Ethereum’s price has lagged behind its own institutional and on-chain advances for much of the past cycle, and Bitwise says the reason is simple: ETH remains primarily traded as a proxy for Bitcoin, rather than as a fundamentally valuable network. In a new factor model analysis, the asset manager found that BTC has been the main driver of weekly ETH returns since 2018, with macro conditions, network activity, and ETP flows playing a secondary role.
This discovery is important because it contradicts one of the most deeply held narratives about Ethereum. With improved regulatory clarity and greater institutional access, Ethereum still powers the majority of stablecoin and tokenized asset activity. Still, ETH remains about 62% below its all-time high, which Bitwise attempted to explain with a model based on 406 weekly observations dating back to May 2018.
The answer, at least statistically, is that Bitcoin trumps almost everything else. Bitwise said ETH has “traced almost 1:1 with BTC on a weekly basis” with a coefficient of approximately 0.99. BTC alone explains about 65% of Ethereum’s return variation and is clearly the central driver of price direction.
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The company’s broad conclusions are straightforward. “Adoption fundamentals such as active addresses clearly have less impact on Ethereum price than many assume,” the report said. “Extending this further, revenue generation appears to be even less relevant as it has been removed from the GETS model as ‘noise rather than signal’. Both of these conclusions combined support the idea that since the model’s inception in 2018, Ethereum’s price has become more like a network-driven commodity than a business with perpetual cash flows. ”
Other factors influencing Ethereum price
This framework runs through the rest of the report. Financial health, measured through the Bloomberg U.S. Financial Health Index, emerged as the second most important explanatory variable. We assigned a coefficient of approximately 0.05 to this coefficient per bit, and the average explanatory power was 11.3%, rising to approximately 40% at its peak. The coefficient of network activity proxied by active addresses was close to 0.03, with an average explanatory power of 6%, rising to 30% in stronger phases.
ETF flows showed a different pattern. Although their coefficients were only about 0.01, Bitwise said they were “highly significant” and explained on average about 10% of ETH’s variance, with peaks of up to 40%. In other words, flows are consistently important, but not as powerful as the BTC-driven market beta.
This difference becomes clearer in different market regimes. Bitwise said that from June to August 2025, Ethereum behaved like a leveraged Bitcoin transaction, with the BTC coefficient rising between 1.5 and 1.6 as BTC approached its all-time high.
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During the post-FTX stress period in the second half of 2022, this dynamic became even more severe: “All factors except BTC had negative coefficients, as returns were ~90% explained by BTC. In moments like these, it’s cash liquidity that matters, not fundamentals, flows, or macros. That’s why ETH was essentially pegged to BTC.”
There were exceptions. Bitwise identified May 2021 as the period of lowest BTC sensitivity. During this period, Bitcoin had already peaked, but Ethereum continued to rise as active addresses surged during the NFT boom. Still, these unusual windows appear to be more temporary than structural.
The report also debunks claims that a richer multifactor framework would significantly improve short-term forecasting. Bitwise said that while the model explained historical returns fairly well, it did not outperform the much simpler AR(1)+BTC model in out-of-sample performance. Most of the predictive value came from Bitcoin exposure and price persistence, but additional factors added limited predictive power.
That leaves Ethereum in what Bitwise calls a “paradoxical position.” In other words, despite deepening institutional relevance, dominant market share for stablecoins and tokenization, and an increasingly focused roadmap, it is a network whose price is still primarily driven by external beta.
At the time of writing, ETH was trading at $2,305.
Featured image created with DALL.E, chart on TradingView.com
