Ethereum Under the Shadow of Bitcoin: Can It Become a Self-Sufficient Currency?

The Difficulties in Defining Ethereum

Ethereum exists in a perplexing gap: it is large enough not to be considered a typical public blockchain token, yet not strong enough to establish an independent monetary story like Bitcoin. The debate around Ethereum’s true nature reached a boiling point in the first half of 2025.

In March of this year, XRP’s fully diluted market cap temporarily surpassed Ethereum—an almost unimaginable outcome a year prior. On March 16, Ethereum’s market cap was $227.65 billion, while XRP reached $239.23 billion. This situation is only the tip of the iceberg, as deeper factors are gradually coming to light.

Declining Influence and Competitive Pressure

By the end of April 2025, the ETH/BTC exchange rate fell below 0.02—its lowest since February 2020. This means the entire yield of Ethereum relative to Bitcoin during the previous bull cycle has been wiped out completely. Market sentiment towards Ethereum hit multi-year lows.

Pressure is not only from price. Ethereum’s market share of transaction fees on public blockchains has shrunk significantly. In 2024, Solana recovered strongly; in 2025, Hyperliquid suddenly emerged. These two competitors together pushed Ethereum’s fee market share down to 17%, ranking fourth among public blockchains—a sharp decline from its leading position the previous year.

Signs of Recovery: When Pessimism Hits Bottom

However, history in the crypto markets shows that major turning points often begin when sentiment is at its most pessimistic. In May 2025, signals indicated the market was overly bearish on Ethereum. At that time, the ETH/BTC rate and USD-denominated price both started to rebound strongly.

From a bottom of 0.017 in April, the ETH/BTC rate rose to 0.042 by August, a 139% increase. During the same period, Ethereum’s USD price went from $1,646 to $4,793, a 191% increase. This recovery peaked on August 24, when Ethereum hit $4,946.

As of January 12, 2026, Ethereum is at $3.12K, down -5.08% over the past year but still significantly above April’s bottom.

Institutional Capital Flows: Notable Changes

A significant structural shift is occurring in the spot ETF space. In July 2024, the Ethereum spot ETF launched with very low inflows. The first six months recorded only $2.41 billion in net inflows—completely opposite to Bitcoin ETFs.

However, as Ethereum recovered, this concern also dissipated. Throughout 2025, net inflows into the Ethereum spot ETF totaled $9.72 billion, compared to $21.78 billion for Bitcoin ETFs. Considering Bitcoin’s market cap is nearly five times that of Ethereum, the scale of capital flows is only 2.2 times different—much lower than expected. When adjusted for market cap, demand for Ethereum ETFs actually exceeds that for Bitcoin.

Notably, from May 26 to August 25, Ethereum ETFs recorded net inflows of $10.2 billion, surpassing the $9.79 billion of Bitcoin ETFs during the same period—marking the first time institutional demand clearly favored Ethereum.

BlackRock continues to lead the market. By the end of 2025, BlackRock’s Ethereum ETF held 3.7 million ETH, accounting for 60% of the Ethereum spot ETF market share. Compared to 1.1 million ETH at the end of 2024, this is a 241% increase—far surpassing other institutions.

True Power: Ethereum Treasury Companies

The main driver behind Ethereum’s recovery is not romantic stories but the genuine demand for structural backing—Ethereum treasury companies.

In 2025, Ethereum treasury holdings increased by 4.8 million ETH, representing 4% of the total supply. The most prominent is Bitmine, led by Tom Lee (m, with the ticker BMNR). This Bitcoin mining enterprise began shifting reserves into Ethereum starting July 2025. From July to November, Bitmine purchased a total of 3.63 million ETH, accounting for 75% of all Ethereum treasury holdings.

By the end of 2025, Ethereum spot ETFs held 6.2 million ETH, roughly 5% of the total token supply.

Is Ethereum Truly an Independent Cryptocurrency?

The recent recovery reflects that some investors are now willing to treat Ethereum on par with Bitcoin. But a deeper core issue emerges: Ethereum is accumulating a monetary premium, yet this premium always follows Bitcoin.

Throughout 2025, the 90-day correlation coefficient between Ethereum and Bitcoin remained between 0.7 and 0.9. The beta coefficient even spiked to multi-year highs, exceeding 1.8 at times. This means Ethereum is more volatile than Bitcoin but still depends on its trend—a subtle but critically important difference.

Ethereum’s current monetary attribute is based on market belief in Bitcoin’s monetary story. As long as Bitcoin continues to be recognized as a trustworthy, non-sovereign currency, some investors will be willing to extend that trust to Ethereum.

Unresolved Issues

Despite the price recovery, the fundamental factors that once dragged Ethereum down remain unresolved:

• Market share of transaction fees continues to be dominated by Solana, Hyperliquid, and other strong competitors
• Network activity on Ethereum remains well below previous cycle peaks
• Bitcoin has easily surpassed its historical ATH of (126.08K USD), while Ethereum remains around its ATH of (4.95K USD)

Even during Ethereum’s strongest months, many holders viewed the rally as an opportunity to exit rather than a sign of long-term value.

Indirect Monetaryization: An Uncertain Path

The core debate is not whether Ethereum has value, but whether ETH truly accumulates value from the development of the Ethereum network.

In the previous cycle, the market believed ETH’s value would directly benefit from network growth. This is the logic of the “super-monetary thesis”: network utility creates demand to burn tokens, establishing a clear value foundation.

Today, this logic is almost certainly no longer valid. Ethereum’s transaction fee revenue has plummeted and shows no signs of recovery. Moreover, the two core growth drivers—real-world assets (RWAs) and the institutional market—both use USD as their primary currency, not Ethereum.

Ethereum’s future value will depend on how it can indirectly benefit from the network. But this indirect path is fraught with uncertainties, entirely dependent on social preferences and collective market consensus.

Outlook: High Beta and Dependence

If Bitcoin continues to surge in 2026, Ethereum could recover many of its lost positions. Ethereum treasury companies are still in early development stages, with increased holdings mainly from issuing common stock.

However, if the market enters a new bull cycle, these organizations might explore more diverse capital-raising strategies—issuing convertible bonds, preferred shares, etc. For example, Bitmine could raise funds via low-interest bonds, use the capital to increase ETH holdings, then stake to earn income. The staking income could offset some costs, allowing treasuries to continue increasing holdings with leverage.

Assuming Bitcoin enters a strong bull phase, this “second growth path” for Ethereum treasuries would further amplify Ethereum’s high beta relative to Bitcoin.

Conclusion: A Secondary Beneficiary

Currently, Ethereum has not become a standalone monetary asset with independent macro fundamentals; it remains a secondary beneficiary of Bitcoin’s monetary consensus—and this beneficiary group is expanding.

Ethereum’s monetary story, though past its crisis phase, is still unresolved. In the current market structure, as long as Bitcoin continues to be reinforced, Ethereum’s price has room for significant growth. Demand from Ethereum treasuries and institutional flows will provide genuine upward momentum.

But ultimately, Ethereum’s monetary development will still depend on Bitcoin. Unless Ethereum can maintain a low correlation and low beta with Bitcoin over a long cycle—which it has never achieved— the gap in monetary premium between the two will persist: Ethereum remains a beneficiary of Bitcoin’s monetary narrative rather than an independent asset.