Key Points:
Despite Ethereum's dominance in the institutional space, the reduction in network fees and the slowdown in blockchain usage continue to drag down ETH's performance.
Ethereum's recovery relies on stronger on-chain activity, clearer upgrade benefits, and new capital inflows from strategic reserve companies.
Since October 29, Ethereum has struggled to return to the $4,000 level. Since then, every upward momentum has quickly faded, leading traders to question what is limiting its performance in the context of dominant Ethereum deposits and strong institutional demand.
One key reason investors hold Ethereum is its staking yield and its role as a source of data processing computational power. Therefore, the broad slowdown in blockchain activity naturally puts pressure on prices, even though previous activity was driven by the launch of memecoins and speculative trading, both of which are unpredictable and unsustainable.
In the past 30 days, Ethereum's trading volume has decreased by 23%, and the number of active addresses has dropped by 3%. In contrast, during the same period, the trading volume of Tron and BNB Chain has increased by at least 34%, while Solana's active addresses have risen by 15%.
Typically viewed as more centralized competitors currently offer lower fees and a smoother user experience. For ETH to regain lasting bullish momentum, the Ethereum network needs to enhance the interaction between decentralized applications and wallets and reduce friction in bridging usage.
Ethereum spot exchange-traded funds (ETFs) are set to launch in the U.S. in mid-2024, about 16 months earlier than competing altcoins. Following the successful launch of the Solana ETF in the U.S., traders are now concerned that competition for institutional capital will intensify as XRP, BNB, and Cardano enter the market.
The inflow of funds into Ethereum exchange-traded products drove Ethereum to rise 140% over the 100 days ending August 9, when ETH first reached $4,200, marking its first time since December 2021. If funds flow out of Ethereum, it could directly threaten its bullish momentum.
Since the peak of weekly fees at $70 million at the end of 2024, Ethereum's network fees have plummeted by 88%, putting pressure on staking yields. Investors are currently focused on what practical benefits the upcoming Fusaka upgrade can bring. While the enhancement of data processing capacity through layer two rollups is promising, there is still a lack of transparency regarding how holders will ultimately benefit.
Ethereum has a clear advantage in total value locked (TVL) and layer two scaling. However, traders remain skeptical about whether these advantages can truly translate into higher revenues from decentralized applications (DApps) developed on Ethereum. Currently, Solana has a certain lead in DApp revenue, while emerging players like Hyperliquid are also presenting new challenges.
Although the Base ecosystem adds some value to the Ethereum system, the convenience brought by its native integration with Coinbase does not fully reflect the overall layer two ecosystem landscape.
On Thursday, Ethereum fell to $3,200, causing companies accumulating ETH reserves to see their stock prices drop below their net asset value (mNAV). In this situation, there is no incentive to acquire ETH through issuing new shares, and these companies have to explore alternative strategies such as issuing debt.
Ultimately, whether Ethereum can return to $4,000 will depend on stronger on-chain activity, a rebound in network fees supporting staking yield increases, clearer benefits from the Fusaka upgrade, and a new round of capital inflows from strategic reserve companies.
This article is for general informational purposes only and does not constitute legal or investment advice. The views expressed in this article are solely those of the author and do not necessarily reflect or represent the official position or views of Cointelegraph.
Related: Circle enters the world's largest financial market, launching an on-chain foreign exchange engine
Original: “Ethereum's (ETH) Chance of Turning Bullish Before 2025 Ends Depends on Four Critical Factors”
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