Ethereum Shows Bullish Q1 and Q2 Pattern After Red Q4

Ethereum ended the final quarter of 2025 with its fourth-worst performance in history, posting a 28.28% decline. The drop was part of a broader bearish trend that saw ETH fall from near $5,000 in August to just below $3,000 by the end of the year. Liquidity and risk appetite waned, contributing to the sustained downward pressure.

The sell-off was driven by multiple factors, including year-end portfolio rebalancing and tax harvesting. Institutional and retail investors reduced positions ahead of the new year, increasing downward pressure in the final weeks of Q4.

Despite the red quarter, historical patterns suggest Ethereum has shown resilience in the months following a weak Q4. In past years, Q1 has averaged a 139% gain, and Q2 has averaged 158%. As of early January 2026, ETH has already gained 6.57% in the new year, signaling a return of buyer confidence.

Why Did Ethereum See a Strong Rebound?

Historical data shows Ethereum has followed a consistent pattern after red Q4 periods. In 2016, 2018, 2019, and 2022, the first and second quarters of the following year produced strong gains. The average Q1 performance after a red Q4 is 139%, and Q2 averages 158%.

Ethereum's post-red Q4 bounce is partly driven by seasonal liquidity improvements. As year-end selling subsides, investors return to the market in early Q1, often looking to capitalize on undervalued positions. This trend is supported by the return of inflows into Ethereum ETFs in early 2026.

The network's upcoming upgrades and continued institutional adoption have also helped sustain interest. Ethereum's 2026 roadmap includes the Hegota upgrade, expected in the first half of the year. These developments provide a backdrop for renewed optimism among long-term investors.

How Are Market Participants Reacting?

Ethereum treasury firm BitMine Immersion has been actively accumulating ETH, pushing its holdings to 4.14 million ETH. This represents 3.43% of the total circulating supply. The firm has also staked a significant portion of its holdings, signaling confidence in the network's future utility and value.

Retail investors appear to be returning to the market as well. On-chain data shows increased accumulation from smaller accounts, indicating a shift in sentiment. Whale activity, on the other hand, has been cooling, with large holders reducing distribution pressure in January.

Derivatives positioning also reflects cautious bullishness. Options call open interest is concentrated around $3,500 for ETH, with traders expecting potential upside in late January. This suggests market participants are betting on a continued upward trend but remain cautious about overexposure.

What Are Analysts Watching Next?

Analysts are closely monitoring Ethereum's ability to break through key resistance levels. The $3,060 mark is seen as a critical threshold for further gains. If ETH can hold above this level, it could signal a stronger bullish trend into Q2.

Institutional inflows and ETF activity will also be key indicators. Spot Ethereum ETFs recorded $174.4 million in net inflows on their first trading day of 2026. Sustained inflows would reinforce the narrative of renewed institutional interest.

Ethereum's dominance in tokenized assets and stablecoins also remains under observation. The network accounts for over 62% of stablecoin issuance and 65% of tokenized assets, giving it a strong position in the evolving crypto ecosystem. Growth in these sectors could further strengthen Ethereum's long-term fundamentals.

While the immediate outlook appears positive, external factors remain a wildcard. Macroeconomic shifts, regulatory changes, and geopolitical events could all influence Ethereum's trajectory. For now, traders and investors are watching closely for signs of sustained momentum.