Ethereum on track for $1B annual profit as DeFi drives Q1 revenue

Ethereum saw first-time profits only last year and if it can keep pace with its 2024 first-quarter results, it could see $1 billion in yearly income by the end of the year.

Blockchain network Ethereum is on the path to $1 billion in annualized profits after it netted income of $365 million in Q1, coming alongside a year-on-year quarterly revenue growth of 155%.

The networks 2024 first-quarter income is a nearly 200% bump from the $123 million profit in Q4 2023, according to an April 17 report from The DeFi Report analyst Michael Nadeau.

Ethereums fee revenue — earned through users paying for transactions — hit $1.17 billion, up 155% from Q1 2023 and an 80% increase from the prior quarter.

Ethereums yearly profit and loss since launching in 2015. Source: The DeFi Report

Increased network activity “primarily driven by a surge in DeFi activity during the quarter” was the cause of the revenue bump, Nadeau said.

The activity surge has seen average daily transactions on the blockchain in 2024 already surpass last year‘s figures and are closing in on the results from Ethereum’s peak in 2021.

Ethereum's average daily transactions per year (blue) and Ether burned (pink). Source: The DeFi Report

Over 1.15 million average daily transactions have taken place in 2024, slightly up from the 1.05 million last year and just shy of the 1.25 million recorded in 2021.

Ethereum was launched in 2015 but only had its first profitable year in 2023 — earning $623 million — despite its revenues that year being 75% lower than its peak $9.9 billion 2021 revenues.

“This is largely due to the move to proof-of-stake consensus in September of 22 — in which token incentives paid to miners (now validators) dropped roughly 80%,” Nadeau explained.

He added Ethereums fees have grown at a rate of 58% since 2017.

“Crypto will outperform everything else” in the years ahead

Nadeau gave his market predictions for the coming years and concluded that “crypto will outperform everything else.”

He expected rising liquidity conditions for the “next few years” as the United States has a large amount of debt needing refinancing this year and the market had priced in three rate cuts this year from the Federal Reserve.

“This should provide a tailwind for risk assets such as tech stocks and quality crypto.”

The U.S. spot Bitcoin (BTC) exchange-traded funds, the Bitcoin halving and what Nadeau called “the innovation cycle” were three additional catalysts “pointing to a bullish setup for the next few years.”

The Bitcoin ETFs will serve as a “gateway drug” for increased interest in cryptocurrencies as they enable broad access and the halving — slated for April 20 — “has historically led to a bull run in the year after.”

The “innovation cycle” will also draw in new venture funding and renew retail interest in crypto as it matures, Nadeau believed.

He claimed Bitcoin and Ether (ETH) are “quite correlated” — Bitcoin outperforms early in the bull market as it is the most recognizable cryptocurrency while ETH and altcoins tend to outperform it in the later stages of the cycle.

“Its noteworthy that altcoins actually rallied so much in the last two cycles that they outperformed Bitcoin across the full length of both cycles,” Nadeau added.

He believed this would continue but only with altcoins “that have clear product market fit.”