The "Dam" Dilemma of Ethereum Price: Hundreds of Billions in TVL and Pricing Imbalance

At the beginning of 2026, the Ethereum ecosystem presents a contradictory picture: on-chain fundamental indicators repeatedly hit new highs, yet Ether’s price in USD remains dull and unremarkable. According to the latest data, Ether’s circulating market cap reaches $35.65 billion, with a 24-hour price change of -1.92%, while on-chain TVL has surpassed $300 billion, and staking scale has hit a record high of $120 billion. Behind this phenomenon lies a deep fissure between Ether’s value capture and market pricing.

Currently, Ethereum is in a “energy accumulation phase”—upstream benefits include staking innovations, Layer 2 scaling, stablecoin ecosystems, and other positive factors, while downstream risks involve centralization threats, weakened value capture, and speculative trading bubbles. As the market re-evaluates these fundamentals, Ether’s price may face a significant correction and recovery.

Staking Scale Breaks $120 Billion, Vitalik Proposes Native DVT to Address Centralization

Ethereum’s staking ecosystem has recently delivered impressive results. According to ValidatorQueue data, as of January 22, 2026, Ethereum’s staking scale reached a historic high of nearly $120 billion, with over 36 million ETH locked in staking, accounting for about 30% of circulating supply.

However, behind this prosperity lurks risk. The top five liquidity staking providers control nearly 18 million ETH, representing 48% of the market share. This high concentration contradicts the core principle of decentralization, exposing the network to single points of failure and censorship risks, directly threatening the long-term security of Ether.

To address this issue, Vitalik officially proposed a “Native Distributed Validator Technology (DVT) staking” solution on January 21. This approach uses innovations such as multi-private key clusters, threshold signatures, and protocol-level integration to reduce the failure risk of individual validators and enhance overall network decentralization.

The four main pillars of native DVT technology include:

1. Multi-private key cluster management – allows a validator identity to register 16 independent private keys for redundancy
2. Threshold signature mechanism – requires more than 2/3 of associated nodes to sign for validity, preventing single points of failure
3. Protocol-level integration – runs directly at the consensus layer, eliminating complex external coordination and lowering operational barriers
4. Low performance overhead – adds only one round of delay during block production, compatible with any signature scheme

If implemented, this solution will significantly reduce operational costs for individual validators, and institutional validators won’t need to build expensive failover systems. For the entire staking ecosystem, native DVT could reshape the liquid staking market landscape, providing smaller service providers and independent validators with a fairer competitive environment.

TVL Surpasses $300 Billion, Stablecoins Build a “Liquidity Moat” for Ether Ecosystem

In early 2026, the total value locked (TVL) on Ethereum surpassed $300 billion, marking a milestone that indicates the ecosystem is becoming increasingly diversified. These funds are no longer speculative bubbles but are active in DeFi, stablecoins, RWA, and staking applications, representing real economic activity.

According to Onchain research, Ethereum leads other networks in liquidity depth, composability, predictability, and user and capital reserves. The $300 billion TVL signifies that Ether has become a foundational settlement protocol capable of supporting sovereign-level assets.

Among these, stablecoins are the lifeblood of the Ether ecosystem. As of January 22, Ethereum’s market share in stablecoins reached 58%, creating a deep liquidity moat. Electrical Capital’s report emphasizes that stablecoins on Ethereum not only serve as transaction media but also as collateral supporting over $19 billion in DeFi lending activities.

With regulatory frameworks gradually improving, USDC’s share on Ethereum continues to rise, and its compliance attributes give mainstream payment companies and traditional financial institutions confidence in adopting stablecoins. Protocols like Ethena, which offer yield-bearing stablecoins, weave ETH staking yields into underlying returns, further strengthening the coupling between Ether and stablecoin ecosystems.

21Shares predicts that the stablecoin market could reach $1 trillion by 2026. This implies that as the underlying settlement asset, the liquidity of stablecoins accumulated on Ether will directly translate into long-term demand support.

Trading Volume Hits Record High, but On-Chain Activity May Be Inflated by “Dust Attacks”

Strangely, the Ethereum network has staged a counterintuitive spectacle: the 7-day moving average of transaction count reached 2.49 million, a new all-time high, more than double the same period last year. Meanwhile, the 7-day average Gas fee dropped below 0.03 Gwei, the lowest in history, with single transactions costing only about $0.15.

However, despite the surge in on-chain activity, Ether’s price remains relatively flat. Security researcher Andrey Sergeenkov points out that this phenomenon may be caused by large-scale “address poisoning” attacks rather than genuine demand growth. Studies show that about 80% of new addresses on Ethereum are anomalously linked to stablecoins, with 67% of new active addresses making initial transfers of less than $1, fitting the pattern of “dust attacks.”

This phenomenon is closely related to the December Fusaka upgrade. Fusaka introduced PeerDAS (Peer Data Availability Sampling), significantly enhancing the network’s capacity to carry Blob data, effectively performing a “data reduction surgery” on the Ether network. The drastic drop in transaction fees has made low-cost attacks feasible, causing record-breaking transaction volumes to be heavily inflated by spam transactions, undermining market confidence in genuine demand growth.

Layer 2 Offloads Mainnet Revenue, Ether’s Deflationary Expectation Faces Pressure

Beyond fake transactions, Ether also experiences a “growing pain” in value capture on the mainnet. To foster Layer 2 expansion, Ethereum’s mainnet has actively reduced “pass-through fees” paid by L2s in 2025.

Growthepie data shows that L2s generated a total revenue of $129 million in 2025, but paid only $10 million to the mainnet, meaning Ethereum sacrificed over $100 million in potential revenue. While this subsidy strategy promotes L2 ecosystem growth, it severely impacts Ether’s value capture ability.

If mainnet revenue cannot grow long-term, the amount of ETH burned will decline sharply, threatening its deflationary outlook and exerting long-term pressure on USD valuation. Additionally, the HODL Waves indicator shows many medium- and long-term holders exhibit a strong willingness to exit near $3,200, which partly explains why on-chain data looks strong while Ether’s price faces resistance.

Valuation Imbalance: Ether as a “Digital Oil Field” Priced Below Its Value

On one hand, ecosystem data is extremely prosperous; on the other, market valuation is severely lagging, trapping Ether in a “valuation inversion.”

According to crypto influencer rip.eth, while Ethereum accounts for 59% of the crypto market’s TVL, Ether’s market cap only makes up 14% of the total crypto market cap. This imbalance indicates that Ether is in a clear undervaluation zone and is currently the most underestimated public chain asset.

The root cause of this inversion may be Ethereum’s deep role transformation into a “digital oil field,” a shift not yet fully priced by the market. Large amounts of TVL are locked in staking protocols, DeFi contracts, and L2 ecosystems, changing liquidity flow logic. The market currently favors chasing “oil” (ecosystem yields) while neglecting the “oil field” itself (Ether as the underlying asset).

As RWA (Real World Assets) continue to expand, Ether is becoming a settlement base for traditional financial assets. This cash flow-generating role will further push its MC/TVL ratio back toward a reasonable range.

The Balance Dilemma: Ether’s “Impossible Triangle”

Behind Ethereum’s prosperity, it is walking a tightrope. Technical upgrades improve performance but may distort real data; ecosystem subsidies promote L2 growth but erode mainnet value capture; long-term risks of staking centralization make native DVT proposals crucial for maintaining decentralization.

Ether’s challenge is no longer just about scalability but about finding a dynamic balance within the “impossible triangle” of maintaining decentralization, preserving technological advantages, and strengthening value capture.

When the market shifts perception or enters a fundamental-driven recovery cycle, the accumulated energy in this “valuation dam” may be released, potentially leading to a deep correction in Ether’s price and USD valuation. At this moment, a deep understanding of Ether’s fundamentals will be key for participants to grasp the cycle.