Over the past six months, Ethereum (ETH) outperformed Bitcoin (BTC), which won 67% on Bitcoin and a modest 20% performance. Bitcoin is in its own category as digital gold without the gold pseudo-skull city, but Ethereum acts as a mainstay for smart contracts.
From the start of Ethereum to the transition to proof of work to proof of stakes, blockchain expands from Bitcoin’s long-term currency anchor to a programmable economy. Ultimately, existing financial services can be automated, 24/7, unreliable, decentralized applications (DAPP).
However, due to network effects, Bitcoin has become a kind of thing. With network work proof and difficulty adjustments, you cannot approach other coins security. In addition to expanding minimalism, immutability and conservative features, this will result in Bitcoin’s price being heavily dependent on macro terms.
The same cannot be said about Ethereum, which has many candidates with the same distributed finance (DEFI) status, along with design philosophy considerations. From this perspective, how should potential investors look at their ETH exposure?
Ethereum’s network effects are substantial and vulnerable
Just as Bitcoin has an advantage across the 58% crypto market, Ethereum governs further within the 61.3% defi blockchain. According to data from Defilama, $96.6 billion worth of assets are locked in Ethereum’s smart contract. This level of activity was slightly above $108 billion during the Peak Bull era in early November 2021.
For comparison, the next largest Defi chain, Solana – is just $11.2 billion in total locked amount (TVL).
In addition to having the advantage of the first mover within Defi, Ethereum achieved this by acting as an extension core. That is, by scaling network bandwidth over a wide range of layer 2 networks, such as Coinbase Base, arbitrum, Polygon, Optimism, Unichain, and more.
They introduced another layer of complexity for end users by bridged tokens and switching networks, but these scaling solutions effectively negate the issue of Ethereum’s crowding and unstable transaction fees.
At the same time, due to the same network effects, Ethereum becomes the biggest target for hacking and smart contract exploits. According to a H1 2025 Hack3d report from Certik Cybersecurity Company, Ethereum suffered $1.6 billion in losses over this period with 175 hacks and vulnerability exploits.
Additionally, simply navigating Ethereum’s ecosystem, user error, has resulted in a cumulative loss of ETH worth $3.43 billion, as it is the most conservative estimate by researcher Connor Grogan.
These numbers not only increase minimalist confidence in Bitcoin, but are also safe for slower-paced alternative blockchains like Cardano (ADA), which has adopted a peer review review mechanism in its roadmap. Ultimately, Ethereum’s roadmap includes both layer 1 scalability with shards and account abstraction to remove the complexity of end-user middleware.
Ethereum supply elasticity
There are 120.7 million ETHs in circulation, serving as a total supply, but Ethereum does not have a fixed supply like Bitcoin. Instead, Ethereum has a resilient supply to protect future growth by encouraging network validators.
In the fixed supply model that Bitcoin has, network rewards are reduced every four years by a half mechanism. In that model, Bitcoin’s security funds are offset by the rising price of BTC.
Ethereum dynamically expands your network security budget. Currently, around 35.7 million ETH are ingrained, ensuring a proven blockchain and generating more ETH tokens. However, this is offset by the token burning mechanism of Ethereum as a programmed rarity.
As a result, Ethereum’s inflation rate is roughly the same as Bitcoin, at around 0.74% per year, both significantly lower than the Federal Reserve’s ideal inflation target for a 2% dollar. Despite user errors and hacking issues, this makes Ethereum a viable Defi infrastructure layer that combines the versatility of smart contracts with sound money.
Nevertheless, ETH prices still depend on the market cycle.
Ethereum’s negative profitability and MVRV signal
According to Tokenterminal, Ethereum has 2 million active users across thousands of Dapps. This maintains the highest level of developer activity in the crypto space. However, like companies in their early stages of growth, the Ethereum network is not beneficial as it has repeated token incentives to promote activity.
If we compare the Ethereum Network to a company, its ETH dynamic supply is similar to issuing new shares to fund security when business slows down. Similarly, token burning is similar to sharing buybacks as a reduction in total ETH supply.
Ethereum’s core revenue comes from transaction fees (gas), ETH staking fees, and maximum extractable value (MEV) as block producers’ “advanced” revenue streams when reordering or inserting transactions.
These three components form the realised value ratio (MVRV) from the actual value or market value of Ethereum. Usually, if the MVRV is above the 3.0 ratio, this directs the top of the market, followed by a sale. In early August, Ethereum’s MVRV reached 2.0, showing a few more months of bullishness before the inevitable market correction.
Ethereum could surpass the previous top
Looking back at the past four years of Biden administrators, it is clear that the crypto space has been under intense attacks. This came not only from Gary Gensler’s SEC, but also from unruly banking practices within the Federal Reserve. As a result, such policies have curtailed enthusiasm across the crypto ecosystem.
It was equally clear that there was a departure from this hostile institutional stance early on in Trump’s administrators. A strong indicator of this is the increase in capital inflows of companies into the etheric treasury.
According to the Strategic ETH Reserve Tracker, there are currently 3.6 million ETHs, worth around $16.6 billion across 72 entities. Just as spot-trade Bitcoin ETFs promote institutional exposure, the same can happen with ETH.
Also, potential investors should inform the new era of stubcoin, taking into account the recently passed genius law. Ethereum is the largest facilitator of Stablecoin Traffic, diversified with a market capitalization of $138 billion, with Tron Network at $83 billion and almost entirely dominated by USDT.
Combined with Ethereum’s elastic supply, it’s easy to see why ETH prices are likely to surpass the previous all-time high of $4,891 in November 2021, with low inflation rates and wide range of defi use cases.
Of course, as the MVRV ratio rises, there could be a big sale. Nevertheless, in an encrypted era, this should only serve as another Buy opportunity.
Disclaimer: The author does not or has the position of the securities discussed in the article. All stock prices were quoted at the time of writing.
