After experiencing three months of fluctuations, Bitcoin's price has once again crossed the $100,000 mark, while Ethereum has surged to become the leader of this rally with an astonishing 20% increase in a single day. This sudden market movement is not coincidental, but rather the result of multiple factors working together, with Ethereum's technological upgrades and regulatory expectations constituting the core driving force.
Market Performance and Data Interpretation
According to Quantify Crypto data, Bitcoin's price has surpassed $104,000, with a 24-hour increase of 7.41%, reaching a three-month high. Ethereum has performed even better, breaking the $2,200 mark with a 24-hour increase of 20.1%. Other major altcoins have also shown a trend of rising, with SOL surpassing $160 (an increase of 8.9%) and DOGE exceeding $0.19 (an increase of 11.38%). The ETH/BTC exchange rate reached 0.0218, hitting a one-month high with a daily increase of 13%.
The overall market sentiment has shown a significant reversal. Alternative data indicates that the Fear and Greed Index has rapidly risen from extreme fear a month ago to 73, entering the greed zone. CoinGecko statistics show that the total market capitalization of cryptocurrencies has surpassed $3.3 trillion, with a 24-hour increase of 5.26%, reflecting a rapid recovery in investor confidence.
The substantial impact of Ethereum's technological upgrades
The approval of the Pectra upgrade brings several key improvements to Ethereum, directly enhancing network value. First is the increase in block throughput, which theoretically can enhance transaction processing capacity by 15-20% through optimized block processing mechanisms. This improvement is significant for the Ethereum network, which has long struggled with high gas fees.
Optimizing the EVM object format is another important breakthrough. The new format reduces contract deployment and invocation costs by approximately 30%, making the execution of complex smart contracts more efficient. According to tests by the Ethereum core development team, the average gas consumption for typical DeFi transactions is expected to decrease by 18-22%.
The advancement of account abstraction has significantly improved user experience. The refinement of the ERC-4337 standard allows smart contract accounts to replace traditional EOA accounts, meaning users no longer need to manage private keys directly. According to Dune Analytics data, the retention rate of dApp users using account abstraction is over 40% higher than that of traditional dApps.
These technological improvements collectively strengthen Ethereum's Layer 2 ecosystem. According to L2Beat data, the total value locked (TVL) in major Layer 2 networks increased by 12% within a week after the upgrade announcement, and daily trading volume rose by 25%. The technological upgrades reduced transaction costs and improved data availability, creating a more developer-friendly environment.
Regulatory Expectations and Market Psychology
The approval window for the staking function of Ethereum spot ETFs at the beginning of June has become another focus of the market. If staking services are approved, they will bring investors an annualized additional return of 4-6%. According to Glassnode analysis, similar staking yields correspond to high-yield bond levels in traditional financial markets but are more attractive to institutional investors.
The synergy between regulatory trends and technological advancements creates a positive effect. The SEC's change in attitude towards Ethereum ETFs sends a positive signal, while the Pectra upgrade provides fundamental support for this optimistic expectation. This dual benefit makes Ethereum's risk-adjusted return expectations superior to Bitcoin, resulting in a noticeable shift of funds towards ETH.
The performance of the options market confirms this trend. Deribit data shows that the open interest for ETH call options has increased by 35% in the past week, far exceeding BTC's 18%. The proportion of call options with exercise prices above $2,500 has significantly risen, reflecting market optimism regarding ETH's short-term outlook.
Market Structure and Capital Flows
On-chain data analysis reveals the sources of capital for this rally. Chainalysis reports that the volume of stablecoins flowing into exchanges has increased by 45% in the past two weeks, with about 60% directed towards ETH and related tokens. This capital flow pattern resembles the early stages of the 2021 bull market, but with significantly higher institutional participation.
Changes in holdings are also worth noting. CoinShares statistics show that digital asset investment products have seen net inflows for five consecutive weeks, with Ethereum funds increasing their share from 25% at the beginning of the year to 38%. Institutional investors seem to be adjusting their holdings, increasing the proportion of Ethereum in their portfolios.
The ETH balance on exchanges has dropped to a three-year low. CryptoQuant data shows that ETH reserves on major exchanges decreased by 12%, while the amount of ETH locked in smart contracts increased by 8%. This change in supply-demand structure provides support for prices, especially as leverage in the derivatives market remains relatively restrained.
Risk Factors and Technical Observations
Although market sentiment is high, potential risks cannot be ignored. The futures funding rate has risen to a relatively high level of 0.15%, indicating that leveraged long positions are accumulating. According to historical data, when the funding rate exceeds 0.1%, the probability of a short-term market correction increases by 60%.
Technical indicators show that ETH has entered the overbought territory. The daily RSI has broken above 70, and the weekly MACD has formed a golden cross; this technical pattern has guiding significance for mid-term trends. It is worth noting that there is significant psychological resistance around the $2,200 mark, coinciding with the 2018 peak and the 50% Fibonacci retracement level of the 2022 correction.
On-chain profit-taking pressure may become a short-term constraint. Analysis from IntoTheBlock indicates that approximately 35% of ETH holdings are currently in profit, nearing the historical average profit-taking threshold. If prices continue to rise rapidly, this part of the holdings may create supply pressure.
The Deep Logic of Market Evolution
This rally differs fundamentally from previous bull markets. The rise in 2021 was mainly driven by retail liquidity and DeFi innovations, while the current market reflects a reevaluation of crypto asset allocation value by institutional investors. The participation of traditional financial institutions like BlackRock has changed the market structure, making price fluctuations more fundamentally supported.
The maturity of the Ethereum ecosystem is also a key variable. According to the Electric Capital developer report, the number of monthly active developers on Ethereum is more than three times that of all other smart contract platforms combined. This developer advantage is translating into real applications, with continuous innovations emerging in areas such as DeFi, NFTs, and gaming.
The subtle changes in the regulatory environment cannot be overlooked. The SEC's softened stance on Ethereum's securities attributes and the gradual implementation of the European MiCA framework have cleared some obstacles for institutional capital entry. The impact of this policy shift may be more profound than technological upgrades.
The market is always seeking new balance amid change. Ethereum's strong performance this time is due to both fundamental improvements from technological upgrades and capital reassessment driven by changes in regulatory expectations. When technological innovation resonates with financial demand, it often leads to the most sustainable market trends. Investors need to remain clear-headed in this complex environment, seizing opportunities without blindly following trends.