Following the repeal of a KYC law, Solana, Base, and Arbitrum attracted $86 million from Ethereum, which saw its price dip below $1,600. Solana captured over 60% of these outflows, with a significant surge in its Total Value Locked, raising questions about Ethereum’s future dominance in the DeFi space.
In a week marked by significant activity in the cryptocurrency market, Solana, Base, and Arbitrum attracted $86 million in capital from Ethereum, following the recent repeal of a DeFi KYC law by former President Trump. This decision has prompted investors to withdraw assets, with Ethereum’s price falling below $1,600, amidst lagging performance compared to Bitcoin, which saw a price spike to $85,000.
The shift in investment appears strongly influenced by a Trump executive order that nullified KYC and AML compliance requirements for DeFi protocols. This reversal has been viewed positively within the crypto community, yet it has negatively impacted Ethereum, causing a notable exodus of funds towards competitor platforms like Solana, which secured over 60% of Ethereum’s outflows.
Data from Wormhole, Ethereum’s leading cross-chain bridge, indicates Solana garnered approximately $54 million of the total outflows, with Base, Arbitrum, and Avalanche receiving lesser amounts ($9.6 million, $5.8 million, and $3.9 million, respectively). The redirected capital has predominantly flown into high-frequency DeFi protocols on Solana, capitalising on its superior scalability and reduced fees.
As a result, Solana’s Total Value Locked (TVL) rose from $6.1 billion to $6.9 billion within a week, showing a 12% increase. Over $800 million in new investments have been channelled into Solana’s ecosystem, lifting the price of its native token SOL by 21% in the past week, a stark contrast to Ethereum’s mere 8% increase.
The dynamic suggests that Ethereum’s dominance in the DeFi sector may be in jeopardy as users increasingly seek faster and cheaper alternatives. Despite Ethereum still holding the largest TVL exceeding $80 billion, its competitive footing is challenged by others that prioritise user experience and performance.
The trend appears indicative of a broader industry shift, with institutional investors exploring platforms like Avalanche and Hedera for asset tokenisation and regulatory compliance. Solana and Cardano continue to gain traction particularly in retail and memecoin sectors due to their effective scalability.
