Analysis of Multiple Factors Behind Ethereum's Price Weakness

In the past two years, Ethereum (ETH) has been a major asset in the cryptocurrency market, but its price performance has not met market expectations. Although its ecosystem still dominates the decentralized finance (DeFi) sector, the ETH price has continued to languish, with growth lagging behind emerging public chains like Solana, and it has even faced criticism for "ecological prosperity but token value not reflected." This article will explore the complex reasons behind Ethereum's current predicament from multiple perspectives.

The Discrepancy Between Market Expectations and Reality

Ethereum was once the core driving force behind the DeFi and NFT waves. However, as market focus shifts towards artificial intelligence, real-world asset tokenization, and meme coins, its dominance is being challenged. Many emerging projects are choosing to develop on other platforms, leading to Ethereum's gradual marginalization in emerging narratives.

The Layer 2 scaling solutions of Ethereum have alleviated the performance bottlenecks of the mainnet to some extent, but their feedback effect on the ecosystem is not significant. Developers are overly focused on infrastructure improvements, neglecting innovation at the application layer. This misallocation of resources has not only failed to expand the user base but has also led to a decline in transaction volume and activity, shifting towards competitors.

In addition, unlike the influx of funds during the launch of the Bitcoin ETF, there has been capital outflow following the listing of the ETH ETF, partly due to the selling pressure of certain investment products. However, institutional interest in ETH continues to grow in the long term. Analysts predict that due to staking yields, smart contract locking, and ETF absorption, ETH could become a favored asset for institutional investors in the coming years. This misalignment between short-term and long-term expectations reflects the market's confusion about ETH's ability to capture value.

The Dual Nature of Technological Upgrades

Technical upgrades have been the core narrative of Ethereum in recent years, but they have also brought unexpected side effects. Although multiple upgrades to Ethereum have successfully achieved supply deflation, the latest upgrade, which reduced data storage costs, has instead weakened the mainnet's revenue sources, indirectly affecting the appreciation potential of ETH. In addition, the community's expectations for sharding technology have shifted to Layer 2 networks, but the development strategy of the Layer 2 ecosystem relies too heavily on commercial narratives, failing to substantially expand the user base.

The internal divergence within the Ethereum community over the development roadmap has also exacerbated the technical dilemma. Some developers believe the existing roadmap is too conservative and are calling for a faster upgrade process; others question the strategy of relying solely on layer 2 network expansion and advocate for a large-scale upgrade of the mainnet. This oscillation in the technical route exposes the issue of Ethereum's lack of strong leadership. Although the founder has repeatedly emphasized that "price is not the primary goal," the actions of core community members selling ETH are still interpreted by the market as a lack of confidence.

The Complex Game of Capital Trends

Despite a weak price performance, institutional funds are quietly entering the Ethereum market. Reports indicate that the limited supply of ETH, staking rewards, and compliance make it the preferred smart contract platform for institutional investors. Some analysts even predict that the total amount of Bitcoin held by enterprises may soon surpass that of the founders, while ETH may regain capital favor due to trends such as stablecoins, asset tokenization, and AI agents.

However, the selling behavior of core members of the Ethereum community has also raised market concerns. In December 2024, reports indicated that key members of the community had cashed out multiple times at price peaks, exacerbating market worries about "insider bearishness." This capital movement has created a hedge against institutional entry, resulting in ETH being stuck in a value discovery deadlock.

Challenges of Ecological Transformation

One of the core contradictions faced by Ethereum is how to achieve ecological transformation. While the DeFi culture has established Ethereum's early position, it has also led to an excessive reliance on financial arbitrage within the ecosystem. Community leaders are calling to "step out of the shadow of DeFi" and shift towards practical scenarios that integrate with Web2, but progress has been slow.

Moreover, the uncertainty of the regulatory environment has also suppressed institutional confidence. Although certain policies may bring a turning point, Ethereum still needs to find a balance between compliance and decentralization.

Future Outlook

Although the price performance of Ethereum may still be constrained by multiple factors in the short term, its long-term development prospects remain promising.

If Ethereum can embrace the modular trend, positioning itself as a settlement layer and a data availability layer while integrating other high-performance execution layers, it may reconstruct its position in the industry. In addition, accelerating the implementation of privacy technologies could open up new application scenarios such as AI agents and decentralized storage.

In 2025, changes in relevant legislation and regulatory policies may open a compliance channel for Ether. If the staking ETF is approved or new creation mechanisms are introduced, institutional demand for Ether may see a surge. At the same time, the entry of corporate funds and sovereign funds may change the current landscape of capital competition.

The current dilemma of Ethereum is the result of a combination of market, technology, and capital factors, reflecting the growing pains of ecological transformation. In the short term, price fluctuations may still be influenced by internal pressures and a vacuum of narratives; in the long run, if new development directions can be found in modularization, compliance, and de-financialization, ETH is still expected to return to a growth trajectory.

There are analyses predicting that with the launch of related financial products and institutions reassessing the value of Ethereum, the revaluation of ETH is likely just a matter of time, with expectations to break the $8000 mark in 2025.