Ethereum faces significant challenges as institutional investors reduce their ETH holdings amidst falling usage. Key players like Galaxy Digital and Paradigm are selling off parts of their investments, while others see this as an opportunity. With Ethereum moving into an inflationary phase, Vitalik Buterin proposes a significant overhaul of the network. Despite current depressions, some whales continue to accumulate ETH, reflecting mixed sentiments in the market.
Ethereum is currently experiencing a difficult period characterised by declining base-layer usage and core metrics falling to multi-year lows. Institutional investors have begun reducing their Ether (ETH) holdings, as shown by recent blockchain data indicating significant sell-offs by firms like Galaxy Digital and Paradigm. Approximately $105.5 million worth of ETH was deposited by Galaxy Digital to Binance, leading to a reduced holding of around 68,000 ETH, down from highs earlier in the year.
In addition, institutional investment products linked to Ethereum have reflected a similar trend, with CoinShares reporting $772 million in outflows over the past eight weeks, despite a positive year-to-date net inflow of $215 million. In contrast, some large investors perceive this downturn as a strategic buying opportunity, although overall confidence appears shaken.
Paradigm also reduced its ETH holdings, transferring 5,500 ETH valued at roughly $8.66 million to Anchorage Digital. Over four months, this investor moved around $301.57 million of ETH to Anchorage, reflecting growing concerns about Ethereum’s declining protocol revenue and perceived weaknesses in its tokenomics, as noted by Sei Labs co-founder Jayendra Jog.
After previously enjoying a deflationary status, Ether supply began increasing post-April 2024, moving into an inflationary scenario due to reduced fees and therefore lower Ether burn rates. Data indicates a minuscule collection of transaction fees, hitting a low not seen since 2017, suggesting a downturn in user engagement and financial activity on the network.
Vitalik Buterin’s recent proposal to introduce the RISC-V instruction set, which would replace the existing Ethereum Virtual Machine (EVM), underscores the urgency for improvements in network performance. Some experts interpret this suggestion as an acceptance of the limitations within the current architectural framework of Ethereum, hinting at a possible strategic overhaul in response to the ecosystem’s challenges.
Critics have pointed out that Ethereum’s rollup-centric scalability strategy may have created excessive fragmentation within its ecosystem, hindering its overall strength and usability. The Ethereum Foundation, now under new leadership, plans to prioritise immediate goals in layer-1 scaling solutions alongside continued support for layer-2 scaling efforts.
Despite Ethereum’s current price drop from previous highs, some investors are still accumulating ETH in anticipation of a future rebound. In a recent assessment, Standard Chartered Bank has revised its 2025 price prediction for Ether to $4,000, citing ongoing structural declines while hinting at potential gains for current investors, especially those accumulating during this downturn.
