Bitwise Analyzes What’s Influencing Ethereum's Price: It’s Not Just the Fundamentals

Recent research by Bitwise has revealed that Ethereum's price fluctuations primarily mirror those of Bitcoin rather than being influenced heavily by its own fundamental metrics. This finding suggests that external market factors play a more significant role in ETH's pricing than previously assumed, raising questions about its market behavior.

Key Takeaways

Ethereum’s price is largely influenced by Bitcoin, acting as a proxy rather than reflecting its inherent value.
Bitwise's analysis shows that Bitcoin accounts for around 65% of Ethereum's price movements.
Traditional adoption metrics and revenue generation have less impact on Ethereum’s price than expected.
Other factors, such as financial conditions and ETF flows, contribute to Ethereum's price, though to a lesser extent.

Exploring the Factors Driving Ethereum’s Price

According to new insights from Bitwise, Ethereum's price has consistently lagged behind its institutional advances and on-chain developments throughout this market cycle. The key takeaway from their analysis is that ETH primarily trades as a Bitcoin proxy rather than reflecting the fundamental value of the network itself. Bitwise discovered that since 2018, Bitcoin has been the leading factor influencing weekly returns for Ethereum, with macroeconomic factors, network activity, and exchange-traded products (ETP) flows playing lesser roles.

The significance of this finding challenges prevalent narratives about Ethereum's market role. With improved regulatory clarity, broader access for institutions, and a large part of stablecoin and tokenized asset activity relying on Ethereum, it is surprising that ETH is currently around 62% below its historic high. Bitwise aims to clarify this disconnect through a model utilizing 406 weekly observations dating back to May 2018.

Statistically, it becomes evident that Bitcoin's influence is overwhelming. Bitwise noted that Ethereum's movements are nearly perfectly aligned with Bitcoin on a weekly basis—with a correlation coefficient of about 0.99. Bitcoin explains roughly 65% of the variations in Ethereum's returns, marking it as the primary driver of price direction.

Bitwise's conclusions are straightforward: "Adoption fundamentals, such as active addresses, have less of an impact on Ethereum's price than many may think." Furthermore, the analysis suggests that revenue generation is even less significant, as it was eliminated from their GETS model, being categorized as "noise rather than a signal." This evidence supports the notion that, since 2018, Ethereum has been valued more as a commodity driven by network dynamics rather than as a stable business generating reliable cash flows.

Additional Influences on Ethereum’s Value

This framework continues to resonate throughout Bitwise’s report. The analysis indicated that financial conditions—measured using the Bloomberg U.S. Financial Conditions Index—emerged as the second most crucial factor impacting Ethereum's price. Bitwise assigned this factor a coefficient of about 0.05, with an average explanatory power of 11.3%, which can rise to around 40% during peak periods. Meanwhile, network activity, indicated by active addresses, has a lower coefficient of approximately 0.03 with an average explanatory capacity of just 6%, surging to about 30% during stronger market phases.

ETF flows demonstrated a different trend, showing a coefficient of only around 0.01 yet proving to be "highly significant." On average, ETF flows account for about 10% of Ethereum's variance and can reach up to 40% during peak times. This indicates that while ETF flows are consistently impactful, they do not carry the same weight as Bitcoin-led market movements.

This relationship became more apparent during different market conditions. Bitwise noted that between June and August 2025, Ethereum essentially performed as a leveraged Bitcoin trade, with its correlation to Bitcoin increasing to between 1.5 and 1.6 as Bitcoin approached new highs.

In the latter half of 2022, during the post-FTX market stress, the impact of Bitcoin intensified: “Every other factor, except BTC, possessed a negative coefficient as returns were predominantly explained by Bitcoin, accounting for up to 90%.” In such scenarios, cash liquidity takes precedence over fundamentals, flows, or macroeconomic considerations. Consequently, Ethereum appeared to remain tethered to Bitcoin’s movements.

There have been some exceptions to this pattern. Bitwise highlighted May 2021 as a period with minimal sensitivity to Bitcoin, during which Ethereum continued to rise as active addresses surged amid the NFT boom. However, these unique windows seem to be isolated incidents rather than routine occurrences.

The report also calls into question the belief that employing a more complex multi-factor framework significantly enhances short-term predictions. Although their model explains historical returns adequately, Bitwise noted that its performance in forecasting did not surpass that of a simpler AR(1)+BTC model. The vast majority of the predictive benefits stemmed from Bitcoin exposure and its price trajectory, with additional factors contributing only marginally.

This analysis leaves Ethereum in what Bitwise refers to as a "paradoxical position." It is a network gaining institutional relevance, holding a dominant market share in stablecoins and tokenization, and following a clearly defined roadmap. Yet, its price remains primarily under the influence of external factors.

As of the latest update, Ethereum’s trading price stands at $2,305.

Ethereum price chart