Written by: 1912212.eth, Foresight News
For investors holding Ethereum, 2024 has been a year of experiencing all sorts of difficulties, with no sweetness in sight. In terms of return multiples, it not only significantly lagged behind Bitcoin but also fared poorly compared to other public chain tracks. Solana has already set historical highs, achieving over 20 times returns from its bottom. SUI soared from $0.5 to nearly $5, yielding close to 10 times returns.
Ethereum has faced significant scrutiny this year, with a weak ecosystem. Compared to the previous cycle's DeFi and NFT boom, this round of innovation has performed mediocrely, and the overall reflection is evident in the coin price. Will 2025 be the year of Ethereum's turnaround?
Net inflow of Ethereum spot ETF
After being officially approved in mid-2024, the U.S. Ethereum spot ETF initially did not gain much traction, coinciding with a relatively sluggish market, resulting in significant negative inflows.
After experiencing a three-month period of stagnation, influenced by the recovery of the broader market, Ethereum finally began to see significant inflows at the beginning of November, with net inflows consistently far exceeding net outflows.
At the end of November, Ethereum's spot ETF even showed a rare continuous net inflow for 18 days, with a single-day net inflow exceeding $400 million at one point. Adjusted for market capitalization, this is equivalent to nearly $1.2 billion in daily inflows for Bitcoin, as Ethereum's market cap is about one-fourth that of Bitcoin. This capital flow may reflect a reallocation of investment direction or an expansion of scope, coinciding with the new fiscal year that U.S. mutual funds typically start on December 1, while also reflecting the market's optimistic expectations for 2025. If this demand continues, Ethereum's price in 2025 could rise significantly.
As of the time of writing, Ethereum spot ETFs have accumulated a total net inflow of $2.64 billion.
Ethereum has performed brightly in Q1 over the past few years.
In the past eight years of Ethereum's Q1 performance, six years have seen an increase. Especially in the first quarter of the new year after the U.S. elections, such as in 2017 and 2021, Ethereum achieved quarterly increases of 518.14% and 160.7%, respectively.
The crypto market often has self-fulfilling prophecies; if history repeats itself, Ethereum's performance in this year's Q1 may once again attract market attention.
Ethereum's price performance often resonates with the market. In Q1, when the market generally performs well, it tends to benefit from factors such as DeFi and liquidity, resulting in an increase.
Long-term holders of ETH are still increasing their holdings.
Observing the dynamics of long-term holders is one of the methods to gain insights into the market. Continuous significant reductions in long-term holders often indicate that the coin price is approaching its peak. Conversely, when prices drop significantly or the future trend looks promising, long-term holders tend to increase their holdings, buying low and selling high, in a cycle.
The data in the chart below shows that long-term holders of BTC are continuously reducing their holdings, which may indicate that some long-term investors believe the price has reached their profit-taking zone. In contrast, the data for Ethereum appears relatively optimistic, rising from a total proportion of less than 60% in the middle of the year to over 80% at its peak, with some recent pullback.
From the chart data, it can be seen that there are currently no significant returns from Bitcoin above $100,000, but long-term holders in the market believe that Ethereum still has good opportunities next year.
Staking and re-staking data remain stable and upward.
Ethereum's staking and re-staking data can also serve as indicators of market confidence.
The staking volume of Ethereum has increased from less than 35 million ETH at the beginning of 2024 to 55 million ETH by the end of the year. In terms of re-staking data, after explosive growth at the beginning of the year, it has entered a stable period, remaining above 4 million ETH.
Ethereum spot ETF is expected to support staking
Currently, the market only trades Ethereum spot ETFs and does not support staking yields. However, the future introduction of 'Ethereum ETF staking' may be possible. For investors in Ethereum spot ETFs, holding ETH through ETFs means missing out on staking yield; additionally, they need to pay management fees ranging from 0.15% to 2.5% to the ETF issuer.
SEC Commissioner Hester Peirce recently stated that the possibility of physical redemption and Ethereum ETFs starting to stake could be reconsidered. Unlike last time, when under Gary Gensler's leadership, the likelihood of these measures coming to fruition was almost zero; Peirce expressed optimism about the potential for changes under the new management.
Fidelity's digital asset management head, Cynthia Lo Bessette, also stated in an interview that the introduction of Ethereum ETF staking is just a matter of time, not a question of whether it will happen.
It is foreseeable that once Ethereum spot ETFs support staking yields, it will have a boosting effect on Ethereum's coin price.
Summary
While Ethereum is still worth looking forward to, there are significant challenges to face. Observing its gas fee data reveals that in 2024, its ecosystem's activity is sluggish, trading volume remains stagnant, and it faces strong challenges from Solana and Sui. Ethereum needs to consider whether its core narrative positioning is still accepted and recognized by the public.
