Ethereum price prediction: Bulls eye $4,000, but bears warn of worrisome trends this year

The crypto industry got a so-called “Trump bump” late last year after Donald Trump’s re-election.

Among other things, investors bet Trump's second term would bring regulatory clarity and friendlier SEC leadership than the one under Gary Gensler.

This faith sent bitcoin (BTC) soaring to record highs, breaking the $100,000 mark, while Coinbase (COIN)—the U.S.'s largest crypto exchange—surged past $300 for the first time since 2021.

Ethereum joined in on the party, crossing $4,000 at one point—its highest level since August.

Bitcoin has since struggled to hold those record highs, but analysts remain bullish on a breakout later this year. Ethereum, on the other hand, faces a tougher road ahead.

ETH has been lagging behind bitcoin and most other major cryptos, with its price hovering around $2,588 over the past month. Analysts chalk that up to three reasons: short sellers, competition, and structural challenges.

ETH shorting swells

In a Feb. 9 post on X, macro research firm The Kobeissi Letter noted that hedge funds had ramped up their short positions on Ethereum—up 40% in just a week and a staggering 500% since November 2024.

“Never in history have Wall Street hedge funds been so short of Ethereum, and it's not even close,” the research firm posted on X.

So what’s driving the bearish bets?

According to an analysis by Ayesha Aziz at CoinMarketCap, hedge funds are betting on ETH’s continued decline due to its weak performance relative to bitcoin. BTC has surged 104% over the past year, while Ethereum has managed just a 5.9% gain.

Instead of getting a sustained lift from Trump’s election—something many market watchers had expected—the opposite has happened.

The ether-to-bitcoin ratio, which tracks Ethereum’s price against bitcoin, has sunk to its lowest level in four years, according to CoinGecko.

Higher competition

Another factor driving hedge funds’ short bets on ETH is rising competition from other layer-1 blockchains—particularly Solana and Base.

One of Ethereum’s ongoing challenges is that Solana is simply faster and cheaper. While Ethereum processes around 1 to 1.5 million transactions daily, Solana handles between 60 to 65 million, according to Ankish Jain at crypto.news.

“The difference is substantial, with Solana not only processing exponentially more transactions but also doing so at a fraction of the cost, making long-term scalability a persistent challenge,” Jain writes.

So it’s no surprise that retail investors are increasingly shifting to Solana and Base.

As Arete Capital founding partner Ilya Paveliev told The Block, these platforms offer a smoother user experience alongside lower fees for launching memecoins and using AI-based apps.

Structural challenges

The shift of retail investors to competing layer-1 blockchains highlights Ethereum’s core structural issues—namely, that it’s slower and more expensive than its main rivals.

This has led to growing “frustration with the Ethereum Foundation,” the nonprofit backing the Ethereum ecosystem, as Arete Capital founding partner Ilya Paveliev told The Block.

Investors feel the foundation isn’t innovating fast enough to keep up with competitors like Solana.

Adding to Ethereum’s struggles, NFT trading volumes—a key source of network activity—plummeted 19% in 2024 to $13.7 billion, the lowest level since 2020.

However, Ethereum still leads in the smart contract space, which could help counterbalance some of the decline in NFT-driven activity.

Another major challenge is the lack of institutional adoption compared to bitcoin.

That’s a big reason why BTC ETFs have seen massive inflows, pushing their total market cap to $114.6 billion, while ETH ETFs have only attracted $8.29 billion, according to Blockworks data.

Reasons for optimism

Despite these headwinds, Ethereum could still see a bullish breakout this year.

Recent developments have given ETH some much-needed institutional backing—Fidelity, for example, recently bought nearly $50 million worth of ETH. Ethereum also got a surprising endorsement from none other than one of President Trump’s sons.

But the biggest catalyst could be regulatory clarity under the Trump administration.

Paul Atkins, Trump’s pick to replace Gary Gensler as SEC Chair, is a strong crypto advocate and could finally give institutional investors a reason to pour money into Ethereum.

Analysts at Bernstein have already predicted that an ETH staking yield “will likely be approved” by the SEC under Trump.

Edward Wilson, an analyst at Nansen, echoed that view, telling Cointelegraph that a “staked ETH ETF” could be approved early in the administration, allowing investors to fully leverage ETH as an asset.

That would be a game-changer for ETH ETF issuers and their investors. While the SEC’s approval of nine spot ETH ETFs last summer was a step in the right direction, the restriction on staking has kept it from reaching its full potential.

If the Trump administration greenlights staking, it could ignite a surge in investor demand—potentially giving bulls the push they need to send ETH past the $4,000 mark this years, analysts say.