Santiment analysts warn of volatility risks as retail gets bullish on ETH.
Bitwise CIO Matt Hougan has attributed Ethereum’s recent rally to a sustained “demand shock” from institutional investors and ETH treasury companies. In a thread on X, Hougan highlighted these as the key reasons behind ETH’s massive surge.
According to Hougan, Ethereum exchange-traded products (ETPs) and corporate treasuries have bought 2.83 million ETH, valued at more than $10 billion, since the middle of May. This represents around 32 times the amount of Ethereum issued during the same period.
He said:
“ETH is on a tear. After trading steadily downward for the first four months of the year, it has rebounded strongly. It’s up 50%+ in the past month and more than 150% since its lows in April. The reason? Overwhelming demand from ETPs and Corporate Treasuries.”
Hougan noted that this marks the start of what he identified as a “classic demand shock,” adding that spot Ethereum ETPs accounted for over $5 billion of these purchases. The Bitwise executive added that he expects demand to increase even further, noting that ETH ETPs have bought less than 12% of the assets that Bitcoin ETPs have bought.
The CIO projects an additional $20 billion in institutional purchases over the next 12 months. This would equate to 5.33 million ETH entering long-term holdings at current market prices. Meanwhile, Ethereum’s projected issuance over the same period is expected to be only 800,000 ETH, suggesting a potential 7-to-1 demand-to-supply ratio.
However, he acknowledged that ETH is not the same as Bitcoin, that the price is not driven primarily by demand and supply, and that it does not share ‘Bitcoin capped long term issuance’. Still, he noted that ETH will go higher for now as there is more demand for ETH than supply.
Meanwhile, Hougan added that growing momentum around stablecoins and tokenized assets will likely drive further ETH demand. He noted that as traditional assets such as stocks and fiat move onto Ethereum’s programmable ledger, it strengthens the narrative of ETH as essential infrastructure.
Ethereum rebounding after early setback
Meanwhile, Ethereum is rapidly regaining momentum. In the post, Matt Hougan highlighted that ETH has surged more than 65 % over the past month and 160 % since April, marking a strong rebound from early‑year weakness.
With the gains, ETH is back in the green with 7.63% yearly gains. Although the asset is down 2% in the past 24 hours, it has reached its weekly peak of $3,800. However, many believe the price correction that has sent its price careening back to $3,600 is only a minor correction after the recent surge.
According to crypto analyst Dan Crypto, Ethereum is not overheated yet, and any correction in price will be minimal because its current rally compares to previous rallies in March 2024 and November 2024.
He said:
“Looking at a slightly bigger frame, compared to the overheating in the futures market in March 2024 and November 2024, the current level is way too small. Even if a correction comes, it’s likely to be shallow and short.”
The analyst further observed that the current Ethereum cycle has been sluggish despite being in an upcycle. He acknowledged that ETH has already reached what seems to be a bottom in this cycle. Therefore, the only way for ETH is for the price to go up.
Analysts warn of upcoming volatility
Meanwhile, the resurgence in ETH value has led to increasing sentiments about the incoming altcoin season within the crypto community. With several chatters on X (formerly Twitter) about the altcoins season, analysts have warned about potential market volatility.
According to Santiment analysts, crypto users should be prepared for volatility in the recent trends, adding that prices tend to increase mostly when the crowd does not expect it.
The firm wrote:
“When the crowd begins to perpetuate that we are in “altseason”, beware of some upcoming volatility. Crypto prices historically move up most prominently during periods of crowd disbelief.”
Interestingly, Ethereum’s recent performance came amidst crowd sentiment that “it is over.” Santiment noted that markets usually move in the opposite direction from retail expectations.
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