Ethereum(CRYPTO: ETH), the world’s second-largest cryptocurrency, has had an absolutely dreadful start to the year. It’s still down 20% in mid-May, and has been underperforming the broader crypto market for months now.
However, a number of catalysts are coming together for Ethereum that could make it the comeback story of the year. In the second half of 2025, I’m expecting a big breakout for Ethereum. Here’s why.
It might sound simplistic, but the easiest way to gauge how much momentum a cryptocurrency has is by looking at investor inflows and outflows.
This method is available to Ethereum investors, because it is one of only two cryptocurrencies with exchange-traded funds (ETFs) based on their current spot prices. Generally, if money is flowing into these spot ETFs, it suggests rising demand and can put upward pressure on Ethereum’s price. If money is flowing out of these spot ETFs, the price of Ethereum is likely to fall. Other factors also drive Ethereum’s price changes, including market sentiment and recent news, but generous ETF inflows are still a handy measuring stick.
Image source: Getty Images.
That’s why the first half of the year has been so problematic for Ethereum. Investors were moving money out of these ETFs at a rapid pace. But inflows are starting to appear again. In fact, May is shaping up to be the best month of the year, with over $100 million in new money flowing into the spot Ethereum ETFs. It’s still too early to do a victory lap, but things are definitely looking better.
Another important catalyst is a brand-new upgrade of the Ethereum blockchain, known as “Pectra” (a combination of “Prague” and “Electra”). While blockchain upgrades are a dime a dozen these days, this one from Ethereum really resonated with investors. As soon as Pectra went live on May 7, the price of Ethereum started to soar.
There are several reasons why the Pectra upgrade has resonated so much with investors. The primary reason is that it reaffirms Ethereum’s desire to boost its transaction processing capacity. This is one area where upstart rivals have really stolen a march on Ethereum, so it’s important to show constant progress on this front. The upgrade also helps to make Ethereum cheaper and easier to use.
At the same time, Ethereum co-founder Vitalik Buterin appears to be making important changes to the overall strategic vision for the blockchain network. Just days before the Pectra upgrade, for example, he outlined a vision to make Ethereum “as simple as Bitcoin(CRYPTO: BTC)” within the next five years.
Ever since The Merge in 2022, Ethereum has been making so many upgrades, and getting so bogged down in wonky tech implementations, that it has become too complex and too difficult for many people to use. So Ethereum has been forced to rely on Layer 2 scaling solutions (helper blockchain systems that sit on top of the core Ethereum blockchain) to improve speed and scalability.
The good news is that the Ethereum community seems to have woken up to this problem. After months of people complaining about Ethereum’s slow performance, Buterin appears to be searching out new approaches that will simplify Ethereum, making it cheaper to use and easier to maintain.
At the end of the day, any comeback for Ethereum is only possible if it becomes a bigger player in the White House’s strategic vision for crypto. The good news is that there have been some promising first steps. For example, Ethereum has become a core holding of World Liberty Financial, the Trump-affiliated crypto venture. And, in March, the White House added Ethereum to the U.S. Digital Asset Stockpile.
But here’s the thing: Vitalik Buterin was an unexpected no-show at the big Crypto Summit at the White House in March. In the past, he has made no secret of his disdain for the politicization of crypto, and his personal desire to prevent the Ethereum blockchain ecosystem from being transformed into a “degenerate casino” for Wall Street.
Maybe this is reading too much into things, but Buterin’s no-show at the Crypto Summit could suggest that Ethereum is not quite ready to get on board with some of the White House’s more aggressive crypto moves. That could end up costing Ethereum, if it ends up losing ground to other blockchain rivals.
By just about any measure, Ethereum has underperformed this year. It is losing ground in key sectors of the crypto world. It failed to capitalize on the enormous retail investor interest around meme coins, and it has yet to get fully on board with the White House’s pro-crypto strategy.
But that was the first half of 2025. The second half of 2025 looks much more favorable. In fact, I wouldn’t be surprised at all if Ethereum outperforms Bitcoin over the next six months, making it the crypto sector’s comeback story of the year.
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Dominic Basulto has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
