3 reasons why Ethereum can outperform its rivals after crashing to 17-month lows

Ether (ETH) fell 13% between March 8 and March 11 as investors moved to short-term fixed-income and cash positions, seeking safety amid a global tariff war and rising fears of an economic downturn.

Market concerns escalated after the United States responded to Canada’s electricity surcharge with retaliatory measures.

S&P 500 futures (left, magenta) vs. Ether/USD (blue). Source: TradingView/Cointelegraph

Typically, traders tend to overreact, increasing the likelihood that Ether will rebound faster than other assets once market sentiment improves. While some argue that risk assets are driven by inflation and economic growth data, others believe gains depend on stimulus measures and monetary expansion.

Regardless of the catalyst for the next bull run, Ether price must climb 29% from its current $1,940 level to reclaim $2,500. This move will likely require increased demand from leveraged buyers, whose activity is now at its lowest point in five months.

ETH 2-month futures annualized premium. Source: Laevitas.ch/Cointelegraph

Traders want higher prices to compensate for longer settlement periods, making a 5% to 10% annualized premium (basis rate) expected in neutral markets. When rates fall below this range—such as the current 4.5%—it signals weak bullish conviction.

Excessive optimism played a role in Ether’s recent correction, as $235 million in leveraged long positions were liquidated between March 10 and March 11.

The panic selling drove ETH to a low of $1,744, its lowest level since October 2023. However, several indicators suggest a potential recovery, as ETH derivatives and onchain metrics show resilience.

Ether is trading 60% below its $4,868 all-time high from November 2021. This decline is largely due to increased competition in the smart contract sector and waning demand for applications such as non-fungible tokens (NFTs), gaming, collectibles, metaverse projects, social networks, and Web3 infrastructure.

However, this perspective overlooks a key factor. In late 2021, the average transaction fee exceeded $50, while activity on Ethereum’s layer-2 ecosystem was 97% lower than it is today.

For context, a token swap on Ethereum’s base layer cost $1.70 on March 11 despite the number of daily average operations per second growing, highlighting notable progress in network efficiency.

Ethereum layer-2 daily average operations per second. Source: L2beat

Even if bots generate 80% of layer-2 transactions, the remaining 20% of activity on Base, Arbitrum, Optimism, ZKsync, and Blast is still roughly three times higher than Ethereum’s base layer. However, critics have a valid argument: despite the surge in network activity, validators are earning significantly less compared to late 2021.

Ethereum has reinforced its position as the second-most popular option for institutional investors in traditional finance, supported by $8.9 billion in spot exchange-traded funds (ETFs).

Meanwhile, competitors such as Solana still await regulatory approval for similar ETF products. Even if they gain approval, they cannot match the first-mover advantage of the Grayscale Ethereum Trust, which began public trading on over-the-counter markets in June 2019.

Moreover, Ethereum smart contract deposits, measured by total value locked (TVL), reached their highest level since July 2022 in ETH terms on March 11, marking a 10% increase over the past two weeks.

Related: The strategic crypto reserve will fuel ecosystem growth

Ethereum network TVL, ETH. Source: DefiLlama

At 24 million ETH, Ethereum’s TVL has been driven by the growth of liquid staking, lending, yield farming, and real-world asset tokenization. The network recently reclaimed its leading position in decentralized exchange volumes, reaching $20.5 billion over seven days and surpassing Solana’s $13.9 billion, according to DefiLlama data.

This provided a bullish outlook for ETH’s price, driven by layer-2 transactions nearing all-time highs, reclaiming of the top spot in DEX volume, and rising TVL deposits.

Ultimately, Ether’s trend reversal remains highly dependent on macroeconomic improvements, but once stabilized, ETH is well-positioned to regain $2,500 as a key support level in the coming weeks.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.