Over the past month and a half, Bitcoin (CRYPTO: BTC) has dominated headlines. In a matter of weeks, the world’s largest cryptocurrency surged nearly 50%, ultimately breaking through the $100,000 milestone to set a new all-time high near $107,000. This kind of performance has rightly placed Bitcoin center stage. Meanwhile, Ethereum (CRYPTO: ETH), the second-largest cryptocurrency, has largely taken a backseat.
In fact, Ethereum’s struggles have defined much of its 2024. At one point in October, Ethereum’s year-to-date gains were a mere 5%, far below the explosive growth seen in Bitcoin and other cryptocurrencies. However, recent developments suggest that the tides may be shifting. For investors, this presents a unique opportunity to reevaluate Ethereum. Here are three reasons 2025 could be Ethereum’s time to shine, and why it might be worth considering over Bitcoin.
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One of the most exciting aspects of cryptocurrency markets is the phenomenon known as altcoin season. This is a period when alternative cryptocurrencies (altcoins) outperform Bitcoin as profits from Bitcoin begin to flow into the broader crypto market. So far, this hasn’t materialized in the current cycle.
Bitcoin dominance, a metric measuring Bitcoin’s share of the total cryptocurrency market, has been rising steadily for more than two years. This suggests that Bitcoin has attracted disproportionate value, leaving altcoins like Ethereum struggling to keep up.
However, recent data shows a strong reversal in Bitcoin’s dominance. While it has yet to fully materialize, a move of this size has not happened in more than a year and could signal the start of an altcoin rally. Ethereum, as the most widely recognized altcoin, stands to benefit immensely.
Another reason Ethereum could outperform in 2025 lies in the growing popularity of spot Ethereum exchange-traded funds (ETFs). These financial instruments, approved in mid-2024, allow institutional and retail investors to gain exposure to Ethereum via the traditional stock market. While Bitcoin ETFs launched earlier and garnered significant attention, Ethereum ETFs have struggled to attract similar levels of interest.
However, that narrative is beginning to change. In early December, Ethereum ETFs recorded their highest trading volumes since launch, even briefly surpassing the volumes of their Bitcoin counterparts — a remarkable achievement considering Ethereum’s slower start. This surge in activity reflects increasing institutional interest in Ethereum as investors look beyond Bitcoin for opportunities in the cryptocurrency market.
Should this trend continue to gain momentum, it could drive substantial buying pressure on Ethereum, particularly as the broader crypto bull market matures and investors seek higher returns outside of Bitcoin.
The last reason to consider Ethereum isn’t necessarily found in any particular data point or development, but rather in some simple math.
While many cryptocurrencies are trading near or at all-time highs, Ethereum remains roughly 25% below its 2021 peak of $4,800. This gap presents a compelling opportunity for investors, especially given Ethereum’s foundational role in the cryptocurrency ecosystem. The way I see it, Ethereum has at least a 25% upside from today.
However, given its foundational role in crypto and the history of cryptocurrencies notching new all-time highs in bull markets, it has even more upside.
The reason is that Ethereum is the backbone of decentralized finance (DeFi), hosting over 55% of all the value in the sector. DeFi allows users to engage in financial activities like lending, borrowing, and trading without traditional intermediaries, and holds the potential to revolutionize global finance.
Additionally, Ethereum’s Layer 2 solutions have become increasingly popular. They’re driving millions of daily transactions, further solidifying its dominance. While some argue that Layer 2 adoption has contributed to Ethereum’s lagging price, these solutions ultimately strengthen the network by increasing its usability and adoption.
Last but not least, Ethereum also plays a critical role in bridging traditional finance with decentralized finance. Major financial institutions, including BlackRock and UBS, are leveraging Ethereum’s blockchain for tokenizing traditional assets like money market funds. Tokenization is widely regarded as the future of financial markets, and Ethereum is emerging as the platform of choice for global financial giants.
While Bitcoin’s jump to $100,000 appears to have more room to run, its growing price also increases its risk profile. Ethereum, on the other hand, offers a compelling alternative with a more favorable risk-reward balance at today’s prices.
Historically, Ethereum has lagged behind Bitcoin early in bull markets, only to stage significant rallies during altcoin seasons. Ethereum struggled to keep up with Bitcoin last cycle, but once altseason arrived, it increased more than 600% in five months. Ethereum could be poised for a similar breakout in 2025 if history at least rhymes.
For investors seeking to diversify or find an undervalued blue chip cryptocurrency to capitalize on the bull market, Ethereum stands out as a strong contender. As capital flows into new areas of the crypto market, Ethereum could emerge not just as a complement to Bitcoin, but as a leader in its own right.
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RJ Fulton has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
