Ethereum Price Annual Forecast: Can Pectra upgrade push ETH to new all-time high in 2025?

• Ethereum gained about 48% in 2024, underperforming major cryptos due to its declining revenue and inflation-related concerns.
• The Pectra upgrade and Unichain's launch are two key events that could alter ETH's price trend in 2025.
• Ethereum could rally to a new all-time high near $7,000 in 2025 if it surges above a three-year symmetrical triangle pattern.

Ethereum's (ETH) price extended its good run from 2023 into 2024, rising by about 48% to $3,390 in December. ETH somewhat mimicked its performance of 2023, posting a green first quarter that saw its price reach a two-year high of $4,093.

It declined from the late stages of Q1 and into Q2 – with $2,817 as a key support level – before surging in May. However, the increase didn't last long as ETH resumed a downtrend that spanned into Q3, breaching the $2,817 support. This aligned with the historical crypto market's slow growth in Q3 due to the holiday season.

Ethereum picked up pace in Q4, rising by over 50% between November 5 and December 19, particularly fueled by bullish sentiment surrounding the US presidential election victory of Donald Trump.

Many anticipated a higher price ceiling of $5,000 for ETH in 2024 following the ETH exchange-traded fund (ETF) launch and overall crypto bullish market cycle. However, it looks set to fall short of expectations due to the headwind of declining on-chain revenue and the inflationary pressure it experienced during the year.

ETH/USDT 3-day chart

Going into 2025, a major contention among investors is whether Ethereum could break its all-time high of $4,868 – as Bitcoin and Solana have done in 2024 – before the overall crypto market bullish momentum cools.

Ethereum 2024 review: Dencun upgrade triggers Layer 2-centric roadmap

The Ethereum Dencun upgrade went live on March 13, improving the network with features from nine Ethereum Improvement Proposals (EIPs). The most popular was EIP-4844, also known as proto-danksharding, which introduced Binary Large Objects (blobs) space for Layer 2 networks to store transactions.

Blobs are temporary storage space attached to Ethereum blocks where Layer 2 networks post their transactions for validation. Unlike call data, blobs are stored on the Main Chain for about three weeks, reducing the storage requirements and costs for processing Layer 2 transactions.

Layer 2 (L2) solutions improve Ethereum's scalability by bundling transactions off-chain and submitting a compressed version to the main chain.

While L2 networks boosted speed and reduced fees to an extent, they initially posted these compressed transactions to Ethereum's call data, which permanently stores data on-chain.

Permanently storing L2 data on the main chain resulted in significant storage costs. Network nodes passed on this cost to L2 networks, which ultimately trickled down to end users. This process constrained scalability and made transactions on L2s expensive compared to blockchains like Solana and Cardano.

After blobs went live via the Dencun upgrade, it reduced fees on L2s by over 90% and boosted transaction finality. Most L2s became even cheaper to use than low-cost blockchains like Solana.

Ethereum Layer 2 L1 Data Fees. Source: The Block

Since the introduction of blobs, Layer 2 networks have become more attractive to users, with chains like Base growing their transaction volume by 525% between the Dencun upgrade and its peak in November. Overall, blobs made Ethereum competitive again and placed it in the class of next-generation blockchain networks.

Ethereum Layer 2 Transaction Volume. Source: Dune (watermeloncrypto)

While blobs were a major win for Ethereum, it came with a challenge that hampered ETH's price growth in 2024 – the ultrasound money scare.

Ultrasound money narrative face risk from declining fees

In the London hard fork of August 2021, Ethereum developers introduced a burn mechanism that solved one of its most critical currency challenges at the time: inflation. Unlike Bitcoin, which is capped at a maximum supply of 21 million BTC, ETH supply was ever-increasing as validators added new blocks to its network.

Burn is a word used to indicate when coins are sent to an address where they can't be recovered, hence, permanently removing them from circulation.

The burn mechanism was a strategy to curb this challenge and give Ethereum a competitive edge over Bitcoin. It works in such a way that a part of the transaction fees – paid in ETH – in every block is burned, reducing ETH's total supply over time. The process unlocked a deflationary feature that eventually turned into the Ultrasound money narrative, which has become a major part of ETH's investment thesis.

The logic follows the principle of scarcity: as demand for the Ethereum blockchain grows, more fees are collected, increasing the amount of fees burned. This reduces ETH's circulating supply and boosts its market price.

Additionally, the yield – partly from fees – that investors earn from contributing to Ethereum's security through staking was a major way to keep coins out of circulation and help ETH's price growth.

However, after Blobs reduced L2 fees, weekly revenue on the L1 plunged.

While this was the originally intended plan that developers set out to achieve, the reduced transaction fees have caused a decrease in revenue for stakers, plunged ETH's burn rate, and flipped the trend of supply reduction.

Daily ETH Burnt. Source: Etherscan

The supply hike has weighed on prices and could be partly responsible for ETH's underperformance against Bitcoin and Solana.

If the new supply growth trend continues, most crypto community members anticipate that ETH will return to being an inflationary currency and lose its Ultrasound money appeal over time.

ETH Supply Growth. Source: Ultrasound.money

Unichain's launch poses risk to Ethereum revenue growth

To add salt to injury, the Uniswap decentralized exchange – Ethereum's highest fee contributor and largest ETH burner – unveiled plans to launch its own Layer 2 solution in 2025.

Uniswap currently accounts for a large percentage of the L1 revenue, with over 90% of its cumulative fees coming from settlement on the main Ethereum chain, per DefiLlama data. The loss of such a major revenue generator to the L2 world could cause Ethereum to lose about $600 million in annual revenue. This could disincentivize validators and investors from staking their ETH holdings.

Uniswap cumulative fees across chains. Source: DefiLlama

Uniswap V1, along with Uniswap V2 and Uniswap V3, ranks among the top ten contributors on the ETH burn leaderboard, making them significant players in reducing ETH supply. Since the introduction of the ETH burn mechanism, Uniswap platforms have collectively burned a total of 656,000 ETH as of December 19.

ETH Burn Leaderboard. Source: Ultrasound.money

With most of the transactions that cause such a high burn rate for Uniswap potentially moving away to Unichain, ETH supply growth could accelerate, increasing inflationary pressure and potentially weighing down on prices.

However, some crypto community members, including Ethereum co-founder Vitalik Buterin, said that ETH could return to its deflationary trend over time as the scalability of L2s grows in popularity and attracts new users. The idea is that L2s boost Ethereum's revenue and annual burned ETH more than before the Dencun upgrade through economies of scale.

As we go into 2025, investors need to watch how this prediction will play out and its potential impact on their ETH investments.

Ethereum ETFs pick up pace in Q4

US spot Ethereum ETFs launched on July 23 after the Securities and Exchange Commission (SEC) delayed commenting on the filing of issuers for months.

After the launch of Bitcoin ETFs in January, crypto community members expected the SEC to quickly approve similar Ethereum-based product filings from major issuers, including BlackRock, Fidelity, Bitwise, and 21Shares.

However, unlike the Bitcoin ETF process – where the SEC constantly engaged with issuers – the regulator delayed commenting on ETH ETF filings for months. With the delay, most experts expected the SEC to deny issuers' applications.

A possible reason for the negativity was rumors that the SEC was investigating firms related to Ethereum and the Ethereum Foundation regarding the potential classification of ETH as a security.

However, the SEC seemingly made a U-turn on May 23, requesting issuers and exchanges to update their registration statements. The updates reflected issuers removing words related to ETH staking from their filings as the regulator was reportedly uncomfortable with the feature. The SEC eventually approved nine Ethereum ETFs for launch on July 23.

Ethereum ETFs. Source: Coinglass

In the first few months of launch, outflows from Grayscale Ethereum Trust (ETHE) significantly outpaced inflows in the other eight products. However, since Donald Trump emerged as the winner of the US presidential election on November 5, the exodus from Grayscale's ETHE has slowed, and inflows into the other eight ETH ETFs – particularly BlackRock iShares Ethereum Trust (ETHA) – have accelerated.

Total Ethereum Spot ETF Net Inflow. Source: Coinglass

Ethereum ETFs have attracted net inflows of about $3 billion between November and December. The recent inflows have been instrumental in boosting their cumulative net flows to $2.47 billion on December 19.

Most analysts expect issuers to update their ETH ETF filings with the SEC to include staking in 2025. Bernstein analysts said the upcoming new SEC administration under Trump will likely approve issuers to offer staking within their Ethereum products.

If the SEC acts accordingly in 2025, it could significantly boost the appeal of Ethereum ETFs and, in turn, cause an equivalent surge in ETH's price. 

Ethereum in 2025: The year of Pectra upgrade 

After Dencun, Pectra is the next key upgrade that's set to introduce new features from 20 EIPs to the Ethereum blockchain. The upgrade – a combination of previous Prague and Electra upgrades – is aimed at improving the wallet experience for users, boosting security, increasing staking rewards, speeding up smart contracts and improving scalability.

According to Ethereum developers, Pectra will be deployed in two phases, with phase one set to go live in 2025 and phase two coming up later. While the initial plan was to ship all the upgrades together, Ethereum core developers split the process into two to make the transition less cumbersome and reduce the risk of shipping both. The first phase will feature about 10 EIPs, while the others will ship with the second phase, known as Fusaka.

Some of the notable upgrades in Pectra phase one include:

• Account Abstraction: allows users to batch transactions together to pay one-time gas fees, sponsored transactions where third parties pay fees for users, payment of fees in any ERC-20 token, account recovery options, etc.
• Blob expansion: increase the blob target in Ethereum blocks to boost its data availability capacity and reduce fees for Layer 2 networks.
• Zero-Knowledge proof upgrade: improve how Ethereum processes zero-knowledge cryptography to unlock additional privacy, security and scalability benefits.
• Staking upgrade: increase the maximum balance of validators from 32 ETH to 2,048 ETH to maximize earnings, reduce the validator set size and enable flexible staking withdrawals.
• Steps to Verkle Trees Implementation: tweak the execution layer to allow the generation of proofs of historical blocks from the state, which holds all the information about Ethereum accounts and their associated smart contract data.

Read this Galaxy Research report to learn more about the upcoming Ethereum upgrade.

The changes from the Pectra upgrade could significantly impact the network activity of Ethereum and, ultimately, ETH's value.

Ethereum Fundamental Outlook 2025: Key on-chain metrics to look at

Historical In/Out of the Money

This measures the profitability of addresses and coins on a blockchain network. The number of profitable addresses increased from 80.61 million (75.6% of total addresses) at the beginning of the year to 115.03 million (89.44% of total addresses) on December 18. Meanwhile, addresses experiencing a loss represented only 7.07% of total addresses, with the remaining 3.5% at break even.

Prices often correct when such a high percentage of addresses are in the money as traders opt to realize profits.

ETH Historical In/Out of the Money. Source: IntoTheBlock

Furthermore, during ETH's volatility over the year, the range between $2,074 and $2,517 served as a key support level as it represented a historically high demand zone where investors purchased 61.5 million ETH, representing over 51% of its total supply. This is a critical price support zone to watch out for in case the market flips bearish in 2025.

ETH Global In/Out of the Money. Source: IntoTheBlock

Total ETH Staked

It measures the willingness of investors to hold onto their tokens long-term and contribute to Ethereum's security. In 2024, the total amount of staked ETH increased by 17% from 29.26 million ETH to 34.47 million ETH as of December 18. Still, the increase is well below the 75% staking growth rate of 2023.

Total ETH Staked. Source: IntoTheBlock

The slower growth rate is potentially due to the lower staking rewards from the decline in Ethereum fees in 2024. As evidenced in the chart below, the total fees captured on the Ethereum main chain in 2024 were much lower than in the past two years, even though 2024 was generally bullish.

If Ethereum network activity improves in 2025, it could boost fees, increase staked ETH, accelerate ETH burning, and drive up prices. A drop in activity would have the opposite effect on these metrics.

Ethereum Total Fees. Source: CryptoQuant

Active Addresses

In 2024, Ethereum's active addresses slightly edged its 2023 record. A spike in this trend in 2025 can help ETH's price surge further.

Ethereum Active Addresses. Source: Etherscan

Total Number of Holders

Ethereum added 23.02 million new holders in 2024, increasing from 111.6 million in 2023 to 134.62 million as of December 18. This is over 20% higher than the 18.94 million addresses added in 2023. A large number of holders can help cushion volatility in ETH's spot market in the coming year.

Total Amount of ETH Holders. Source: Santiment

Total Value Locked (TVL)

It measures the total worth of all assets deployed on a blockchain network or decentralized application. Ethereum's TVL increased from a low of 12.98 million ETH in 2023 to 20.16 million ETH on December 16. Despite the rise, this is still far below the 29.8 million ETH TVL registered during the 2021 bull market.

The slow growth in Ethereum's TVL may be due to increased competition from other Layer 1 blockchain networks.

Ethereum TVL. Source: DefiLlama

MVRV and 365-day MVRV Ratio

The Market Value to Realized Value (MVRV) Ratio shows the average profit or loss of Ethereum investors. Currently, all ETH investors are up by an average of 82%, while those who bought in the past year have an average profit of 18% as of December 19.

The current cycle’s MVRV peak in March is much lower than the peaks of previous bullish seasons, as the chart below shows, suggesting ETH has more growth potential in 2025. However, the 365-day MVRV indicates ETH may have topped in this cycle after reaching levels last seen in November 2021 during its rally in March.

MVRV and 365-day MVRV Ratio. Source: Santiment

Open Interest and Funding Rates

Open interest is the total amount of outstanding contracts in a derivatives market, while funding rates are periodic payments between traders to ensure derivatives don't deviate from the spot price of their underlying asset.

In 2024, Ethereum's open interest reached a new all-time high of $28.7 billion before seeing a slight correction. Funding rates have returned to normal levels after peaking in early December. While the open interest growth is a positive, a closer observation reveals another story.

Ethereum Open Interest. Source: Coinglass

DeFi protocol Ethena's synthetic dollar basis trade strategy is responsible for a large amount of the open interest growth. The process involves locking a delta-neutral position by holding ETH in staking protocols and then opening equivalent short positions in the futures market. The staked ETH earns staking rewards, while the short positions earn yield from funding fees.

Ethena's success saw several institutional players replicating the strategy on ETH to compound their yield-generation effort. Hence, Ethereum's open interest and whale holdings rose without having much effect on prices.

While the strategy is working well for now, it's unclear how investors will respond if funding rates turn negative and how that might affect Ethereum's price. This is another factor to consider for 2025.

Experts predictions for Ethereum in 2025

According to Jesper Johansen, CEO and Founder of Northstake, the gap between Ethereum and Bitcoin ETFs could be corrected in 2025 as institutions are beginning to realize the yield-bearing potential of ETH. The approval of staking within Ethereum ETFs could turn over 3.6 million ETH sitting idle within ETFs to yield machines while strengthening Ethereum through increased security and decentralization, he said.

Johansen's most ambitious prediction for 2025 is the ETH internet bond:

"Perhaps the most transformative development we'll see in 2025 is the emergence of what I call the 'Internet Bond'. This innovation will bridge the gap between traditional fixed-income products and DeFi yields. By packaging Ethereum staking yields into a familiar investment vehicle, we're making DeFi accessible to millions of traditional investors who have been sitting on the sidelines.

This isn't just about creating a new financial product; it's about democratizing access to digital asset yields through a framework that institutional investors and regulators can understand and embrace. The Internet Bond could do for DeFi what ETFs did for stock market investing – make it accessible, understandable, and mainstream."

However, Laurent Benayoun, CEO of Acheron Trading, noted that while staking would make ETH ETFs attractive to investors, it could create a centralization risk for Ethereum.

Manthan Dave, co-founder of Palisade, focused on the effects new altcoins ETF could have on ETH. According to Dave, speculations of new ETF launches for altcoins like XRP and Solana are "having a dampening effect on ETH this bull cycle, drawing capital into other altcoins."

Meanwhile, James Toledano, Chief Operating Officer at Unity Wallet, believes that "Ethereum's performance in [2025] will hinge on [the] interplay between institutional and retail demand and macroeconomic conditions."

Ethereum 2025 Technical Outlook: New all-time high possible if price breaks out from triangle pattern

On the weekly chart, Ethereum has struggled to maintain a breakout above a symmetry triangle pattern that extends from its all-time high in November 2021. ETH declined below the support level near the upper boundary trendline of this symmetrical triangle pattern on December 18.

However, if ETH recovers the triangle's descending trendline support and breaks its yearly high resistance of $4,093, it could establish a new all-time high near the $7,000 psychological level. The $7,000 price target is obtained by taking the height of the triangle and extrapolating it higher from its breakout point.

ETH/USDT weekly chart

A potential tailwind that favors such price action is the expectation that cryptocurrencies could hit new highs in 2025, extending the historical four-year crypto market cycle trend.

The Stochastic Oscillator declined from the overbought region, aligning with the trend that ETH often sees a correction if the Stoch stays in the overbought region for an average of 40 days.

The last time the Stoch spent more than two months in the overbought region, it rallied more than 4.5x from just under $440 in November 2020 to about $2,000 in February 2021. While it's unlikely that ETH will see such a move in 2025, a rich rally can be expected if the indicator repeats this historical trend.

On the downside, ETH often suffers major corrections when the Stoch crosses below its midline at 50.

Meanwhile, the Relative Strength Index (RSI) is above its neutral level but declining, indicating weakening bullish momentum.

A key level to watch is if the RSI crosses below its yellow moving average line when below the neutral level. Such a move could also see ETH sustain heavy corrections.

The support zone around the $2,800-$3,200 range is a major level to watch out for if ETH sustains a decline. A move below this level could send ETH toward the lower boundary of the symmetrical triangle.

The 50-day, 100-day and 200-day Simple Moving Averages (SMAs) are also important support levels to monitor in 2025.

A weekly candlestick close below $2,817 will invalidate the bullish thesis.

Summary

Ethereum observed a good 2024 but couldn't reach a new all-time high like most top crypto assets. In 2025, Ethereum could quickly reach a new high, but further price growth will largely hinge upon the wider crypto market outlook, ETH ETF inflows, potential approval of staking within ETFs, and its main chain's ability to capture more fees.

If the tides favor Ethereum, then it could reach $7,000 before 2025 comes to an end. It's also important to monitor the bullish market momentum and when/if it'll eventually dry up before 2025 comes to a close.