ETH bullish signals keep coming but underperform the market? Analyzing the structural contradictions to understand Ethereum's true situation in this cycle

December 16, according to Gate market data, ETH (Ethereum) is currently trading at $2,942, down 5.9% in the past 24 hours, with an intraday high of $3,177 and a low of $2,878. The 24-hour trading volume is approximately $438 million. From a technical perspective, ETH’s key support level is around $2,800, while a clear resistance zone is concentrated near $3,400.

In this cycle, Bitcoin was the first to break its all-time high, becoming the core asset of market consensus; in contrast, ETH, as the second-largest cryptocurrency by market cap, has significantly underperformed market expectations. This divergence—“fundamentals continuously positive, but price remains weak”—is increasingly attracting market attention.

To understand ETH’s current predicament, one must analyze multiple layers including technical upgrades, capital structure, narrative shifts, and market positioning.

What is Ethereum’s recent upgrade doing, and why is the market response limited?

From a technical standpoint, Ethereum has not been stagnant over the past year. A series of upgrades focused on scalability and Rollup friendliness have been continuously advancing, with clear goals: to improve data availability and reduce Layer 2 costs, supporting larger on-chain applications.

However, the core beneficiaries of these upgrades are not the traders holding ETH directly, but rather Layer 2 networks, developers, and the application ecosystem built on Ethereum for the long term. For the secondary market, such upgrades do not immediately translate into higher gas consumption or significant increased demand for ETH, so price feedback often lags.

In other words, Ethereum’s current upgrades are more about laying the groundwork for ecosystem capacity over the next three to five years rather than providing immediate short-term price catalysts.

Why hasn’t the inflow into ETH spot ETFs replicated Bitcoin’s market logic?

The launch of ETH spot ETFs was once seen as an important factor in driving a revaluation of Ethereum’s price. In the long term, ETFs indeed provide a channel for compliant funds to access ETH and improve institutional accessibility.

But unlike Bitcoin, ETH’s positioning in the eyes of institutions is more complex. Bitcoin’s narrative is highly concentrated on “digital gold” and store of value, whereas ETH also carries multiple roles: a technical platform, Gas asset, staking asset, and risk asset. This multi-identity means that under the ETF framework, ETH has not formed a single, clear allocation logic like BTC.

Additionally, some institutions prefer to participate via on-chain staking, DeFi, or structured products rather than simply holding ETF shares. This somewhat weakens the marginal impact of ETF capital inflows on the spot price.

The logic behind corporate ETH allocations and market expectations are misaligned

Recently, several companies have disclosed holdings or research into ETH-related assets, which is often interpreted as a long-term positive. However, it’s important to note that such allocations are motivated more by infrastructure deployment, technological synergy, or ecosystem participation rather than pure price speculation.

Corporate ETH holdings tend to be long-term, with low-frequency adjustments, and their funds do not participate actively in market trading. This means that even if the scale of holdings increases, the short-term price impact is limited, acting more as a “bottom-layer stabilizer” than a market driver.

Structural disadvantages of ETH in this cycle

From a market structure perspective, ETH currently faces several adverse factors stacking up.

First is the capital rotation issue. In early or mid-stage bull markets, capital tends to flow into the simplest, most certain narrative assets, with Bitcoin being the biggest beneficiary under this logic. ETH’s complex attributes make it less of a first choice for capital.

Second, the success of Layer 2 solutions has diluted the mainnet narrative. As more transactions and applications move to Layer 2, the growth in mainnet gas revenue has not kept pace with ecosystem expansion, leading some investors to question the efficiency of ETH as a “value capture layer.”

Third, the long-term presence of competing narratives. Although Ethereum’s network effects remain strong, high-performance chains like Solana are continuously diverting attention and liquidity through better user experience and lower transaction costs.

Does ETH still have a chance to strengthen?

From a medium- to long-term perspective, ETH’s fundamentals remain intact. Ethereum continues to be a key settlement layer for stablecoins, DeFi, RWA, and smart contracts, and its irreplaceability is unlikely to be shaken in the short term.

Conditions for ETH to truly strengthen may include: 1) a further rise in market risk appetite, prompting funds to rotate from Bitcoin into mainstream and secondary assets; 2) a boom in Layer 2 that can somehow feed back into ETH’s value capture, such as through fee structures or staking demand; 3) a more accommodative macro liquidity environment, allowing high-beta assets to command higher premiums.

Until these conditions are fully met, ETH’s price action is more likely to be range-bound rather than a one-way breakout.

Conclusion

ETH’s current “lackluster performance” is not due to deteriorating fundamentals but rather a misalignment between long-term technological optimism and short-term market preferences. In this cycle, Bitcoin has taken on the role of the consensus asset, while Ethereum continues to quietly expand its infrastructure layer.

For investors, ETH’s value does not lie in short-term outperformance relative to Bitcoin, but in whether it remains an indispensable settlement and application backbone in the crypto world. Price re-pricing may only occur when the next capital rotation and narrative shift happen.