Revived Optimism On ETH

Markets are Bullish on ETH

There are a number of signs that market participants are bullish on ETH. Firstly, ETH Spot ETFs are currently in their longest streak of consecutive inflows so far this year in 2025, second only to the run between November-December 2024. Since May 16, ETH ETFs have recorded net inflows summing to a total of $1.015B. Those flows have been consistently positive, even on days where BTC Spot products have recorded outflows. We highlighted this divergence first back here. The recent straight win streak for Ethereum ETFs came after spot price rallied more than 50% between May 8 and May 15.

Secondly, ETH derivatives markets are pricing in a far more bullish picture for ETH relative to BTC – and the recovery of skew in ETH volatility smiles show this clearly. Only two days ago, ETH short-tenor options went from a balanced tilt with a slight preference for OTM puts to markedly bullish skew towards OTM call options. The 25-delta put-call skew ratio for 7-day options is now at 7%, close to its highest levels all year. That sentiment is not just in options markets either. Perpetual swap funding rates have surged to 0.03% – a level last seen in late January this year.

Our Sentimeter index which aggregates both the put-call skew ratio and perpetual funding rates as well as futures-implied yields is now once again above a value of 2, indicating increasing bullish sentiment. This value has often preceded rallies in spot, as it did ahead of the sudden rally in mid-May.

What are the Potential Drivers?

The Ethereum network has been bolstered by a number of catalysts. Firstly, the Pectra upgrade which was rolled out on the mainnet on May 7, 2025 included the most Ethereum Improvement Proposals (EIPs) out of any upgrade so far. These included introducing a variable stake size between 43 and 2,048 ETH for a single validator, increased blob space, and major moves towards account abstraction – which many DeFi applications are already taking advantage of. Fees generated on the network have more than doubled following the upgrade, and remained that way for most days since the upgrade in early May.

Secondly, the SEC recently released a statement in late May that “certain proof-of-stake blockchain protocol ‘staking’ activities are not securities transactions within the scope of the federal securities laws”. The previous SEC administration deemed that staking constitutes an investment contract, thereby making it subject to SEC regulations as a security. According to the Head of the SEC Crypto Task Force, Commissioner Hester Peirce, “uncertainty about regulatory views on staking discouraged Americans from doing so for fear of violating the securities laws”.

If the SEC is to approve Ethereum staking-enabled ETFs in the foreseeable future, it will likely increase the demand for these ETFs as it will provide holders exposure to a crypto-native yield that they cannot find elsewhere, while still in a regulated environment. 

Currently, ETH Spot ETFs collectively hold $10.649B of ETH in assets under management. Using the current spot price of $2.8K, that amounts to approximately 3.8M ether tokens. If that entire amount of ETH is staked, it would amount to a more than 10% increase in the amount of ETH held on the beacon chain (currently 35M ETH).  

Finally, the Ethereum Foundation has recently undergone an internal restructuring in an effort to realign the Foundation’s priorities with three main goals of the network: scaling the base layer, scaling layers 2s and improving the user experience (UX). As part of that realignment, the Foundation has reorganised and streamlined some of its teams in order to accelerate progress from research to real-world deployment – a signal to investors that the Ethereum Foundation is taking the necessary steps to maintain its competitiveness in the layer 1 landscape.