Ethereum has snapped back into the spotlight after a sharp climb, forcing the key question of whether this is a constructive turn or merely a head fake.
Since early 2025, the asset has wrestled with a cocktail of macro stress, exchange breaches, delayed upgrades, and fierce competition. The latest rally arrives just as markets lean toward easier policy from the Federal Reserve, with traders rotating into risk once more.
This piece explains how Ethereum fell out of favour, what has changed in recent days, and why the current rebound could signal improving conditions or set a well timed trap for eager buyers.
How Ethereum Lost Momentum in 2025 and Why It Matters
From the start of 2025, negative sentiment built around Ethereum as global inflation stayed elevated, interest rates remained high, and trade tensions pushed investors toward perceived safety.
That flight to caution triggered broad liquidations across crypto and Ethereum suffered heavily. Highly leveraged positions were flushed, while exchange traded fund flows turned negative.
Outflows were notable enough that large institutions, including BlackRock products, saw millions in ETH redemptions as confidence weakened.
At the same time, on-chain activity cooled. Active wallet counts decreased and transaction volumes waned, indicating softer real usage.
Rival Layer 1 networks such as Solana and BNB Chain pressed their speed and fee advantages, drawing developers and users who wanted faster confirmation and lower cost activity. Competitive pressure added to a sense that Ethereum’s edge was narrowing exactly when it needed to widen.
Delays to the much anticipated Pectra upgrade then dented confidence further. Pectra had been viewed as a path to improved scalability and more predictable fees, yet setbacks left unresolved concerns about throughput and cost.
The blow to sentiment deepened when Bybit suffered a major breach in which $1.5 billion worth of ETH was stolen, one of the largest exchange incidents on record. Even though the hack was not a protocol failure, the size of the loss fed a wider narrative of fragility.
Relative performance made the mood worse. Ethereum lagged behind Bitcoin, which many investors treat as the first port of call when risk appetite is mixed.
The underperformance, combined with a drumbeat of bearish technical signals, encouraged more short selling and negative social commentary.
Across the ecosystem, investor trust appeared to erode, growth felt sluggish, and competition intensified.
By mid-year, the picture looked decidedly bearish, and many participants assumed that the path of least resistance remained down or, at best, sideways until the fundamental story changed.
What the Latest Rally Suggests and What Risks Remain
The picture shifted on Friday when ETH jumped about 14% after Federal Reserve Chair Jerome Powell signalled that a 25 basis point rate cut could arrive in September.
That single-day move has extended Ethereum’s gains to more than 250% from the April low of $1,385. Powell told the Jackson Hole audience that the stability of the unemployment rate and other labour measures allows the central bank to proceed carefully.
He added that policy sits in restrictive territory and the baseline outlook, alongside a shifting balance of risks, may justify adjusting the stance. In plain terms, the tone was more dovish, and easier liquidity usually supports appetite for risk assets such as Ethereum.
Flows and corporate adoption helped the change in mood. Ether ETFs now manage more than $12.12 billion in assets as of Friday, suggesting that institutional wrappers continue to attract investors back into exposure.
Corporations have also been buying. Around $1.6 billion in ETH treasury purchases were made over the past month, with names such as BitMine, SharpLink, Bit Digital, BTCS, and GameSquare among the most active. According to StrategicETHReserve.xyz, these holdings have since swelled to more than $29.75 billion.
A shift in how Ether is perceived is also taking shape. Rather than regarding ETH purely as a speculative token, more market participants are treating it as a reserve asset with real utility attached to its network.
Ray Youssef, the chief executive of NoOnes, captured the idea by noting that the market increasingly views Ether through this lens. If that reframing continues, it could provide a steadier base of demand than momentum alone.
Banks are taking notice. Standard Chartered lifted its year-end ETH target to $7,500 from $4,000 and projected $25,000 by 2028. Some analysts go further, arguing that ETH could reach as high as $13,000 in the coming months if conditions stay supportive.
These targets are not guarantees, but they reflect a clear recalibration of expectations following the latest macro signals and flow data.
The immediate trigger remains the debate over a September rate cut. A reduction would typically encourage investors to move toward higher return assets, including crypto.
Only days earlier, markets bounced when the Bureau of Labour Statistics reported that July inflation rose 2.7%, which was a smaller increase than expected.
That softer reading drew buyers into risk. Two days later, sentiment wobbled when the same agency published a 0.9% rise in the producer price index, the largest monthly climb since June 2022. Traders pulled back, worried that the Fed might keep policy steady for longer.
Into Powell’s Jackson Hole remarks, crypto softened again. Once he spoke, anxiety eased, and positioning flipped.
According to the CME FedWatch gauge, traders now price an 85% chance of a September cut, up from 72% just before the speech. If the market is right, the liquidity backdrop will improve, and the case for higher beta assets strengthens.
None of this erases the headwinds that defined 2025 for Ethereum. The network still needs to deliver on the Pectra roadmap to answer questions about scalability and cost.
Competition from faster and cheaper chains has not gone away. Security remains a constant focus after the Bybit theft, even though that was an exchange failure rather than a protocol flaw.
The lesson is that macro relief can ignite rallies, but lasting advances usually need underlying improvement in utility, user activity, and developer momentum.
The next phase will show whether this rally marks the start of a durable turn or simply sets another trap for buyers who chase strength before the fundamentals catch up.
Conclusion
The latest surge in ETH has real drivers behind it. A likely tilt toward easier policy, improving ETF and corporate flows, and a gradual shift in how Ether is perceived have combined to change the tone.
Yet the challenges that dragged on sentiment earlier in the year are still present. Ethereum needs to progress on Pectra, rebuild on chain activity, and hold its ground against rapid competitors.
If policy does ease in September and the network advances on utility, the rally could gain a stronger footing. If not, the risk is that the rebound fades as quickly as it arrived.
Contributor: Lydicius