Ethereum’s Rally Has a Hidden Engine – The Real Forces Fueling Its Surge

Ethereum’s price is soaring—but the drivers aren’t what traders expect. Forget retail FOMO; institutional maneuvers and protocol upgrades are pulling the strings.

Here’s the breakdown:

The Merge Effect

Post-Merge efficiency gains finally ripple through DeFi, slashing gas fees just as staking yields attract lazy capital from traditional finance.

Institutional Chess

BlackRock’s ETH ETF quietly accumulating while Wall Street hedges against dollar weakness—because nothing says 'store of value' like a blockchain that just fixed its inflation problem.

Liquidity Mirage

CEX reserves dwindle as smart money shifts to self-custody, creating artificial scarcity. (Bonus cynicism: Banks hate this trick.)

The rally’s real? Probably. Sustainable? That depends if the next upgrade delivers—or if the suits lose interest and chase the next shiny thing.

Ethereum Futures Market Leads, But Spot Demand Lags Behind

Data from on-chain analytics firm CryptoQuant suggests the recent uptrend in Ethereum’s price is primarily fueled by the derivatives market. Contributor Avocado Onchain noted that while ETH continues to MOVE higher, the underlying source of momentum appears to be leverage-heavy futures positions rather than sustained buying in the spot market.

This distinction raises questions about the durability of the current rally and whether follow-through demand from spot buyers will emerge. Avocado further highlighted in his QuickTake analysis titled “Ethereum’s Rally Driven by Futures Market — Will Spot Demand Follow?” that the ethereum Futures Volume Bubble Map is signaling an overheated state in specific zones, indicated by surging volumes.

This increase in futures volume, marked by yellow circles on the map, has coincided with ETH’s price gains, implying Leveraged positions are largely responsible for the rise.

In contrast, the spot market data shows relative stability, with no equivalent spike in volume, suggesting that buying pressure from traditional investors has yet to catch up.

The analyst also pointed out that Ethereum’s Open Interest (OI) in futures has reached new all-time highs, which strengthens the idea that the current movement is speculative in nature.

The question moving forward, according to Avocado, is whether momentum from the derivatives market will eventually be matched by genuine spot market demand. If such demand materializes, it could contribute to broader altcoin market activity, he added.

Institutional Interest and ETF Inflows

In a separate insight, another CryptoQuant analyst, Crypto Dan, noted increasing signs of institutional participation in Ethereum accumulation. According to his analysis, ETH is trading at a premium on Coinbase, a platform frequently used by US-based institutions and large investors, indicating heightened buying interest from whales.

The premium, described as rare in recent times, aligns with a broader trend of capital inflows into Ethereum-focused spot ETFs, which have recently reached record daily highs.

Dan stated that while current metrics do not indicate overheating, investors should remain aware of potential risks should the strong upward activity repeat in the second half of 2025.

For now, however, the combination of rising institutional demand and growing ETF allocations may provide structural support for Ethereum, especially if the spot market begins to reinforce the momentum sparked in the futures space.

Featured image created with DALL-E, Chart from TradingView