Two Prime Drops Ethereum, Cites 45% Year-to-Date Loss

Two Prime, a U.S.-based investment advisory firm, has made a significant shift in its trading and lending strategy by removing Ethereum (ETH) from its portfolio. The firm now focuses solely on Bitcoin, citing issues with ETH's unpredictability and declining value metrics. This decision comes after Ethereum's price dropped by 45% year-to-date in 2025, contrasting with Bitcoin's relative stability during the same period.

Two Prime, a registered investment adviser with the U.S. Securities and Exchange Commission, announced the change on May 1. Over the past 15 months, the firm had extended over $1.5 billion worth of loans using both Bitcoin and Ethereum. In its announcement, Two Prime criticized ETH, stating that its statistical trading behavior, value proposition, and community culture have fallen short of expectations. The firm noted that ETH no longer fits into its algorithmic trading models due to its volatile behavior, inability to maintain a consistent correlation with Bitcoin, and unstable performance profile.

Two Prime described ETH's trading patterns as more akin to those of a memecoin rather than a stable digital asset. The firm pointed to several multi-standard deviation swings in Q1 2025 as evidence of ETH's volatile nature, which makes algorithmic trading and lending backed by ETH more challenging. As a result, ETH no longer meets Two Prime's risk-reward criteria, leading the firm to focus exclusively on Bitcoin.

The crypto community reacted swiftly to Two Prime's decision, with some viewing it as a potential signal of a price reversal for ETH. One user on X (formerly Twitter) commented, "If this isn’t a bottom signal for ETH idk what is." However, others were skeptical, questioning the relevance of Two Prime's action. This dichotomy reflects the uncertainty surrounding Ethereum's short-term future, particularly with ongoing discussions about its underlying value and institutional adoption.

Another significant factor supporting Two Prime's decision is the underperformance of Ethereum ETFs. The firm observed that Bitcoin ETFs have significantly outperformed ETH products in institutional investment flows. Two Prime noted that the collapse of ETH's ETF creates a reflexive cycle where institutions commit fewer resources to its promotion and sales, stating, "BTC has found the mainstream while ETH has languished." Despite this criticism, Ethereum remains the largest altcoin in assets under management (AUM) in exchange-traded products, with ETH-based ETPs having $9.2 billion in AUM toward the end of April 2025.

The general sentiment surrounding Ether ETFs has weakened in the past year. Following SEC approval in May 2024, Ether spot ETFs did not achieve the same traction as Bitcoin ETFs. Several issuers have retreated from the market, including VanEck, which shelved its ETH futures ETF, and wisdomtree, which withdrew its Ethereum Trust ETF filing. ARK Investment Management also closed both its Ether and Bitcoin futures ETFs in March 2025 due to underperformance.

Two Prime's exit from Ethereum signals growing concerns over the asset's trading patterns, investor sentiment, and institutional support. Critics view the move as premature, while others see it as part of a larger trend of capital concentration in Bitcoin. The debate continues over whether ETH is approaching a bottom or subject to further erosion.

Ask Aime: Why did Two Prime remove Ethereum from its portfolio?