Ether spent most of 2024 lagging its cryptocurrency peers, but has now firmly joined the rally sparked by bitcoin’s record rise, crossing the $4,000 mark in December but well below its all-time high. of $4,900.
In 2024, ether gained around 53% compared to bitcoin’s 113% rise; However, ether’s recent performance is promising. Since the US election result, ether has risen 39%, outpacing bitcoin’s 35% rise and signaling a possible resurgence driven by market optimism over President-elect Donald Trump’s anticipated pro-crypto policies.
Other key factors driving this optimism include strong betting dynamics, steady transaction fees, and growing institutional interest, particularly through ETFs.
Ether Futures
While the year began with low volume, CME ether futures were the preferred product for risk management as spot ether ETFs began trading mid-year and volatility returned to the market towards the end of the year. anus. In 2024, almost 12 million contracts representing a total value of $256 billion were traded between ether and microether futures. Thirty-nine percent of nominal traded volume was realized in the fourth quarter of 2024, as crypto markets reacted to the US election results, indicating optimistic sentiment.
Large open interest holders (designated by the CFTC as entities holding 25 or more contracts) hit new weekly records throughout December, indicating growing client interest in regulated solutions to manage ether risk.
Ether-bitcoin relationship
The ETH-BTC ratio, which measures the performance of ether relative to bitcoin and shows the number of bitcoins needed to purchase one ether, reached its lowest level since its launch on November 20 of 0.032857, which may be its lowest point as we see a better regulatory outlook and increased institutional adoption.
What’s behind the ether bounce?
1. Ether ETFs outperform bitcoin ETFs
US ETH spot ETFs have received a cumulative total of $577 million in net inflows since their launch in July 2024, an overall success among the broad ETF universe. Between November 25 and 29, spot ether ETFs even surpassed daily inflows into bitcoin ETFs, with ether ETFs experiencing a net inflow of $467 million (including net inflows of $428 million in a single day), marking a change in investor sentiment.
The approval of the bitcoin and ether ETFs represents a major milestone in the widespread adoption of digital assets. Looking ahead, institutional investor interest could increase further if regulatory approval allows asset managers to incorporate Ethereum staking returns into ETFs.
2. Alternative season
After months of ether underperforming bitcoin, traders may now view the bottom of the ETH/BTC ratio as an opportunity with a possible gradual rotation from BTC to ETH and other altcoins.
Bitcoin typically leads the rally and then consolidates as ether and other altcoins catch up. This has been true this cycle where bitcoin dominance fell from 61.7% in October to 57.4% in November and 56.5% in December, suggesting that altcoins may have started to gain momentum for a possible altcoin season.
3. Betting Returns
Ether investors can generate additional returns on top of their holdings by staking or locking their coins on the network in exchange for rewards. At the time of writing, 28% of the ether supply is locked in staking contracts with an average annualized reward rate of 3%. Under a new administration, along with anticipated interest rate cuts from the Federal Reserve and continued blockchain upgrades, there could be an increase in ETH staking yields.
4. DeFi, smart contracts, DAPPS and NFTs
Ethereum’s value proposition extends beyond being a digital currency, as it remains the dominant blockchain for creating decentralized finance (DeFi) applications (DAPPS), smart contract platforms, NFT (non-fungible token) tokenized assets. ) and Web3 applications.
The total value locked (TVL) in Ethereum-based DeFi projects has grown in recent weeks, reaching $69.4 billion, according to DefiLlama. The increase suggests growing confidence in Ethereum as a platform for financial innovation.
5. Ether Updates
On March 24, Ethereum implemented the Dencun upgrade, which reduced transaction costs for Layer 2 and increased the transactions per second (TPS) they could publish to Layer 1. Layer 2 adoption has changed noticeably over the last year. Additionally, the Pectra upgrade, scheduled for Q1 2025, is one of the largest hard forks in history in terms of Ethereum Improvement Proposal (EIP) count. It aims to improve protocol efficiency, improve user experience and expand data capacity, as well as pave the way for future scalability improvements.
Conclusion
All eyes are on what the Trump administration will bring and the implications for the entire crypto market. Growing institutional interest in ether ETFs could mean a diversification of institutional portfolios, which were once heavily focused on bitcoin. The ability to stake rewards and ether’s central role in DeFi and NFT innovations in 2025 may drive even more demand for ether.
