Throughout 2024, Ether (ETH) had been lagging behind its cryptocurrency counterparts. However, as the year concludes, it has decisively joined the rally initiated by Bitcoin’s historic ascent, crossing the $4,000 threshold in December, yet still remaining beneath its all-time high of $4,900.
In the course of 2024, Ether recorded an approximate 53% increase, in stark contrast to Bitcoin’s impressive 113% surge. Nevertheless, recent performance indicators are encouraging. Following the U.S. election results, Ether experienced an uptick of 39%, which surpasses Bitcoin’s 35% gain, hinting at a potential revival fueled by market optimism surrounding President-elect Donald Trump’s expected pro-crypto policies.
Several factors are driving this burgeoning optimism, including strong staking dynamics, consistent transaction fees, and a rising interest from institutional investors, particularly through ETFs.
Ether Futures
Despite a subdued start in terms of trading volume, CME Ether futures emerged as a preferred instrument for risk management as spot Ether ETFs came to the market mid-year. With the return of market volatility as 2024 drew to a close, nearly 12 million contracts—valued at around $256 billion—were traded in both Ether and micro Ether futures. Remarkably, 39% of the notional volume was traded in Q4 2024, reflecting a positive market sentiment in response to the election results.
Moreover, large open interest holders, as defined by the CFTC, have reached unprecedented weekly levels throughout December, signifying an enhanced interest from clients in regulated Ether risk management solutions.
Ether-Bitcoin Ratio
The ETH-BTC ratio—indicative of Ether’s performance against Bitcoin—hit its lowest level since inception as of November 20, resting at 0.032857. This may signal a bottoming out phase, particularly as regulatory outlook improves and institutional adoption sees an uplift.
What’s Behind Ether’s Rebound
1. Ether ETFs Outperform Bitcoin ETFs
Since their July 2024 inception, U.S. spot Ether ETFs have attracted a remarkable $577 million in net inflows—an overall success within the vast ETF landscape. During the late November period, spot Ether ETFs even eclipsed Bitcoin ETFs in daily inflows, boasting a net accumulation of $467 million in just a few days, which included an impressive single-day inflow of $428 million. This shift in investor sentiment marks a significant turning point.
The approval of both Bitcoin and Ether ETFs signifies a breakthrough toward mainstream acceptance of digital assets. Looking to the future, institutional interest could intensify if regulatory policies evolve to permit asset managers to leverage Ethereum staking yields within ETFs.
2. Alt Season
After prolonged outperformance of Bitcoin over Ether, traders now view the lower ETH/BTC ratio as an entry point, potentially leading to a gradual shift from BTC to ETH and other altcoins.
Historically, Bitcoin leads the rally before consolidating as Ether and alternative coins catch up. This trend has been visible in the current cycle, with Bitcoin’s market dominance falling from 61.7% in October to 56.5% in December. This may suggest an impending alt season on the horizon.
3. Staking Yields
Investors in Ether stand to gain additional returns through staking, which involves locking their coins in the network in exchange for rewards. Currently, 28% of Ether’s supply is tied up in staking contracts, with an average annualized reward rate of 3%. Under a prospective new administration and with anticipated Federal Reserve interest rate reductions along with continuous blockchain upgrades, an uptick in ETH’s staking yield could occur.
4. DeFi, Smart Contracts, DApps, and NFTs
Beyond its role as a digital currency, Ethereum remains the leading blockchain for decentralized finance (DeFi) applications, smart contracts, DApps (decentralized applications), NFT (non-fungible token) assets, and Web3 solutions.
Recent weeks have seen the total value locked (TVL) in Ethereum-based DeFi projects reach an impressive $69.4 billion, according to DefiLlama. This increase reflects a burgeoning confidence in Ethereum as a platform for innovative financial solutions.
5. Ether Upgrades
On March 24, Ethereum’s Dencun upgrade was successfully implemented, resulting in decreased transaction costs for Layer 2 solutions and an increase in transactions per second (TPS) that could relay to the Layer 1. The adoption of Layer 2 solutions has seen significant growth over the past year. Furthermore, the forthcoming Pectra upgrade—anticipated in Q1 2025—will represent one of the most extensive hard forks in terms of Ethereum Improvement Proposal (EIP) count, aimed at enhancing protocol efficiency, user experience, and expanding data capacity while paving the way for future scalability improvements.
Conclusion
As we look ahead, much attention is focused on the incoming Trump administration and its potential impact on the cryptocurrency landscape. The increasing institutional interest in Ether ETFs could signify a diversification in portfolios that predominantly centered around Bitcoin. Coupled with the allure of staking rewards and Ether’s pivotal role in DeFi and NFT developments in 2025, a sustained demand for Ether appears promising.
