Ethereum’s Recent Performance Challenges

Ethereum’s performance has been inconsistent lately, negatively impacting its public perception. Continuous price drops, governance issues, and high gas fees have made the crypto community question whether these are temporary setbacks or signs of deeper problems.

Interview Insights

BeInCrypto interviewed industry leaders from Wirex, Komodo Platform, BingX, KelpDAO, and RAAC to analyze the factors contributing to Ethereum’s decline, its current market position, and potential strategies for improvement.

Market Performance and Investor Sentiment

Ethereum’s 2025 is off to a rocky start. After a failed attempt to break through the $2,500 barrier, Ethereum has retreated to $2,090. Meanwhile, whale addresses have been on a selling spree, dumping a massive 640,000 ETH worth $1.5 billion and pushing the altcoin king further from its target.

The recent Bybit hack, which caused the theft of approximately $1.4 billion worth of Ethereum, didn’t help either. Since then, the network recorded its highest weekly outflows at $300 million.

A wave of bearish sentiment and dwindling investor confidence sent ETH spot ETF outflows to a 30-day peak of $94.27 million last week, following Ethereum’s price dip to $2,251, signaling a clear investor retreat. Vivien Lin, Chief Product Officer at BingX, noted, “Compared to Bitcoin, which has surged over 90% this year, Ethereum’s performance feels underwhelming, leading many holders to wonder when it will reclaim a new all-time high.”

External and Internal Factors Affecting Ethereum

Recent price swings in the crypto sector have prompted speculation about the onset of a bear market. Though the market has experienced a reprieve following President Donald Trump’s announcement of a US Crypto Strategic Reserve, the long-term impact of this recovery remains uncertain.

Tariffs on Canada, Mexico, and China have also contributed to price declines across major cryptocurrencies. The ongoing inflation concerns in the United States have traders fearing potential interest rate hikes, which impact sentiment and pricing for cryptocurrencies,

The broader market remains highly sensitive to macroeconomic issues like geopolitical tensions, tariffs, and interest rate adjustments—all of which have added to ETH’s price uncertainty.

Karlos Bujas, Graduate Trading Analyst at Wirex, highlighted internal challenges such as governance issues, inefficient resource allocation, and waning market dominance as contributors to Ethereum’s struggles. Critics cite the Ethereum Foundation’s large budget and underutilized treasury as factors that hinder innovation.

Ethereum’s DeFi Dominance and Challenges

Ethereum’s success largely hinges on its leading role in decentralized finance (DeFi) and its robust developer ecosystem. It currently boasts a total value locked (TVL) exceeding $48 billion, with 58% of DeFi liquidity situated on Ethereum.

Despite this dominance, high gas fees and slow transaction speeds are driving users away from the network, especially to competitors like Solana. Bujas noted that on-chain activity has decreased by 38%, indicating a decline in engagement with essential protocols like Uniswap.

Scalability Issues and Layer-2 Solutions

Scalability remains a pressing issue for Ethereum due to limitations in its network architecture, leading to increased congestion and fees. Efforts to implement reforms, including shifting from proof-of-work to proof-of-stake, have been insufficient to resolve these challenges. Layer-2 protocols designed to enhance scalability further complicate the situation, introducing centralization concerns.

Competition and the Ethereum Foundation’s Response

As Ethereum loses ground to competitors like Solana, it attempts to bolster its DeFi presence. Following public scrutiny over its treasury management, the Ethereum Foundation transferred 50,000 ETH to support DeFi protocols, generating yield without asset sales. Community reactions varied, with some praising the move for enhancing the Foundation’s credibility in the DeFi space.

Leadership Changes and Community Reactions

The Ethereum Foundation faces scrutiny for its management and operational priorities, leading to calls for leadership changes. Aya Miyaguchi transitioned from Executive Director to President, and new co-Executive Directors were appointed. Community opinions on these changes remain divided.

Experts’ Recommendations for Ethereum’s Future

Experts agree on the urgency for Ethereum to improve scalability and address governance issues to compete effectively with rival networks. Failure to address these concerns could limit Ethereum’s potential for future growth. However, some remain optimistic, citing Ethereum’s significant role in the crypto ecosystem and its resources for innovation.

The network’s sustained success will heavily depend on effective leadership and strategic responses to competitive pressures.

Each of these factors highlights the complex landscape Ethereum navigates as it strives to restore investor confidence and enhance its market position.