Ethereum Analysis: Value Reconstruction under Technical Bottlenecks and Ecological Cracks

Introduction

Ethereum (ETH), as the world’s second-largest cryptocurrency and a pioneer in blockchain technology, undeniably leads the fields of decentralized finance (DeFi), non-fungible tokens (NFTs), and smart contracts. However, by the end of April 2025, Ethereum’s price only hovers around $1,800, with this bull market significantly underperforming BTC and SOL. Behind this weak trend, structural contradictions such as lagging technological upgrades, ecosystem fragmentation, and continuous net outflows of institutional funds are accelerating exposure.

This article will comprehensively analyze the current state and future trends of Ethereum from five aspects: market performance, technological development, DeFi ecosystem, market sentiment, and price prediction, providing investors with professional insights and investment advice.

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Ethereum market performance and core contradictions: the underlying logic of valuation pressure

Despite a slight rebound in ETH’s recent price, a common consensus among many investors should be that ETH has significantly lagged in this round of the bull market. On the 14th of this month, the ETH/BTC exchange rate fell to 0.01924, setting a new low since January 2020. As a mainstream asset in the last bull market, Ethereum’s performance in this cycle has led to considerable criticism from many investors. In the face of Bitcoin’s strong performance during this cycle, Ethereum seems to be experiencing a divergence between market sentiment and technical expectations.

According to data from Gate (Gate.io), the ETH/USDT trading pair has recently fluctuated below the $2000 mark. Although there has been a slight increase recently, the overall trend remains constrained by the 60-day and 200-day moving averages. Behind this persistent weak price phenomenon is a wave of capital withdrawal triggered by structural contradictions caused by technological upgrades and ecological fragmentation.

Ethereum Technology Upgrade Lag: An Empirical Study of the Innovator’s Dilemma

The primary challenge facing Ethereum currently lies in the significant gap between its technological iteration speed and market expectations. Although Vitalik’s team proposed the EIP-4488 proposal in an attempt to reduce transaction costs by optimizing on-chain storage fees, the progress of this proposal at the community governance level still appears sluggish. In contrast, competing public chains like Solana have achieved processing capabilities of tens of thousands of transactions per second, while Ethereum’s mainnet still faces the dilemma of Gas fees soaring to hundreds of dollars during peak periods. This technological lag directly leads to the migration of high-frequency applications like DeFi and NFTs to lower-cost chains.

The root cause of the technological stagnation can be traced back to the rigidity of the governance structure. Although the Ethereum Foundation has initiated a reorganization, there are fundamental differences within the community regarding the technical roadmap: the conservatives emphasize prioritizing stability, while the radicals advocate accelerating iterations through hard forks. This internal friction was fully exposed during the Cancun upgrade delay incident—the shard solution originally scheduled for implementation in 2024 has been postponed to mid-2025 due to a breakdown in consensus, further undermining market confidence. The technological bottleneck is directly reflected in the price of the coin: the ETH/BTC exchange rate continues to be under pressure, down over 60% from historical highs.

Fragmentation of the Ethereum Ecosystem: Structural Deterioration of Value Capture Ability

The Ethereum ecosystem is facing an unprecedented fragmentation crisis. The prosperity of Layer 2 scaling solutions has not consolidated the mainnet position as expected, but instead has given rise to independent economies such as Arbitrum and Optimism. These L2 networks build independent economic models by issuing native tokens, resulting in value that should have flowed back to ETH being intercepted. Data shows that L2 transaction volume has exceeded 75% of the total Ethereum ecosystem, but the value captured by ETH in this is less than 30%.

More severely, the dilution of ecological control rights is shaking the settlement layer status of Ethereum. The rise of cross-chain protocols like LayerZero allows asset transfers between different chains without relying on the Ethereum mainnet for validation. If this trend continues, the narrative of ETH as the “global settlement layer” will face collapse risks. The price performance of the coin confirms this concern: the average daily trading volume on the Ethereum chain is below $3 billion, the mainnet Gas has long maintained a level of 2 Gwei, and the number of active addresses in March is below 15 million. The decline in on-chain activity, coupled with the impact on coin prices, has led to the monthly earnings of mainnet validators in March falling below $200 million. From the perspective of investor sentiment, the lower on-chain opportunities have made some investors adopt a wait-and-see attitude towards Ethereum’s growth potential in the short term.

Ethereum Key Game Nodes: The Triple Catalysts of Policy, Technology, and Capital

Policy: ETF Approval and Regulatory Sandbox Because staking will help improve the security of Ethereum network and bring additional returns to shareholders at the same time, Grayscale, Fidelity and others have repeatedly proposed rule changes to Ethereum ETF staking (Staking) and in-kind subscription and redemption to the SEC in the United States, but the SEC postponed the application to buy more time for evaluation, and a number of decisions originally scheduled for mid-April have been postponed to early June this year. It is worth mentioning that in mid-April, the Hong Kong Securities and Futures Commission approved the ChinaAMC Ethereum Pledge ETF, which is scheduled to be launched on May 15.

Technical Aspect: EIP-4488 and Zero-Knowledge Proof Breakthrough If the EIP-4488 proposal, which is set to be voted on in May, is approved, it will restructure the economic model for on-chain data storage. Testnet data shows that this upgrade could reduce Rollup transaction costs by 58%, directly benefiting derivative protocols (such as GMX) and gaming chains (such as Immutable X). Even more noteworthy is the “recursive proof compression” technology breakthrough announced by the zkSync team, which is expected to shorten ZK-Rollup transaction confirmation times to within 3 seconds. If this synergizes with EIP-4488, it could trigger a restructuring of the Layer 2 landscape.

Capital aspect: Vampire attacks on the re-staking track The “re-staking revolution” triggered by EigenLayer has locked more than 4.6 million ETH, but this model implies “double staking risk”. If a black swan event occurs (such as the security of the mainnet is questioned), it may trigger a chain release wave. It is recommended to closely monitor the linkage between the ETH staking rate (currently 32.7%) and the Liquidation Health Ratio.

Conclusion

Overall, although Ethereum ETF staking can influence ETH supply and holder returns to some extent, it cannot directly address core challenges such as ecological competition, L2 fragmentation, or low market sentiment. Additionally, the uncertainty surrounding the Pectra upgrade has added some pressure to the coin price.

Historical experience shows that the average cycle for blockchain projects from technological leadership to ecological monopoly is 4.7 years, and Ethereum has entered its 8th year of development. If key technological breakthroughs are not achieved by the end of 2025, its market value share (currently 7.4%) may face the risk of continuous erosion. Investors need to establish a “technology realization rate” tracking model to dynamically adjust their position exposure.

Author: Charle A., Gate.io researcher *This article only represents the author’s views and does not constitute any trading advice. Investment carries risks, and decisions should be made cautiously. *This content is original and the copyright belongs to Gate.io. If you need to reproduce it, please indicate the author and source; otherwise, legal responsibility will be pursued.