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Table of Contents
2. Revaluation of the value of the deflation model
3. Marginal changes in institutional configuration
4. Differences in the maturity of derivatives market
V. Value capture of Layer2 solutions
Home web3.0 Why do Ethereum ETFs have better returns than Bitcoin ETFs?

Why do Ethereum ETFs have better returns than Bitcoin ETFs?

Jul 29, 2025 pm 03:48 PM
Bitcoin cryptocurrency Ethereum the difference btc optimism Ethereum etf Lock position

Ethereum ETF investors' returns are better than Bitcoin ETFs, mainly because: 1. Ethereum has 7,893 monthly active developers, 6.4 times that of Bitcoin, driving DeFi ecosystem TVL to account for more than 55%, forming a positive economic flywheel; 2. After the upgrade of EIP-1559, it has destroyed more than 4 million ETHs in total, with an annualized deflation rate of about 0.5%, which is more sustainable than Bitcoin halving mechanism; 3. Institutional configuration shows a path of "Bitcoin first, Ethereum follows up"; the narrowing of grayscale ETHE premium reflects the increased demand for institutional position building; 4. CME Ethereum futures open contracts grew by 320% in 2023, far exceeding Bitcoin's 85%, derivatives deeply improve price discovery efficiency and risk hedging capabilities; 5. L2 network TVL such as Arbitrum and Optimism exceeded US$15 billion. Ethereum, as the settlement layer, continues to capture the underlying bandwidth value, while Bitcoin L2 development is relatively lagging. This excess return is particularly significant in the rising cycle of risk appetite, and an independent valuation system may be gradually formed in the future.

Why do Ethereum ETFs have better returns than Bitcoin ETFs? - php Chinese

The phenomenon that investors' returns of Ethereum ETFs are better than Bitcoin ETFs mainly stems from two underlying logics: the difference in value capture brought about by technological iterations, and the structural opportunities for capital rotation in the market cycle. The following analysis is carried out from five dimensions:

1. Compound interest effect of smart contract ecosystem

As the underlying infrastructure of programmable money, Ethereum's network effects are experiencing exponential growth. According to the Electric Capital developer report, the number of active developers in the Ethereum ecosystem in 2023 reached 7,893, 6.4 times that of the Bitcoin ecosystem. This development activity is directly converted into TVL (total locked value) for applications such as DeFi and NFT. Currently, the amount of locked positions of Ethereum DeFi protocol accounts for more than 55%, forming a positive cycle economic flywheel.

2. Revaluation of the value of the deflation model

After the upgrade of EIP-1559, Ethereum entered a substantial deflation stage. Ultrasound.money data shows that more than 4 million ETH have been destroyed since the merger, with an annualized deflation rate of about 0.5%. Compared with the impact of halving the reward Bitcoin will face in four years, Ethereum's deflation mechanism provides more sustainable value support.

3. Marginal changes in institutional configuration

Bloomberg Think Tank pointed out that traditional financial institutions show a path dependency of "Bitcoin first and Ethereum follow-up" when allocating cryptocurrencies. When the BTC ETF absorbs the first batch of allocation demands, funds will naturally overflow into ETH. The premium rate of Grayscale Ethereum Trust (ETHE) compared with its net asset value continued to narrow in Q4 2023, indicating a strong demand for institutional position building.

4. Differences in the maturity of derivatives market

CME Ethereum Futures Open Contracts grew by 320% in 2023, far exceeding Bitcoin’s 85%. This deep improvement in derivatives reduces the risk of institutional holdings and makes Ethereum ETF more likely to obtain risk-adjusted excess returns. Options market data show that ETH's volatility premium is 1.2 standard deviations lower than BTC, indicating that the market's findings are more efficient.

V. Value capture of Layer2 solutions

With the L2 network TVL such as Arbitrum and Optimism exceeding US$15 billion, Ethereum is realizing the value layering of the "settlement layer execution layer". This architecture makes ETH the underlying bandwidth resource in the crypto world, and its use value continues to accumulate as L2 transaction volume grows. In contrast, the development of Layer2 in the Bitcoin ecosystem is relatively lagging behind.

It is worth noting that this excess return has obvious cyclical characteristics. When the market is in a rising stage of risk appetite, Ethereum's beta coefficient usually reaches 1.3-1.5 times that of Bitcoin. However, with the improvement of the regulatory framework and the marketization of staking returns, Ethereum may gradually show independent valuation logic that is different from Bitcoin.

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