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Main takeaways:
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Lower network fees and slowing blockchain usage continue to weigh on ETH’s performance despite Ethereum’s institutional dominance.
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Ether’s recovery depends on stronger onchain activity, clearer upgrade benefits, and renewed flows from strategic reserve companies.
ether (ETH) struggled to regain the $4,000 level last seen on October 29. Since then, any burst of bullish momentum has quickly fizzled out, leaving traders wondering what is limiting Ether’s performance despite Ethereum’s dominance in deposits and its strong institutional demand.
A key reason investors hold Ether is the staking performance and its role as a source of computing power for data processing. As such, a broad slowdown in blockchain activity naturally puts pressure on prices, although previous activity has been driven by memecoin launches and speculative trading, which are both unpredictable and unsustainable over time.
Ethereum has seen a 23% decrease in transactions in the last 30 days, with the number of active addresses falling by 3%. By contrast, transactions on Tron and BNB Chain increased by at least 34% in the same period, while Solana’s active addresses increased by 15%.
Competitors that are generally seen as more centralized currently offer lower fees and a smoother user experience. For ETH to regain a durable bullish momentum, the Ethereum network needs to improve how decentralized applications interact with wallets and reduce friction in using the bridge.
The Ethereum spot exchange-traded fund (ETF) launched in the United States in mid-2024, about 16 months before competing altcoins. After the successful debut of Solana ETF in the United Statestraders now worry that competition for institutional capital will intensify as XRP (XRP), BNB (BNB), and Cardano (ADA) enter the market.
Inflows into Ethereum trading products fueled Ether’s 140% rally in the 100 days leading up to August 9, when ETH hit $4,200 for the first time since December 2021. A potential spin off of Ether could directly threaten its bullish momentum.
Ethereum network fees have plunged 88% since peaking at $70 million per week by the end of 2024, putting downward pressure on staking yields. Investors are now looking for clarity on the benefits expected from Fusaka’s future upgrade. While reinforced Data processing through layer-2 rollups are welcome, there remains little transparency on how ETH holders will ultimately benefit.
Traders doubt that Ethereum’s dominance will increase DApp revenues
Ethereum’s dominance in total value locked (TVL) and the successful adoption of layer 2 are undeniable. However, traders wonder if these strengths will translate into higher revenues for decentralized applications (DApps) built on Ethereum. Solana currently has a competitive advantage in DApps revenuewhile emerging players such as Hyperliquid also present increasing challenges.
While the Base expansion adds moderate value to the Ethereum ecosystem, the easier onboarding enabled by its native integration with Coinbase it does not fully reflect the wider landscape of layer-2.
Related: The community expects the first US spot XRP ETF to launch on Thursday
Ether’s drop to $3,200 on Thursday led companies accumulating ETH reserves to trade below its net asset value (mNAV). Under such conditions, the incentive to issue new shares to acquire ETH disappears, forcing these companies to explore alternative strategies, such as raising additional debt.
Ultimately, Ether’s path back to $4,000 will depend on stronger onchain activity, increased network fees supporting staking returns, greater clarity on the benefits of the Fusaka’s next updateand renewed influence from ETH strategic reserve companies.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed herein are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
