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Ethereum (ETH) is finally making a significant comeback, experiencing an impressive surge of nearly 37% in the past week. This rise follows the record-breaking rally of Bitcoin (BTC), which has reached an all-time high. As Ethereum gains momentum, let’s explore the factors contributing to its renewed strength and the implications for the broader cryptocurrency market.
Spot Ethereum ETFs Witness Record Daily Inflows
Ethereum, the second-largest cryptocurrency boasting a market capitalization of around $404 billion, is steadily closing in on Bitcoin. The ETH token has seen a remarkable leap of more than 35% over the past week alone. While the broader digital assets market has been invigorated by Donald Trump’s victory in the 2024 US presidential election, other elements are also contributing to Ethereum’s recent surge.
Significant Inflows into Spot Ethereum ETFs
A notable factor in Ethereum’s recent ascent is the substantial inflow of funds into spot ETH ETFs. On November 11, US-based spot ETH ETFs attracted a record-breaking $295 million in daily inflows, marking the highest amount ever recorded. This surge eclipses the previous peak of $106 million, achieved on the launch day of these ETFs in July 2024.
Data from SoSoValue highlights that the record inflows were primarily driven by Fidelity’s FETH ETF, which garnered $115.48 million. BlackRock’s ETHA followed suit with $101.11 million, Grayscale’s ETH attracted $63.32 million, and Bitwise’s ETHW accounted for $15.57 million. Currently, the total value of net assets held across various spot ETH ETFs stands at $9.72 billion, representing just over 2.41% of Ethereum’s total market cap. Meanwhile, cumulative net outflows from all spot ETH ETFs amount to $41.30 million.
ETH Price Action and DeFi Resurgence
The renewed interest from institutional investors in Ethereum ETFs, amid record daily inflows, is having a positive impact on ETH’s price trajectory. In 2024, ETH had lagged behind other major cryptocurrencies like Bitcoin and Solana (SOL) in terms of price performance. However, the fourth quarter of 2024 holds immense potential for a significant turnaround in ETH’s momentum.
Supply Dynamics and Potential Price Surge
Insights from Leon Waidmann, Head of Research at Onchain Foundation, reveal that ETH staking levels have reached an all-time high. Simultaneously, the token’s reserves on crypto exchanges are approaching record lows. This combination of high staking levels and decreasing supply on exchanges suggests a possible supply squeeze that could lead to a parabolic rally for ETH.
The ETH/BTC ratio, which had suffered prolonged losses, is showing signs of recovery. The trading pair rose from 0.034 to 0.040 before slightly dipping to 0.037 at the time of writing. The next major resistance for this pair lies around 0.040, and a successful breakout from this level could result in further gains for ETH over BTC. Currently, ETH is approximately 32% below its all-time high value of $4,878, recorded in November 2021.
Decentralized Finance (DeFi) Activity on the Rise
Ethereum’s decentralized finance (DeFi) sector is witnessing a resurgence. Data from DefiLlama indicates that the total value locked (TVL) across Ethereum-based DeFi protocols is now at $62.36 billion, a substantial increase from approximately $24 billion in November 2023. Over half of this TVL is linked to the ETH staking platform Lido, which holds nearly $33 billion. Lido is followed by the DeFi lending protocol Aave with $15.21 billion and EigenLayer with $14.57 billion.
Despite the positive developments, concerns persist regarding ETH’s “ultrasound money” narrative due to its high issuance rate. At present, ETH trades at $3,291, reflecting a 3.1% increase over the past 24 hours.
