet (3350.T) market cap is ~5.7x larger than its Bitcoin holdings. 

While most of these are financed by share sales, there has been a quiet build-up of debt issuances as well. As at end-May, Galaxy Digital estimates that there’s at least ~$12.7 billion in outstanding corporate debt used to finance bitcoin treasuries, with Strategy accounting for ~$8 billion, and there will likely be more to come down the pike. The answer to “why this is happening” is basic Corporate Finance 101 - debt is “cheap” compared to equity, as there’s only so much a management team or shareholder will want to dilute itself to accumulate more crypto.    

While this is all good when Bitcoin prices are high and these companies will be able to service debt repayments, the question inevitably comes to what happens when the price drops and the companies run into trouble to repay their debts. Industry watchers are beginning to monitor the mNAV ratio quite closely, a metric first coined by Michael Saylor that represents a company’s enterprise value  divided by the value of their Bitcoin holdings. There are growing conversations about what happens when a company who has borrowed heavily sees their mNAV falls significantly below 1. In fact, one of the earlier Bitcoin treasury companies, Semler Scientific now finds itself in this predicament. 

The answer is quite complicated - public listed companies can have a fair bit of leeway in refinancing their debt, though ultimately this avenue could get exhausted if investors lose confidence. Not to mention that such a situation would likely send share prices spiralling down, driving their mNAV even lower. The final outcome may be that they would likely need to start selling their crypto stockpiles to repay debt. Saylor did recently suggest issuing more preference shares to buyback the ordinary stock as a possible solution, which is not unlike how a crypto project would buyback and burn tokens in an attempt to drive prices up, but the question is “Who would want the preference shares of a spiralling company”?

While the stock market can survive a few public listed companies blowing up, a significant unwinding of leveraged positions could have serious consequences for the crypto market, as we have seen multiple times in the past. Such build-up and bust could also attract the attention of regulators, which could have negative consequences for the industry that is just beginning to see positive regulatory developments. While $12.7 billion is still a relatively small number (at the peak of last cycle before FTX’s collapse, Galaxy estimates crypto leverage to be slightly below $50 billion), and it’s unlikely that the full amount will need to be liquidated in a single point in time, it makes sense to note the lessons from the past. 

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