Ethereum may be poised to end years of lagging performance and finally outrun Bitcoin in 2026, driven by a regulatory overhaul and a confluence of key on-chain and market metrics.

Ethereum’s bull run since 2023 has yielded 160%, less than half of Bitcoin’s staggering 457% return, according to CoinGecko data. The difference in gains highlights Ethereum’s muted performance over the years despite improving market conditions.

But several catalysts suggest that the outlook could change.

## Catalysts for Ethereum

The first signal is a clear market rotation highlighted by a decline in Bitcoin’s dominance.

**Bitcoin dominance**, or the coin’s share of the total market, peaked in July at 66% and has since trended lower, suggesting diversification of investor interest into altcoins, including Ethereum.

The second signal can be viewed through the **ETH/BTC ratio**, which measures Ethereum’s performance relative to Bitcoin. It has risen 3.59% year-to-date, according to market data.

“A rising ETH/BTC ratio, coupled with stagnating Bitcoin dominance, has historically been associated with the start of an altcoin season,” Jimmy Xue, co-founder and COO of the quantitative yield protocol Axis, told Decrypt. “Analysts observe that this rotation is being fueled by investors seeking higher ‘beta’ exposure in the Ethereum ecosystem following the stability of the Bitcoin ETF market.”

The setup suggests “capital rotation rather than Bitcoin weakness” and “often precedes selective Ethereum and large-cap altcoin rallies,” Shivam Thakral, CEO of Indian exchange BuyUCoin, told Decrypt.

However, prediction markets reflect skepticism about an imminent, broad-based altcoin rally. Users on Myriad assign only a 19% chance that an alt season will occur before April 2026.

Still, the rotation of capital and investor interest is underpinned by strengthening fundamentals. The **total transaction count on the Ethereum network** has grown 6.8% to 2.05 million in 2026, spiking 31% since mid-December, highlighting increased adoption.

Will these conditions translate into short-term outperformance for Ethereum? Both experts see a path, though they emphasize different catalysts.

Thakral points to increased demand from **exchange-traded funds**, **Layer 2 adoption**, **fee burn dynamics**, **restaking growth**, and renewed **DeFi activity**. Xue looks to successful protocol upgrades such as **Fusaka**, the **Glamsterdam fork**, and **ERC-8004**, which could position Ethereum as the primary settlement layer for the new "Agentic AI" economy.

Although Ethereum’s year-to-date return of 11% already outperforms Bitcoin’s 8.5%, Thakral said that these moves are likely cyclical rather than a regime shift, at least without sustained support from improving macroeconomic and liquidity conditions.

Ethereum could narrow its performance gap with Bitcoin in 2026 as capital rotates and on-chain activity improves, Decrypt was told.

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