Ethereum Faces Challenges as Whale Activity Declines and Price Volatility Continues

In a recent development, Ethereum has encountered a significant decrease in whale activity, which has coincided with a drop in its price. This summary explores the current state of Ethereum and the potential implications for its future trajectory.

Ethereum Whale Activity Declines, Price Drops

Ethereum has seen a significant decrease in large transactions since February 25, with a reported drop of 63.8%. This reduction in whale activity may be linked to the cryptocurrency’s price fall of nearly 10% over the past week. Ethereum briefly surpassed the $1,900 mark but failed to maintain momentum and is now struggling to stay above it. market volatility has raised concerns about Ethereum’s price trajectory, and shifting investor sentiment could be a contributing factor.

Critics Urge Ethereum to Empower L2s Instead of Extracting Value

Critics argue that imposing tariffs on Ethereum Layer-2 (L2) networks to generate fees on the mainnet will harm the network’s future. Zhang, a commentator, claims that this strategy is suitable for centralized organizations but not for decentralized networks like Ethereum. The strategy is seen as trading long-term scalability and ecosystem growth for short-term revenue. Some sectors within the Ethereum community believe the network is struggling because L2s are extracting value from the mainnet without giving anything back, pointing to the decline in activity and fees on the mainnet despite the growth in L2 value.

L2 Chains Impact Ethereum’s Inflation with Zero ETH Burn From Fees

L2 chains, despite carrying growing app activity, burn zero Ethereum (ETH) from fees. This contributes to the L1 chain’s inflation as they draw significant liquidity and users from Ethereum. The extremely low gas price conditions mean the daily burn of ETH has slowed down. Additionally, DeFi is shifting toward L2 and other chains, with Ethereum now carrying just 51.3% of all value locked, down from over 60% in 2024. A few L2 chains have managed to redirect some traffic away from Ethereum.

Ethereum May Still Drop To $1,400, Analyst Warns

Crypto analyst Klejdi has indicated that Ethereum’s downturn is far from over, with the second-largest crypto by market cap potentially suffering a further drop to as low as $1,400. The analyst noted that ETH lost nearly 12% of its value within just three days after breaking out of its recent pattern last Friday. He further mentioned that Ethereum’s movement and the rest of the crypto market are closely tied to Bitcoin, suggesting that this ETH crash is likely to happen alongside the flagship crypto’s decline.