GuShiio.com Although Ethereum’s price performance in the short term may still be constrained by internal selling pressure, market sentiment and narrative vacuum, in the long run, its future is still worth looking forward to.
Since 2022, Ethereum (ETH) has been a “blue-chip asset” in the crypto market, and its price performance has significantly fallen short of market expectations. Although its ecosystem still accounts for more than 55% of the lock-up value in the DeFi sector, the price of ETH has been sluggish for a long time, and its increase has been surpassed by emerging public chains such as Solana, and it even faces the question of “ecological prosperity but the value of tokens has not been realized.” This article will analyze the complex logic behind the weakness of Ethereum from three dimensions: market sentiment, technological innovation bottlenecks, and capital trends.
1. Mismatch of market expectations: narrative out-of-focus and the “reverse effect” of ETFs
Ethereum was once a core promoter of the DeFi and NFT wave. However, in recent years, after market hotspots have shifted to AI, RWA (real-world assets) and Memecoin, its dominant position has been challenged. For example, many AI projects and Memecoin in the Solana ecosystem did not choose Ethereum as the main platform, leading to its gradual marginalization in emerging narratives.
At the same time, although Ethereum’s Layer 2 (L2) expansion solution has alleviated the performance bottleneck of the main network to a certain extent, its feedback on the ecosystem is not significant. The problem of “involution” in the Rollup camp is particularly prominent, with developers focusing too much on infrastructure improvements (such as data availability services) and ignoring application-level innovation. This kind of resource diversion not only did not expand the user base, but instead allowed transaction volume and activity to flow to other competitive public chains.
In addition, unlike the influx of funds when the Bitcoin ETF was launched, the ETH ETF experienced capital outflows after its listing, partly due to selling pressure from old Grayscale products. Paradoxically, however, long-term institutional interest in ETH is still heating up. Bernstein analysts predict that ETH may become the “institutional darling” in 2025 due to mechanisms such as pledge income (28% of ETH is pledged), smart contract lock-in (7.5%) and ETF absorption (3%). This mismatch between short-term and long-term expectations highlights the market’s confusion about ETH’s ability to capture value.
2. The double-edged sword of technological upgrading: from “deflation narrative” to ecological imbalance
Technology upgrades have been the core narrative of Ethereum in recent years, but it has also brought many unexpected side effects. Although Ethereum’s multiple upgrades (such as mergers and EIP-1559) have successfully achieved supply deflation, after Dencun upgrades reduced data storage costs, they have weakened the main network’s revenue source and indirectly affected the value-added potential of ETH. In addition, after the upgrade of Cancun, the community’s expectations for fragmented chains shifted to L2, but the L2 ecosystem’s “Stack strategy” relied too much on commercial narrative leverage and failed to substantially expand the user base.
Differences within the Ethereum Foundation over the development roadmap have exacerbated the technical dilemma. Base head Jesse Pollak criticized the existing route as “too conservative” and called for the 2027 upgrade plan to be advanced to 2026; developer Dankrad Feist questioned the strategy of “relying solely on L2 expansion” and advocated a large-scale upgrade of the main network. This swing in the technical route exposes the problem of Ethereum’s lack of “strong leaders” like Satoshi Nakamoto. Although Vitalik has repeatedly emphasized that “price is not a priority target”, the foundation’s sell-off of ETH is still interpreted by the market as a lack of confidence.
3. Capital game: The wrestling between institutional entry and internal selling pressure
In terms of capital trends, Ethereum is also facing a complex game.
Despite weak prices, institutional funds are quietly entering. The Coinbase report pointed out that ETH’s limited supply, pledge revenue and compliance make it the “preferred smart contract platform for institutions to adopt.” VanEck even predicts that the total amount of Bitcoin held by companies may exceed Satoshi Nakamoto’s position in 2025, and ETH may regain capital favor due to trends such as stablecoins, tokenization and AI Agents.
At the same time, sell-offs such as the Ethereum Foundation also triggered a chain reaction. In December 2024, the Ethereum Foundation was exposed to cashing out many times at high prices, and some people accurately “escaped the top” and transferred more than 100,000 ETH pieces to the exchange, exacerbating market concerns about “insider bearish”. This capital trend hedges against institutional entry, causing ETH to fall into a “value discovery” deadlock.
4. God V Paradox: “Fear of the Bull Market” and the Difficulties of Ecological Transformation
Vitalik Buterin once expressed in the documentary that he was “afraid of the bull market”, revealing the core contradiction of Ethereum:
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De-financialization challenges: Although Ethereum’s DeFi culture contributed to its early status, it also led to the ecology’s over-reliance on financial arbitrage. Vitalik called for “getting out of the DeFi haze” and moving towards practical scenarios integrating with Web2 (such as forecasting markets, authentication), but progress has been slow.
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Balance between regulation and innovation: The U.S. SEC’s ambiguous attitude towards Ethereum (such as its delay in clarifying its securities attributes) has suppressed institutional confidence. Although the Trump administration’s policy easing may bring a turning point, Ethereum still needs to find a new balance between compliance and decentralization.
5. Future prospects: The road to breaking the situation and potential catalysts
Although Ethereum’s price performance in the short term may still be constrained by internal selling pressure, market sentiment and narrative vacuum, in the long run, its future is still worth looking forward to.
If Ethereum can embrace the trend of modularity, position itself as a “settlement layer + data availability layer”, and simultaneously absorb high-performance execution layers of chains such as Solana, or a reconfigurable voice system. In addition, accelerating the implementation of privacy technologies such as ZK-SNARKs may open up new scenarios such as AI agents and decentralized storage.
In addition, in 2025, U.S. stablecoin legislation and SEC policy shifts may open a compliance channel for ETH. If the pledged ETF is approved or the physical creation mechanism is introduced, institutional demand for ETH may erupt. At the same time, the admission of corporate funds (such as the Trump family treasury’s increase in ETH) and sovereign funds may reverse the capital game.
Ethereum’s weakness is essentially the result of the resonance of markets, technology and capital. Its dilemma does not stem from a single factor, but an inevitable pain during the ecological transformation period. In the short term, price fluctuations will still be subject to internal selling pressure and narrative vacuum; in the long run, if new pivots can be found in modularization, compliance and de-financialization, ETH is still expected to return to the growth track.
As one of HashKey Group’s top ten predictions,”digital oil” Ethereum is expected to exceed the $8000 mark in 2025. With the accelerated implementation of ETH pledge ETFs and the re-understanding of the value of Ethereum by institutions, the revaluation of ETH will be a matter of time.
