As the market enters a new quarter, forecasts around quarter-end targets begin to develop.
However, to assess potential direction, it is important to look back. The first quarter was bearish, with Bitcoin (BTC) closing down 22.2%, its worst quarterly performance since 2018.
Ethereum (ETH), meanwhile, finished the quarter down 29.36%, although this was still an improvement from Q1 2025’s 45.41% losses.
However, if we take the 2025 cycle as a base case, Ethereum’s 36.48% rally in Q2 outperformed Bitcoin by around 1.2x, highlighting ETH’s stronger rebound. That said, a recent CryptoQuant report suggests that this trend may already be happening, with March leading the shift.
During the month, Bitcoin recorded a marginal gain of +1.83%, while Ethereum gained +7.12%, indicating a clear turnover of capital.
At the same time, Bitcoin’s market cap contracted slightly (-0.43%), while Ethereum increased (+2.97%), reinforcing the narrative of a capital shift towards higher beta assets.
This divergence is notably confirmed by the dynamics on the supply side.
Continued exchange outflows from Ethereum, for example, indicate a gradual move towards long-term holding. Additionally, on-chain data confirms: the Coinbase Premium Gap is improving, signaling the start of a recovery.
Meanwhile, Ethereum’s active addresses continue to increase, indicating increasing usage of the network.
Essentially, the rise in the ETH/BTC ratio to 5.15% in March was no accident. Instead, it was driven by a combination of churn, tightening supply dynamics, and improving on-chain activity.
Naturally, this brings us to the key question: is the pattern forming for Ethereum to outperform Bitcoin in the second quarter?
Institutional flows begin to catch up with Ethereum fundamentals
Ethereum’s strength is not always fully captured by short-term technical price action.
Instead, price tends to lag underlying fundamentals. The logic is simple: in DeFi, increased network activity directly translates into higher demand for ETH. However, this demand is not immediately reflected in price developments.
Instead, it first accumulates on-chain before finally being priced into the market.
Looking at the recent CryptoQuant report, Ethereum appears to be getting closer to this phase. As the data shows, the 7-day SMA of Ethereum’s “total transfers” has once again surpassed 1.3 million, revisiting levels last seen at the all-time high in mid-February.
For context, a high 7-day SMA of “total transfers” generally signals high on-chain activity, reflecting stronger usage in DeFi transfers, exchanges, and interactions.
More importantly, recent accumulation trends suggest that institutional participation may be beginning to catch up with this underlying network strength.
Now, combined with the rise in the Coinbase Premium Index, the increase in active addresses, and the stronger capital flows seen in March, the picture becomes more constructive.
These indicators “collectively” point to on-chain demand, with retail and institutional participation showing early signs of alignment.
Overall, this suggests the early formation of a base for an ETH/BTC rotation in Q2, with Ethereum increasingly positioned to outperform Bitcoin through the end of Q2.
Final summary
- Capital turnover in March and improving ETH/BTC flows suggest an early positioning shift towards Ethereum.
- Increased transfer activity, improved Coinbase Premium, and higher active addresses indicate strengthening on-chain demand, paving the way for Ethereum to outperform in the second quarter.
