Ethereum in 2025: Dead or Just Playing Possum?

Gas fees still choking developers? Check. Layer-2 solutions eating its lunch? Probably. But reports of Ethereum’s death are greatly exaggerated—or at least that’s what the bagholders keep telling themselves.

The Merge was supposed to be its salvation, but here we are in 2025 with the same old scalability issues dressed in shiny new proof-of-stake clothes. Meanwhile, Solana’s over there doing 50k TPS for the price of a Starbucks latte.

Institutional money keeps flowing in though—nothing gets Wall Street horny like an asset that burns tokens while doing absolutely nothing to improve user experience. Classic ’finance innovation.’

Bottom line: Ethereum isn’t dying. It’s just becoming the IBM of blockchain—clunky, corporate, and somehow still standing despite everyone rooting for its downfall.

How Bad Is The Performance of Ethereum?

Ethereum’s poor price action has been a point of focus within the crypto space for a very long time, with its failure to keep pace with Bitcoin’s gains coming under the microscope. Traditionally, ETH has lagged behind Bitcoin’s rallies, as investors tend to rotate bull market profits from BTC into ETH. Yet, as of April 2025, it continues to fail to break above its 2021 all-time high of around $4,900, stuck below the $4,000 resistance level. Meanwhile, Bitcoin exploded over its earlier peak of $69,000 to hit $94,000 before a recent dip. ETH is one of the only prominent altcoins lacking substantial price appreciation in this cycle, with its value sometimes sliding to bear market values. On the Bitcoin charts, Ethereum has been in an ongoing downtrend since September of 2022, highlighting its relative weakness.

Why Is Ethereum’s Layer 2 Ecosystem a Challenge?

The Ethereum layer 2 ecosystem, built to overcome scalability constraints, has been both a strength and a weakness. High fees and low throughput have been issues for the coin for some time, prompting developers to shift away from sharding—splitting the blockchain into pieces—to a modular design that uses L2 solutions. The L2s handle transactions more quickly and cheaply, allowing them to compete with more efficient blockchains. Nonetheless, this has fragmented the liquidity across many L2s, weakening their economic activity. The dense L2 environment also makes it difficult for user experience, with more chains to handle being less natural than the cohesive layer 1 alternatives. Furthermore, Venture Capital has turned towards L2 infrastructure, taking attention away from ETH, and aiding in its price plateau.

Ethereum is strongly challenged by “Ethereum killers”—alternative smart contract platforms such as Solana, BNB Chain, Aptos, Avalanche, and Sui. They have lower fees and greater transaction speeds, frequently exceeding ETH’s theoretical maximum of 119 transactions per second (TPS), which usually runs at about 15 TPS. Most of these competitors have reached new all-time highs this cycle, while Ethereum has not. Even though ETH leads in developer activity by many measures, with more than 16,000 developers versus Solana’s 6,400, and total value locked (TVL) of $47 billion, the competition is closing in. The strong ecosystem is still an asset, but its competitors’ metrics are challenging it to a significant extent.

The problem of Ethereum is not in the blockchain ecosystem alone; macroeconomic factors also have a decisive contribution. Institutional investors prefer government bonds like US Treasuries, paying 4.28%, to ETH’s 3% staking reward due to high interest rates. Institutional demand has decreased since mid-2023, when Treasury yields surpassed 4% and their staking returns dropped below 4%. The technicality of operating an Ethereum validator, which demands specialized equipment and technical expertise, also discourages institutional involvement. Spot ETH ETFs have also witnessed lukewarm demand relative to Bitcoin ETFs, in part due to the lack of staking mechanisms. Although its security makes it a perfect candidate for tokenizing real-world assets (RWAs), its lower yields and operational complexity discourage institutions, affecting ETH’s market performance.

Despite these challenges, several trends indicate that ETH may make a comeback. A more crypto-friendly US Securities and Exchange Commission (SEC) post-Gary Gensler’s departure raises the chances of staked Ethereum ETF approvals, which will draw institutional capital by making yield generation easy. Etherealize, which went live in January 2025, seeks to enhance ETH’s institutional adoption by extending RWA tokenization, supported by veterans such as Danny Ryan. The Ethereum Foundation’s new leadership, with Aya Miyaguchi and Thomas Stauch with TradFi experience, may also simplify development. The Pectra upgrade being tested on the Holesky testnet will improve wallet capability and increase validator staking up to 48 ETH, pleasing large investors. Expected interest rate reductions in 2025 would make ETH staking more attractive. In addition, increasing DeFi usage on ETH’s L2s indicates continued demand for ETH, which may fuel price appreciation as adoption increases.

Ethereum’s inability to keep up with the pace of Bitcoin, fragmentation of liquidity by its layer 2 ecosystem, rivalry from blockchains with high performance, and macroeconomic strain have raised eyebrows about its performance. But its unparalleled developers, unmatched safety, and strategically timed efforts like Etherealize set it up for a probable resurgence. Added regulatory tailwinds, Pectra upgrade, and escalating DeFi involvement, it stands as a foundational pillar of the crypto ecosystem.

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