Why Ethereum Could Be Poised to Outperform Bitcoin by 2026

Ethereum could be on the verge of ending years of underperformance and finally overtaking 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 returned 160%, less than half of Bitcoin’s staggering 457% return, according to CoinGecko data. The difference in gains underlines Ethereum’s subdued performance over the years, despite improving market conditions.

But several catalysts suggest the outlook could change.

Catalysts for Ethereum

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

Bitcoin’s dominance, or the coin’s share of the overall market, peaked at 66% in July and has been lower since, indicating that investor interest has diversified into altcoins, including Ethereum.

The second signal can be viewed through the ETH/BTC ratio, which measures Ethereum’s performance against Bitcoin. According to market data, interest rates have risen 3.59% this year.

“A rising ETH/BTC ratio, coupled with stagnant Bitcoin dominance, has historically been associated with the start of an altcoin season,” Jimmy Xue, co-founder and COO of quantitative returns protocol Axis, told me. Declutter. “Analysts note 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 me. Declutter.

However, the prediction markets reflect skepticism about an upcoming broad altcoin rally. Users on Myriad assign only a 19% chance that an alt season will happen before April 2026. (Disclaimer: Myriad is owned by Decrypt’s parent company Dastan.)

Yet capital rotation and investor interest are supported by strengthening fundamentals. The total number of transactions on the Ethereum network has grown by 6.8% to 2.05 million in 2026, a spike of 31% since mid-December, highlighting increased adoption.

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

Thakral points to increased demand from exchange-traded funds, Layer 2 adoption, cost-cutting dynamics, growth recovery and renewed DeFi activity. Xue looks at 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.

While Ethereum’s 11% return this year is already outperforming Bitcoin’s, Thakral said these moves are likely cyclical rather than a regime change, at least without continued support from improving macroeconomic and liquidity conditions.