Despite Ethereum enthusiasts’ hopes for a new ETH surge in 2025, the past year was a tough test for the network. Following confident expectations of a continuation of the bullish cycle, the market saw the opposite result. Ethereum ended 2025 in the red, marking its first negative annual return since 2022. The price of ETH was unable to maintain its highs, and pressure from structural and external factors exposed vulnerabilities in the ecosystem.
The price of ETH in 2025 was not a one-time glitch but rather a reflection of the deeper processes determining the asset’s weak dynamics. However, perhaps this decline is not the end of the story but rather a necessary stage on the way to achieving the set goals.
Let’s take a closer look at the reasons for ETH’s decline and the varying probability of different forecasts for 2026.
2025 Results for Ethereum
The beginning of 2025 looked promising. ETH entered the new year at around $3,300, maintaining the momentum of late 2024. Then, the market turned around. By spring, ETH was under strong pressure. Against the backdrop of tightening macro conditions and the high-profile $1.5 billion Bybit hack, prices fell to $1,500 by April, reaching a multi-year low. Then, amid institutional inflows into ETFs, growth followed, peaking at $4,756 on August 13. By December, the situation had stabilized, and ETH ended the year near $2,967. However, Ethereum’s negative performance for the year was cemented in annual terms, with a decline in price and capitalization of approximately 11.5%.
Protocol updates and external shocks significantly impacted the coin’s market. The Pectra updаte in April and May improved staking mechanics and returns but was accompanied by short-term spikes in fees, reaching 109 Gwei during periods of network congestion. The December Fusaka updаte introduced PeerDAS, which radically reduced Ethereum Layer-2 fees. However, it also led to a 37% drop in the network’s base-level revenue in ETH terms. These changes significantly impacted Ethereum’s tokenomics. The doubling of blob space and the migration of activity to Layer 2 sharply reduced the amount of fees burned. This eased deflationary pressure, making the total coin supply slightly inflationary in 2025 despite record staking levels (approximately 30% of the circulating supply).
Additional factors putting pressure on the ETH market at the macro level were the Fed’s tight policy throughout the year and a general decline in liquidity in risk assets. Nevertheless, ether proved to be slightly weaker than average market dynamics in the crypto sector.
Against the backdrop of ETH’s weakening, competing ecosystems demonstrated more aggressive growth rates for certain metrics. Solana, despite its own price decline over the year, significantly increased its TVL and user activity. Sui and TON also showed rapid growth in TVL and integrations, albeit with smaller absolute volumes.
Why did Ethereum show negative returns?
Decline in User On-Chain Activity
At first glance, Ethereum’s on-chain metrics in 2025 appeared strong. The average number of daily transactions reached about 1.8 million, the number of active addresses doubled to over 1.29 million since 2024, and the weekly audience remained above 700,000. However, this growth did not translate into a price increase. More than 90% of activity migrated to Layer-2 solutions, reducing the economic burden, expressed in commissions, on the base level of the network. This led to a steady decline in activity on the Ethereum network in terms of value, despite the quantitative records.
Increased Competition from Solana, TON, Sui, and Other L1s
In 2025, there was increased competition between L1 blockchains. Solana cemented its role as the main alternative layer by attracting the largest share of mentions on social media and demonstrating significant growth in TVL and user base. Despite their smaller scale, Sui and TON actively attracted the attention of developers and experimental capital. Clearly, some of ETH’s liquidity and users have shifted to ecosystems with lower fees and higher throughput.
Scalability issues and commission costs
Despite powerful updates, Ethereum’s scalability remained far from ideal. The base layer of the network continued to process a limited number of transactions, and periods of peak demand were accompanied by sharp spikes in commissions.
The Role of Macroeconomics
The Fed’s tight policy and declining liquidity
For most of the year, the Federal Reserve maintained a tight monetary policy, keeping interest rates high and limiting the flow of liquidity into risky assets. For the crypto market, this resulted in a prolonged downturn. The sector’s total capitalization fell by more than 10%, and in October, there was a wave of liquidations worth tens of billions of dollars. In this context, Ethereum’s exposure to macroeconomic influences increased. As an asset dependent on global liquidity, ETH found itself in a more difficult situation than other altcoins.
Declining institutional interest in ETH
Previously, inflows into ETH ETFs were significant and steadily growing, but price dynamics did not reflect this interest. This reinforced the perception in the market that institutions were exiting Ethereum, reallocating capital in favor of Bitcoin and more conservative instruments. The discrepancy between infrastructure progress and market reaction was an important factor in analyzing Ethereum’s decline in 2025. For some funds, ETH lost its status as the basic “digital fuel” of the crypto economy, putting additional pressure on prices.
Weakening of the DeFi and NFT sectors
In 2025, DeFi and NFTs no longer played the role of key growth drivers as they had in previous cycles. While Ethereum retains a dominant share of the DeFi market, the total volume of activity and revenue has declined. The NFT market has also lost its speculative momentum, shifting toward niche and collectible scenarios.
Problems within the Ethereum ecosystem
Decline in validator revenues
In 2025, Ethereum staking remained substantial in terms of locked funds; however, the economic efficiency of validators declined significantly. Average returns fluctuated between 3 and 4 percent per year, and additional income from MEV only partially offset the reduction in base rewards. Against the backdrop of active user migration to Layer 2, ETH validators experienced a drop in fees and revenues, which directly impacted the appeal of L1 as a source of income.
Slowdown in the implementation of updates
Although major protocol updates in 2025 were moving forward, their effect was delayed. Pectra improved staking parameters but experienced temporary network congestion. Fusaka reduced Layer-2 costs but did not solve the problem of protocol state growth. As a result, there was an increase in discussions within the community about the network’s technological debt and other negative developments in the Ethereum ecosystem. The argument is that development is slower than that of younger, more flexible competitors.
Outflow of developers to alternative blockchains
Although Ethereum still leads in terms of the number of active developers, a noticeable migration of some teams to the Solana and Sui ecosystems began in 2025. These networks are attractive to new projects and experimental applications due to their simpler architecture, low fees, and high throughput. While the outflow of developers was not critical, it undermined expectations for a rapid recovery in the pace of innovation at the base level of the network.
Comparison with competitors
While Ethereum was heading for a negative end to the year, other leading blockchains turned changing market conditions to their advantage. Solana became the main beneficiary of the redistribution of liquidity and user activity by offering consistently low fees and high throughput. Consequently, the network experienced significant growth in TVL, expanding its market share in the DeFi and NFT sectors. Against the backdrop of Ethereum’s scalability issues, Solana became an attractive alternative for active traders and developers. Sui demonstrated one of the industry’s highest TVL growth rates, and TON strengthened its position through deep integration with Telegram and massive user traffic.
By 2025, Ethereum still controlled more than half of the decentralized finance (DeFi) market and a significant share of stablecoin turnover. However, Ethereum lost out in terms of market attention when comparing the growth rates of ETH and Solana in 2025. TON and Sui remained niche players but demonstrated acceleration due to their narrow specialization and rapid scaling. These imbalances underscored Ethereum’s underperformance compared to its competitors.
What does this mean for the future of ETH?
Although the negative dynamics of 2025 do not indicate a loss of Ethereum’s fundamental value, they allow for various scenarios in 2026.
- In the base case scenario, the market anticipates gradual price recovery as macro conditions improve and technological updates are implemented. In this scenario, ETH’s prospects following the 2025 decline suggest a return to a higher price range, maintaining dominance in the DeFi and infrastructure segments.
- A more optimistic scenario involves an influx of institutional capital and growth in the real-world use of blockchain technology. With monetary policy easing and the expansion of RWA tokenization segments, Ethereum could demonstrate a qualitatively new growth cycle.
- The negative scenario assumes continued pressure from competitors and an extension of the trend that began in 2025.
Planned updates aimed at increasing throughput and simplifying the architecture should reduce developers’ costs and restore some lost activity to the network’s baseline. The effectiveness of these updates will largely determine whether the bearish scenario for Ethereum in 2025 turns into prolonged stagnation or becomes a starting point for restarting the ecosystem.
Several conditions must be met to restore investor interest. Easing macroeconomic policy, growth in on-chain activity with real economic value, and stabilization of network revenues will help Ethereum confirm its role as key infrastructure for decentralized finance, tokenization, and payment solutions. If these factors are implemented simultaneously, the market will reinterpret the negative outcome of 2025 as a phase of adaptation rather than a sign of systemic weakness.
FAQ — Frequently Asked Questions
- Why did Ethereum go into the red at the end of 2025?
The main reason is a combination of external and internal pressures. Despite growth in on-chain metrics and infrastructure improvements, Ethereum fell into the red due to tight monetary policy, increased competition, and the shift of activity to Layer-2.
- What were the main reasons for ETH’s decline?
The main reasons for ETH’s decline at the end of 2025 were the contraction of the network’s base-level revenues, ETH’s decreased attractiveness to some investors, and competing ecosystems’ increased strength.
- How did the ecosystem and the market react to the decline of ETH?
The market responded with a redistribution of capital, with some liquidity going to alternative blockchains and Layer 2 solutions. Meanwhile, Ethereum’s 2025 on-chain analysis shows that activity within the ecosystem remained high, and interest in the network persisted, even amid the price decline.
- What can we expect from Ethereum in 2026?
Expectations range from a moderate recovery to a new growth cycle in a favorable macro environment. The focus is on the pace of updates and the network’s ability to maintain its position as a leader in key segments.
Conclusion
In 2025, Ethereum went into the red. During this period, the reasons for Ethereum’s loss of market capitalization relative to more dynamic ecosystems became clear: pressure from competitors, migration of activity within the Ethereum ecosystem to Layer 2 solutions, and macroeconomic influences. These factors have not made for a good year for the world’s largest altcoin.
At the same time, ETH’s decline is not significantly different from the overall market decline during this time. If we view the situation through Vitalik Buterin’s eyes, for whom achieving the goals of decentralization and scalability is more important than price and minor market declines, then 2025 can be characterized as a period of reboot. The forecast for Ethereum in 2026 can then be formulated as follows: The success of ETH’s implementation of updates and growth in real network usage will directly impact its prospects. If these conditions are met, 2026 could transform the current bearish scenario into a turning point and mark the beginning of Ethereum’s comeback.
Thank you for your attention. Invest safely and profitably!
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