ETH Takes Center Stage: The True Beginning of the Bull Market’s Second Half

Author: Proton Capital Research Team

 

Entering Q3 2025, the digital asset market is at a critical turning point. Bitcoin has served as the “risk asset anchor” in previous cycles, but its leadership is gradually weakening. We firmly believe that Ethereum is taking over from Bitcoin, becoming the dominant force in the second half of the bull market.

In the short term, the current market correction is more a result of seasonality and macro uncertainty rather than a trend reversal. The dovish signals released by the Federal Reserve at the central bank’s annual meeting have provided marginal support for risk assets; meanwhile, the Treasury’s trillion-dollar financing plan and the low level of the overnight reverse repurchase balance mean that dollar liquidity still faces some pressure. This coexistence of “dovish policy and tightening liquidity” has brought the market into a “halftime break” phase.

More importantly, the baton for the second half has already been handed to Ethereum. Whether it’s capital inflows, on-chain capital accumulation, derivatives market structure, or policy narratives such as stablecoin legislation and financial assets on-chain, all signals are gradually converging. For investors, this is not just an asset price switch, but a process of repricing capital logic and institutional dividends. For retail investors, this means that Bitcoin’s period of rapid growth is basically over, while Ethereum is opening a new window for wealth accumulation; for institutions, ETH is not only an asset in the crypto market, but also the core foundation for stablecoins, RWA, and compliant financial infrastructure. Whether ETH is allocated in time will determine performance differentiation in the coming years. In other words, the rise of Ethereum is about the restructuring of the entire crypto financial landscape.

Against this backdrop, we provide our mid-term benchmark price forecast: by the end of 2025, the BTC target price is $130,000, and the ETH target price is $11,000.

 

Halftime Pause – Macro Disturbances

Recently, the market has seen a certain degree of correction, which is not uncommon in seasonal patterns. Summer is usually a low point for trading activity, with traders in major European and American markets on vacation, combined with macro policy uncertainty, resulting in relatively scarce overall liquidity and naturally more cautious risk appetite. Against this backdrop, the market’s reaction to short-term news is amplified, leading to increased price volatility.

Figure 1. BTC Seasonal Performance (Source: Coinglass)

From a macro perspective, investors’ wavering expectations for Fed rate cuts have become the core driver of recent price fluctuations. Notably, at the central bank’s annual meeting at the end of August, Chairman Powell sent relatively dovish signals, suggesting that the Fed may gradually shift to a more accommodative policy stance based on assessments of economic and inflation progress. This statement has to some extent alleviated market concerns about excessive monetary tightening and provided marginal positive support for risk assets.

However, in contrast to the dovish shift in monetary policy is the liquidity pressure brought by Treasury financing operations. According to the US Treasury’s Q3 financing plan, the expected financing scale for the third quarter will reach $1 trillion. If we assume the TGA balance rises to $850 billion by the end of September (currently $526 billion), the market will almost inevitably have to absorb a large amount of newly issued Treasuries. Meanwhile, the overnight reverse repurchase (ON RRP) account balance, which serves as a “reservoir for excess liquidity,” has fallen to a historic low of less than $40 billion. In this environment, the Treasury’s bond issuance draining effect may partially offset the positive impact of the Fed’s policy shift, putting short-term pressure on the US dollar funding market.

Figure 2. US Treasury TGA Account Balance and Overnight Reverse Repo Account Balance (Source: FRED)

Although macro signals are mixed, we firmly believe this is more like a “halftime break” in a bull market rather than a trend reversal. First, from our internally tracked long-term market indicators, BTC does not yet exhibit the characteristic signals of a historical top, and the market structure is still some distance from a cyclical peak. Second, the Fed’s overall policy path remains accommodative, and the probability of a “soft landing” for the US economy is rising, providing solid support for risk assets to maintain a medium- to long-term upward trend. In other words, while short-term macro disturbances may bring volatility, they have not changed the fundamental logic of the bull market’s continuation.

 

Market Structure Signals: BTC Steps Down, ETH Rises

BTC.D has dropped from 66% in June 2025 to about 59% currently. From the perspective of the traditional four-year cycle, this usually means the bull market may be entering its second half. ETH will take the baton and lead the market, and the overall market performance from July to August 2025 confirms this view. Although the market has slightly retreated this week, it is only a halftime break, and ETH is expected to continue its strong performance after a brief consolidation.

Figure 3. BTC.D Weekly Chart (Source: Tradingview)

The ETH/BTC ratio has officially broken above the 60-week moving average on the weekly chart, confirming the end of the ratio bear market since 2022. In terms of its position, we are still in the early stage of mean reversion to historical averages, and market consensus is just being established. After significant adjustments in regulatory policy, position structure, and token distribution in recent months, with more concrete policies being implemented, ETH will enter the next phase: value discovery.

Figure 4. ETH/BTC Weekly Chart (Source: Tradingview)

 

Exchange Liquidity Changes

Observing exchange data, we can see that ETH’s supply structure is undergoing changes similar to what BTC experienced previously. Over the past two months, ETH balances on exchanges have continued to hit historic lows, indicating that sell-side liquidity is rapidly decreasing. This process occurred during the BTC bull market and ultimately triggered a supply squeeze and accelerated price increases. Since July 1, institutional capital inflows have become the key driver of declining exchange balances: listed companies’ treasuries, represented by BMNR, have cumulatively purchased 2.9 million ETH (about $13 billion); ETFs have added 2.22 million ETH over the same period. This shows that institutional buying is rapidly changing the liquidity landscape of ETH. As more funds move to long-term lock-up (corporate treasuries, ETFs, staking), the circulating supply will shrink further, and this supply-side tightening will have a significant marginal impact on price.

Figure 5. ETH Exchange Balances (Source: CryptoQuant)

 

Institutional Position Structure: Significant Room for Growth

Currently, ETH’s overall institutional penetration rate is 8.74% (ETF holdings 5.34% + corporate treasuries 3.40%), still significantly lower than BTC’s 10.89%. In other words, if ETH’s institutional holding ratio catches up to BTC’s, there is at least a passive incremental demand for 2.6 million ETH in the market. This gap not only means that ETH’s current institutionalization level is still in its early stages, but also indicates considerable catch-up potential in the future.

Meanwhile, the potential launch of staking ETFs and the anticipated entry of long-term funds such as pensions (e.g., 401(k)) will become new drivers of institutional buying in the future. Combined with the supply contraction effect brought by ETH’s own staking mechanism, it can be expected that institutional capital will continue to play a leading role in the ETH ecosystem going forward.

Figure 6. Institutional Holdings Ratio of BTC and ETH

 

Derivatives Market: Leverage and Liquidity Are Migrating

Structural changes in the derivatives market also clearly point to ETH. According to Glassnode data, ETH perpetual contract trading volume has recently surged. The dominance of ETH perpetual contract trading volume relative to BTC has reached a historic high, currently at 67%, which also indicates that speculative interest in altcoins is heating up. Another data point—open interest in perpetual contracts—shows that ETH’s dominance is also rising rapidly and approaching BTC, now close to 45%. Across the entire market, the total open interest for major altcoins (ETH, SOL, XRP, and DOGE) recently hit a new high of $60.2 billion, indicating that market risk appetite and capital flows are shifting across the board. This means that in terms of capital allocation, ETH has become the core target for market risk pricing and speculative activity, while BTC increasingly plays the role of a “value anchor.”

Figure 7. BTC and ETH Perpetual Contract Trading Volume Dominance (Source: Glassnode)

 

On-Chain Data: Inflow of Real Capital

From the perspective of on-chain capital accumulation, ETH’s performance also surpasses other mainstream assets. Realized Cap is an important indicator for measuring real capital inflow on-chain, calculated by valuing each token at the price of its last on-chain transfer and summing up. As of August, ETH’s Realized Cap has maintained stable and rapid growth since July, while BTC and SOL have shown sideways or declining trends. This indicates that the process of capital accumulation on-chain is clearly tilting towards ETH. This not only means a larger scale of capital inflow, but more importantly, this capital reflects the accumulation of “real cost,” showing that ETH’s status in investor asset allocation is systematically rising.

Figure 8. Realized Cap of Major Crypto Assets (Source: Glassnode)

 

Policy and Narrative: Accelerated Release of Institutional Dividends

Recent policy and narrative developments have also injected strong momentum into Ethereum’s medium- and long-term development. In July 2025, the US officially passed the GENIUS Act, the first federal legislative framework for stablecoins. This act not only clarifies requirements for compliant issuance, reserves, and audits, but also provides institutional guarantees for the long-term development of USD-pegged stablecoins. As regulatory uncertainty gradually dissipates, market confidence has been significantly boosted. Considering that more than half of stablecoin issuance currently takes place on the Ethereum network, we expect the total market cap of stablecoins to further expand to nearly the trillion-dollar level, with Ethereum as the most direct beneficiary.

Meanwhile, the scaling progress of the Ethereum network is also providing practical support for this narrative. Thanks to the rapid development of Layer 2 networks, Ethereum’s daily transaction volume has recently hit new highs, while gas fees remain relatively low. This not only ensures the network’s scalability under high usage, but also provides a stable operating environment for more future application scenarios, especially large-scale adoption of on-chain financial assets and stablecoin payments.

Figure 9. ETH Network Daily Transaction Volume (Source: Etherscan)

Another major policy catalyst comes from the “Project Crypto” plan launched by the Trump administration in August 2025. The goal of this plan is to systematically revise existing securities laws and promote the gradual migration of capital markets to an on-chain environment. If implemented, this plan will effectively lower the compliance barriers between traditional finance and crypto finance, enabling the US to take the global lead in establishing capital market infrastructure for crypto assets. Such institutional dividends directly benefit the RWA and DeFi sectors. In fact, leading protocols in the ETH ecosystem, such as AAVE, ETHENA, and PENDLE, have recently seen accelerated growth in total value locked (TVL), reflecting positive feedback from capital on institutional expectations.

From a longer-term perspective, if future pension channels such as 401k allocate crypto assets, ETH is highly likely to become the only core target besides BTC. This means that, driven by both institutional and capital forces, Ethereum not only maintains its dominant position in technology and ecosystem, but is also gradually establishing its strategic position in the global financial market.

 

Conclusion

Taking into account market structure, capital flows, on-chain data, and the policy environment, our judgment is very clear: Ethereum is gradually replacing Bitcoin as the core asset in the second half of the bull market. Short-term volatility and corrections will not change the long-term trend; on the contrary, they create a valuable window for capital to reposition.

From the perspective of investor structure, the market is shifting from BTC’s single narrative to ETH’s diversified ecosystem, which means that the next stage of wealth opportunities will be more concentrated on Ethereum. For funds, whether they establish and increase ETH positions in a timely manner will directly determine their relative performance in industry competition over the next few years. Missing this stage may result in a significant gap with peers. ETH’s role is surpassing that of a public chain itself, as it is gradually becoming the core infrastructure deeply integrated with stablecoins, RWA, and compliant financial markets, representing the inevitable direction of the financial system moving on-chain.

Therefore, we maintain our mid-term benchmark forecast:by the end of 2025, the target price for BTC is $130,000, and the ETH/BTC ratio will further rise to 0.08, with the target price for ETH at $11,000.This is not just a price number, but a reflection of the evolution of market structure and the realization of institutional dividends. As capital continues to flow in, circulating supply is compressed, and the policy environment becomes clearer, the revaluation of ETH has only just begun. The stage for the second half is already set, and ETH will be the undisputed protagonist.