Tom Lee says ETH got Q2-dressed and went home early 🪟

Ethereum ($ETH) underperformed during the second quarter as institutional investors rotated capital out of the asset for end-of-quarter portfolio rebalancing, according to Fundstrat chief information officer Tom Lee. Speaking in a recent interview, Lee attributed the decline to "window dressing" by funds adjusting holdings ahead of the quarter close, a pattern he said historically pressures positions outside major benchmarks before being reversed.

Lee has repeatedly pointed to $ETH as a market he expects to benefit once institutional flows normalize, citing the network's transition to proof-of-stake and ongoing layer-2 scaling work as structural supports. He did not specify a price target in the remarks.

Q2 trading data shows $ETH trailing Bitcoin ($BTC) and major U.S. equities over the three-month period, with on-chain analytics from Glassnode indicating a decline in active addresses and a modest drop in total value locked across decentralized finance protocols hosted on Ethereum. Developers, however, continued shipping upgrades tied to the Pectra and PeerDAS roadmaps during the quarter.

Ethereum Foundation staff cuts announced earlier this year also drew commentary from industry figures, including Solana founder Anatoly Yakovenko, who said on a podcast he remained bullish on the foundation's ability to execute despite the reductions. Lee echoed that sentiment, arguing the protocol's fundamentals remain intact regardless of short-term flows.

Other observers have linked part of $ETH's weakness to competition from alternative layer-1 networks and the migration of liquidity toward Bitcoin spot exchange-traded funds, which have absorbed record inflows this year. Bitcoin ETFs recently posted their third-worst weekly outflow on record, underscoring uneven demand even in the largest digital asset.

Lee maintained that once the institutional rebalancing window closes, $ETH typically rebounds in the following quarter as managers redeploy capital into higher-beta positions. He provided no specific timeline or forecast, and the comments were framed as analysis rather than investment guidance.