Ethereum Surges 20% Amid Rising Trading Activity

Ethereum has seen a remarkable 20% surge in the past 24 hours, reaching $2,209, marking one of its sharpest short-term rallies of the year. This price increase is supported by a significant rise in trading activity, particularly within the derivatives market, where volume has soared by 184%, according to data from Coinglass. Additionally, open interest in Ethereum futures has jumped by 20%, signaling a surge of fresh capital entering the market.

The increase in open interest, coupled with Ethereum's price rise, suggests the possibility of a new trend emerging, as traders appear to be building long positions rather than merely covering shorts. Liquidations of short positions have also added fuel to the upward momentum, with more than $265 million in shorts wiped out in the past day.

Despite Ethereum's recent 54% rally over the last month, it remains down 26% year-to-date. However, analysts believe there could be further upside potential if the current momentum persists.

This rally coincides with a significant decline in the ETH/BTC Market Value to Realized Value (MVRV) ratio, which analysts at CryptoQuant highlighted on May 8. According to this ratio, Ethereum is now at its most undervalued level relative to Bitcoin since 2019. The MVRV ratio compares the market cap of an asset to its realized capitalization, or the average price at which tokens were last moved. The current ETH/BTC MVRV ratio has fallen into a historically low range of 0.4–0.8, a zone last seen in 2019. In previous cycles, such undervaluation has been followed by Ethereum outperforming Bitcoin, including in 2017, 2019, and 2021.

While this signal may appear bullish, there are concerns that Ethereum may not easily replicate its past outperformance. On-chain and macro data suggest that the current cycle is marked by stagnant network activity, an increasing token supply, and underperforming Ethereum ETFs, which could limit Ethereum's potential price growth. Ethereum's circulating supply recently hit an all-time high, reversing the previous deflationary trend, while lower mainnet fees and a decline in ETH burns have shifted its supply dynamics.

Furthermore, active addresses and decentralized finance (DeFi) activity have plateaued, and institutional flows have been muted. Major Ethereum ETFs, such as Grayscale’s ETHE, have seen billions in outflows, signaling a lack of significant institutional interest at the moment.

Despite the bullish MVRV signal, Ethereum may require a new catalyst—such as the approval of staking in Ethereum ETFs or a resurgence in DeFi activity—to maintain its upward momentum. While Ethereum’s price has risen sharply in recent days, its future performance remains uncertain without these additional drivers.