4 Reasons Ethereum's 44% Rally Could Just Be Starting

The market loves a good comeback story, and right now Ethereum (CRYPTO: ETH) is auditioning for the lead role. After spending most of 2023 and 2024 lagging other major cryptocurrencies, Ethereum has surged roughly 30% during the past 90 days. There's reason to believe that this move is not just another speculative pop.

There are four catalysts that look built to last. If those forces keep pulling in the same direction, the rally may be only the opening act.

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Let's check them out and understand how they fit into the coin's longer-term picture.

1. Cooling inflation turns the macro tide

Ethereum, like all cryptocurrencies, is very sensitive to macroeconomic phenomena like inflation and the money supply.

On that front, things are looking pretty good right now.

May's Consumer Price Index (CPI) showed inflation running at 2.4%, the lowest readout since early 2023. That reading boosts the odds that the Federal Reserve will cut interest rates later this year, which will make it cheaper for banks to borrow money, and thus more likely that investors will need to look further down the risk curve, toward crypto, to get a return beyond the cost of borrowing.

Image source: Getty Images.

In short, lower rates have historically tended to nudge investors out of cash and into longer‑duration bets like crypto.

Markets are already leaning that way. The U.S. dollar index, which tracks the strength of the dollar relative to other currencies, just slipped to a three‑year low on expectations of easier money.

Cheaper dollars make dollar‑denominated assets with fixed supplies look more attractive, and Ethereum fits that bill.

2. Institutional money is piling in

When the biggest wallets start buying, price moves can snowball. And there aren't any players with bigger wallets than institutional investors like pension funds and hedge funds.

During the week of May 13, $205 million flowed into Ethereum‑linked products, making for the strongest haul since early 2024, and about 25% of all crypto exchange-traded product (ETP) inflows. The momentum kept rolling; by mid‑June, Ethereum exchange‑traded funds (ETFs) had logged a 16‑day intake streak worth almost $900 million.

Pension funds and ETF sponsors are not day traders. Their allocations typically stay parked for multiple quarters or even years, effectively removing supply from the market and signaling that the fear that dominated late 2024 is fading. And that's bullish for Ethereum, because they hold it now.

3. Pectra aims to make Ethereum cheaper and easier to use

Slated for activation in late 2025, Pectra is Ethereum's biggest technology overhaul in recent years.

The package rolls 11 improvement proposals into one release that simplifies wallets and smooths out gas (user) fee volatility via a variety of mechanisms.

Pectra tackles three persistent pain points in one go: user‑friendliness, account security, and unpredictable transaction costs. If its second phase has the intended affects when it launches later this year as planned, it could also help the network to scale, keeping costs lower and improving transaction times.

History suggests that every time Ethereum reduces friction, developer activity and on‑chain demand rise soon after, both of which tend to lift prices.

4. Staking deposits are locking up ever more coins

While Pectra cooks, Ethereum staking is already squeezing supply.

On June 11, staked Ethereum coins hit a record 34.6 million, accounting for roughly 29% of circulating supply, and up from 26% a year ago. Importantly, the staking share of total supply keeps rising even as the coin's price climbs, suggesting holders prefer yield to speculation. That means investors see that they can get a more attractive return by leaving their capital parked in staked coins rather than transferring it elsewhere, which in turn ensures that more value is stored on the chain, boosting the coin's price.

The reason for this is that staked coins cannot be sold without first exiting a validator queue, which can take days. Layering on Pectra's validator simplifications, which are expected to make staking cheaper and easier, it is plausible that 35% or even 40% of all Ethereum coins could be bonded for yield within a year.

A shrinking float (coin available for public trading) paired with growing demand is a classic recipe for sustained price strength, as it forces buyers to compete with each other in the form of bidding higher prices to secure coins of their own.

Still, investors should take note that none of these four forces I've mentioned guarantees a straight‑line ascent.

A macro shock or an unexpected bug in Pectra could smash confidence fast. Yet if inflation keeps easing, institutions keep allocating, the upgrade continues to land smoothly, and staking continues to grow, Ethereum's risk‑reward profile looks far stronger than it did six months ago.

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Alex Carchidi has positions in Ethereum. The Motley Fool has positions in and recommends Ethereum. The Motley Fool has a disclosure policy.