Ethereum's Potential Surge Amid Global Liquidity Expansion

Bitcoin has hit record highs recently, but Ethereum (ETH) is also experiencing a remarkable comeback. In light of expanding global liquidity, recent market analysis suggests that ETH might be preparing for a notable rally.
The US M2 money supply, an essential indicator of liquidity, has surged to a new peak of $22.2 trillion as it enters a revitalized expansion phase since the last three years.

Ethereum’s Path to $10,000?

CryptoQuant’s latest report suggests that Bitcoin has already capitalized on this liquidity surge, boasting an increase of more than 130% since 2022, tightly linked with M2 at a correlation coefficient of about 0.9. Conversely, Ethereum’s increase has been a modest 15%, a phenomenon termed as a ’liquidity lag.'

However, on-chain metrics demonstrate a narrowing gap; ETH exchange reserves have plummeted to approximately 16.1 million, down by over 25% since 2022, showcasing reduced selling pressure. Ongoing negative netflows indicate that investors are shifting Ethereum to self-custody or staking contracts, which further implies a tightening supply.

Interestingly, the Coinbase Premium Index has reverted to positive territory, mirroring renewed interest from US institutions. Historical data reveals that similar market conditions in 2020 and 2021 led to substantial price increases for Ethereum.

Historically, as Bitcoin leads early in monetary easing phases, capital often rotates into altcoins once BTC dominance dips below 60%, enhancing the ETH/BTC ratio. This emerging pattern signifies that 2025 could mark a shift from Bitcoin-centric rallies to broader altcoin growth.

As Ethereum could realign with M2 growth, it might be positioned for higher valuations if the liquidity expansion trend and structural decline in exchange reserves persist. In such a scenario, targeting $10,000 for ETH might not be a speculative excess, but a natural outcome of liquidity shifts within the cryptocurrency landscape.

Speculations of a Rapid Rally if $5,200 Breaks

The long-term outlook resonates with a recent opinion from Joao Wedson, the founder of Alphractal, who emphasized that surpassing the pivotal $5,200 threshold could set off one of the swiftest ETH rallies ever witnessed.

Institutional momentum is already instilling confidence, with spot Ethereum ETFs acquiring nearly $1.3 billion worth of ETH, prominently led by BlackRock, which accounted for over half of the purchases at $691.7 million.

“Quietly but steadily, the next liquidity wave may already be lifting Ethereum beneath the surface.”