Ether spent most of 2024 behind its cryptocurrency peers but has now firmly joined the rally sparked by bitcoin’s record-breaking surge, which crossed the $4,000 mark in December but is lower all its all-time high of $4,900.
By 2024, ether gained about 53% compared to bitcoin’s 113% surge; however, ether’s recent performance shows promise. Since the US election results, ether is up 39%, surpassing bitcoin’s 35% gain and indicating a potential resurgence fueled by market optimism on the expected pro-crypto policies of president-elect Donald Trump.
Other key factors driving this optimism include stable staking dynamicssteady transaction fees and growing institutional interest, particularly through ETFs.
Ether futures
While the year began on muted volume, CME ether futures were the primary product for risk management as the spot ether ETF began trading mid-year and volatility returned to the market at year-end. By 2024, nearly 12 million contracts representing a total value of $256 billion were traded between ether and micro ether futures. Thirty-nine percent of the notional volume traded was transacted in Q4 2024 as crypto markets reacted to the US election results, indicating an upbeat sentiment.
Large open interest holders (designated by the CFTC as entities holding 25 or more contracts) reached new weekly records throughout December, indicating growing client interest in regulated solutions to manage danger of ether.
Ether-bitcoin ratio
The ETH-BTC ratio, which measures the performance of ether relative to bitcoin and shows the number of bitcoins needed to buy one ether, reached its lowest level since its launch on Nov 20 of 0.032857, which could be at below this as we see improved regulatory insight and an increase in institutional adoption.
What’s behind ether’s rebound?
1. Ether ETFs outperform bitcoin ETFs
US spot ETH ETFs have received a cumulative $577 million in net inflows since their launch in July 2024, an overall success in the broad ETF universe. Between November 25 and November 29, spot ether ETFs even exceeded the daily inflows of bitcoin ETFs, with ether ETFs experiencing net inflows of $467 million (including net inflows of $428 million a day), marking a shift in investor sentiment.
The approval of both bitcoin and ether ETFs represents a major milestone in the mainstream adoption of digital assets. In the future, the interest of institutional investors may increase further if regulatory approval allows asset managers to integrate Ethereum staking yields into ETFs.
2. Alt Season
After months of ether underperforming bitcoin, traders may now see the lower level of the ETH/BTC ratio as an opportunity with a potential gradual rotation from BTC to ETH and others more alt coins.
Typically, bitcoin leads the rally, then consolidates as ether and other alt coins gain. This is true in this cycle where bitcoin’s dominance has dropped from 61.7% in October to 57.4% in November and to 56.5% in December, suggesting that altcoins may be starting to gain momentum for a potential alt season.
3. Staking yields
Ether investors can generate additional income on top of their holdings by staking or locking their coins to the network in exchange for rewards. At the time of writing, 28% of the ether supply is locked in staking contracts with an annual reward rate averaging 3%. Under the new administration, along with the Federal Reserve’s expected interest rate cuts and continued blockchain upgrades, there could be an increase in ETH’s staking yield.
4. DeFi, smart contracts, DAPPS and NFTs
Ethereum’s value proposition goes beyond being a digital currency, as it remains the dominant blockchain for building 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 over the past few weeks, reaching $69.4 billion, according to DefiLlama. The surge suggests increasing confidence in Ethereum as a platform for financial innovation.
5. Ether upgraded
On March 24, Ethereum implemented the Dencun upgrade, which reduced transaction costs for Layer 2 and increased the Transactions per Second (TPS) at which they could post to Layer 1. The adoption of Layer 2 was has changed dramatically in the past year. In addition, the Pectra upgrade, expected in Q1 2025, is one of the largest hard forks ever 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. The growing interest of institutions in ether ETFs may indicate the diversification of institutional portfolios, which were once focused on bitcoin. The possibility of staking rewards and ether’s central role in DeFi and NFT innovations in 2025 may drive even more demand for ether.
