Ethereum poised to outperform Bitcoin in Q2 as on-chain activity and institutional flows improve

As markets move into a new quarter, attention is turning to potential Q2-end targets. Looking back, Q1 was bearish for both major cryptocurrencies: Bitcoin (BTC) closed down 22.2%, its worst quarterly performance since 2018, while Ethereum (ETH) ended the quarter down 29.36%, improving on Q1 2025’s 45.41% losses.

On a 2025 cycle basis, ETH’s 36.48% Q2 rally outperformed Bitcoin by roughly 1.2x, pointing to a stronger rebound for Ethereum. A recent CryptoQuant report suggests this shift may already be underway, with March acting as a key inflection point.

March rotation: ETH gains while BTC softens

During March, Bitcoin posted a marginal +1.83% gain, while Ethereum advanced +7.12%, indicating a clear rotation of capital toward higher-beta exposure.

Market capitalization trends also reflected the divergence. Bitcoin’s market cap contracted slightly (-0.43%), while Ethereum’s expanded (+2.97%), reinforcing the narrative of capital shifting toward Ethereum.

Supply and on-chain activity support the ETH/BTC move

The divergence is further supported by supply-side and on-chain indicators. Ethereum’s continued exchange outflows suggest a gradual shift toward long-term holding. In parallel, on-chain data points to early recovery signals, including an improving Coinbase Premium Gap.

Network usage also appears to be strengthening: Ethereum’s active addresses continued trending higher, consistent with rising demand for blockspace and ecosystem activity.

In this context, the ETH/BTC ratio rising to 5.15% in March is presented as a result of rotational flows, tightening supply dynamics, and improving on-chain activity rather than a one-off move.

Institutional flows and on-chain demand: what the data suggests

Ethereum’s strength may not always show up immediately in short-term price action, as price can lag underlying fundamentals. The article argues that in DeFi, higher network activity increases demand for ETH, with that demand often accumulating on-chain before being reflected in market pricing.

According to the CryptoQuant report cited, Ethereum’s 7-day simple moving average (SMA) of “Total Transfer Count” has broken above 1.3 million again, returning to levels last seen around mid-February’s all-time high. A higher 7-day SMA of Total Transfer Count is described as a sign of elevated on-chain activity, reflecting stronger usage across transfers, trading, and DeFi interactions.

When combined with rising Coinbase Premium, increasing active addresses, and stronger capital flows observed in March, the article characterizes the overall picture as more constructive—suggesting early alignment between retail and institutional participation.

Implications for Q2

Taken together, the indicators are framed as an early formation of an ETH/BTC rotation setup, with Ethereum increasingly positioned to outperform Bitcoin into Q2-end.

Final summary

• March capital rotation and improving ETH/BTC flows suggest an early-stage positioning shift toward Ethereum.
• Rising transfer activity, improving Coinbase Premium, and higher active addresses indicate strengthening on-chain demand, setting the stage for Ethereum outperformance in Q2.