Since the beginning of the year, Ethereum's performance has lagged behind most major Altcoins, with only a 52.8% increase, lower than Bitcoin's 127.7%, SOL's 80.7%, and XRP's 273.3%.
However, many analysts remain bullish on Ethereum, and expect that with the improvement in the regulatory environment, major network upgrades, and the thriving development of Stablecoins, RWA, and other mainstream narratives, next year will be Ethereum's time to shine.
Improved Regulatory Environment Beneficial for DeFi and DePIN
The successful election of Donald Trump as the US President has raised high expectations in the market for a more crypto-friendly regulatory environment, given his pro-crypto promises during the campaign, his family's involvement in a DeFi project, and his nomination of several crypto-supportive individuals for key government positions such as the SEC chairmanship.
Saul Rejwan, a managing partner at the crypto venture capital firm Masterkey, stated:
The Trump administration and a more crypto-friendly SEC will benefit Ethereum and more "compliant" crypto projects, especially in the DeFi and DePIN sectors.
He pointed out: "In a more favorable regulatory environment, DeFi projects on Ethereum will thrive, and areas like reStaking will be able to attract a large amount of institutional investment with just a little regulatory support."
He added that the new leadership is expected to lower the market entry barrier, creating a more favorable environment for early crypto startups and resilient businesses to innovate and grow.
Pectra Upgrade Improves User Experience
Another highly anticipated upgrade for Ethereum supporters is the Pectra upgrade. Gaia Regis, the co-founder and CEO of the reStaking platform Byzantine, stated that the Pectra upgrade will fundamentally change the way Ethereum's security layer operates.
She pointed out that the current driver for Ethereum staking is mainly the demand for liquidity. Essentially, many ETH holders want to participate in staking. This is generally a good thing, as more nodes mean more decentralization and higher security. However, Ethereum's scale has now become very large - the communication between over 1 million validators is starting to slow down the network's performance.
"Pectra's solution is to increase the maximum effective balance of validators from 32 ETH to 2,048 ETH, which will significantly reduce the required number of validators, thereby relieving network pressure.
The reduced pressure means the network will run faster, providing a better user experience for Ethereum users."
She added: "This improvement will lower the participation cost of staking, attracting more people to join, but will also gradually reduce staking rewards over time. Therefore, we are very optimistic about reStaking. Many people will want to boost their staking rewards by protecting other networks as well."
Kain Warwick, the founder of Infinex, stated that the improvements to Ethereum's proposals and network upgrades, leading to a better user experience, will be a key turning point in the forward progress of Ethereum and the ETH price trend.
By 2025, I believe account abstraction technology will advance further, L2 interoperability will improve significantly, and the user experience across L2s will see major improvements.
Stablecoins, Tokenization, and AI Agents Thriving
Matt Houghan, the Chief Investment Officer of Bitwise, stated that Ethereum has three major advantages as it moves towards 2025, and he expects the asset to thrive in the new year.
"Ethereum is at the core of shaping the three major trends in the crypto market by 2025: Stablecoins, Tokenization, and AI Agents. In these three areas, Ethereum has a dominant market share."
He added:
"I believe the heat generated by these three areas will impact ETH, making it the 'comeback star' of 2025. You can already see the signs in its recent strong performance and net inflows into ETF funds."
Nate Geraci, the President of ETF Store, also tweeted on December 20th that Ethereum ETF net inflows have caught up with Gold ETFs, and he expects the inflows to start accelerating.
ETH Performance to Surpass Bitcoin
Looking ahead to Ethereum's future prospects, Michael van de Poppe, the founder of MN Capital, posted on the 24th that "I wouldn't be surprised at all if the $ETH/$BTC ratio breaks above 0.04 in January." He expects:
In January 2025, capital will flow more towards Ethereum, while Bitcoin may face capital outflows, leading to a consolidation phase for Bitcoin. This could trigger an "Altcoin season within the Ethereum ecosystem".
This view aligns with that of Benjamin Cowen, the founder of Into The Cryptoverse, who mentioned in a X post on December 4th that he believes "the downtrend in the ETH/BTC ratio has ended or is nearing its end, and we should see an uptrend in the next 6 to 12 months."
As of the time of writing, the ETH/BTC ratio is currently at 0.03549, up 0.31% in the last 24 hours.
