Ethereum has plummeted nearly 50% in the first quarter of 2025, significantly trailing behind Bitcoin and Solana, with its current struggles attributed to a Layer-2 roadmap, lower ETF inflows, and weak institutional demand. Despite hurdles, upcoming leadership changes and the Pectra upgrade may provide a chance for recovery. Overall, Ethereum’s narrative looks to shift as it aims to attract more traditional investors.
Ethereum has had a rough start to 2025, plunging nearly 50% in value, far behind both Bitcoin and Solana. This slump’s roots seem to lie in multiple factors like Ethereum’s focus on Layer-2 (L2) development, the enormous influx of money into Bitcoin exchange-traded funds (ETFs), and a distinct treasury strategy for institutions favouring Bitcoin over Ethereum.
In 2024, Ethereum (ETH) recorded a modest 47% gain, a sharp decline from the staggering 400% surge during the 2021 bull market. In contrast, both Bitcoin and Solana posted impressive gains, causing Ethereum’s market dominance to nosedive from 19% to just 7% in a year. As the broader crypto market faced a downturn, ETH’s losses accelerated, culminating in a staggering dip of 47% since the year began.
The ETH/BTC ratio has plummeted to unprecedented lows while Solana’s value surges, leading to Solana overshadowing Ethereum’s performance. Such hurdles for Ethereum stem from multiple developments within the crypto ecosystem over the last year.
Starting with Ethereum’s current roadmap, its focus on Layer-2 solutions seems to be impacting the asset’s value accrual significantly. After the Dencun upgrade in March 2024—which enhanced transaction handling for Layer 2—the narrative around Ethereum as “ultrasound money” appears less convincing. The increase in Layer-2 transactions might have reduced fees and increased speed, yet it has led to a decrease in Ethereum’s revenue along with a rise in its supply, causing inflationary pressures. This shift has contributed to the decline in ETH’s price, with over 730,000 ETH introduced into circulation since April 2024.
On the flip side, Solana has been on a tear, largely thanks to its meme coin trading frenzy that sparked heightened demand. The launch of the Pumpfun token platform in January 2024 has seen Solana add over 17 million new addresses and facilitate the launch of around 9.6 million tokens. This substantial uptick in activity has led to revenue and price outpacing Ethereum, showcasing the vibrant trading environment on the Solana network.
Another major player at the moment is Bitcoin’s ETF market. Since its launch, US spot Bitcoin ETFs have seen an unbelievable influx of $39.56 billion, resulting in heavy institutional interest and a price surge of 130% since 2024. Meanwhile, Ethereum’s ETF inflows amount to a mere $2.49 billion, which hasn’t moved the price much at all. This discrepancy stems from Bitcoin being embraced as “digital gold,” which has been well received in traditional finance, compared to Ethereum’s less defined institutional appeal.
Moreover, while many firms are adopting a Bitcoin treasury strategy (notably Michael Saylor’s company, which holds 2% of the total Bitcoin supply), institutional interest in Ethereum remains tepid. The contrast is stark, with Bitcoin treasury strategies implemented by other firms, including Tesla, offering some support for its price. In contrast, publicly traded firms holding Ethereum appear to display far less commitment to accumulating ETH.
Interestingly, Ethereum has also emerged as a common target for hackers, accounting for over 50% of all stolen cryptocurrencies since 2024. A significant hack in February saw approximately $1.4 billion in ETH stolen, exacerbating the already troublesome price decline.
Looking ahead, can Ethereum recover from this predicament? After facing criticism for its performance, the Ethereum Foundation has been shaken up and appears ready for a turnaround, enhancing its leadership structure and doubling down on its commitment to improving Ethereum’s scalability and user experience. A key upgrade, dubbed Pectra, is set for May 7, which aims to address these very issues.
Furthermore, efforts led by the Ethrealize project intend to market Ethereum to institutional investors, showcasing an ongoing evolution and hope for a brighter future for ETH. Recent trends suggest that ETH/BTC ratios are stabilizing, with a potential for recovery after recent slumps across the crypto landscape.
