Why Ethereum Could Be Turning The Tides On Bitcoin

For much of the past two years, Ethereum has been the “forgotten” blue chip in crypto portfolios. Its messaging fell flat, Layer-2s siphoned activity away from the main chain, and a wave of short interest made it one of the least fun trades in the market.

But now, Ethereum’s fortunes may finally be turning — and Fundstrat Head of Digital Asset Strategy Sean Farrell thinks that trend could continue.

“We've been pretty sour on ETH for the better part of the past couple of years,” Farrell told Coinage. “But in early May, we started to see that ETH/BTC pair trade sideways in a pretty tight range."

That kind of relative strength — paired with a lack of any ETF hype or major catalyst — is what caught Farrell’s attention. “This was pretty organic,” he said, describing the recent ETH rally. “An instance of price discovery.”

The organic nature of the move is one key difference from past false starts in the ETH/BTC chart. While Farrell noted prior rallies in Ethereum were tied to catalysts like ETF speculation, this recent move appears to be rooted more in market structure and fundamentals — particularly capital flows.

And even amid the exodus of activity to L2s like Coinbase’s Base chain, Farrell said there may be a “cultural and strategic shift” underway at the Ethereum Foundation itself, with renewed focus on L1 scalability.

“That might bring some more speculation to the L1 and just make the user experience a whole lot better,” he said.

From a price perspective, Farrell is watching the ETH/BTC 100-day moving average — and suggested that, all else equal, if Bitcoin stays flat around $104K, that puts ETH at $3,100 in the near term. And if BTC rallies, as Fundstrat expects it will, “that price target increases.”

So far, Ethereum’s breakout appears to be tracking closely with a broader shift in crypto risk appetite — something Farrell also flagged by looking at small-cap stock performance.

“If you look at the ETH/BTC pair, it's followed that small-cap S&P 500 relative pair pretty closely over the past couple of years,” he said. “And small caps bottomed around April 14th.” Interestingly, both continued to move in tandem and retreated in lock-step Monday morning.

Nonetheless, Farrell highlighted how Ethereum’s moves help anchor valuations across other L1s — most notably Solana. “All of these L1s are priced off of each other,” he said. “If ETH rallies, that increases the near-term upside for Solana.”

That’s especially significant as new ETH buyers step in — and short interest rolls off.

“ETH has also been heavily shorted,” Farrell added. “That’s been a structural headwind.”

But with shorts covering, institutional flows returning, and Ethereum’s fundamentals starting to catch up with price action, Farrell sees more room to run.

“I do think there is reason to be a little more optimistic,” he said.

And for the first time in a long time, Ethereum might finally be leading that optimism.

Coinage members can watch our full episode above ad-free, or later on our YouTube channel. To support our community-owned outlet, own it with us, and unlock other exclusive benefits, mint one of our Membership Passes today or Stake with us today!