Ethereum Pioneer and Challenges
Ethereum (ETH), the second-largest cryptocurrency by market capital, has played a key role in the cryptocurrency space for nearly a decade. However, in 2025, ETH experienced a strong decline with prices dropping approximately 46% in the first quarter. Simultaneously, Ethereum transaction fees have dropped to their lowest level in over 4 years, indicating significant network activity changes.
Ethereum Network Activity Declines
Through a recent article, Blockchain research company IntoTheBlock announced that Ethereum's total transaction fees dropped nearly 60% in the first quarter of 2025, down to 208 million USD in early April. This is the lowest figure since 2020. The fee reduction is primarily due to increased gas limits and transaction shifts to L2 services.
Simultaneously, the ETH burning rate, a mechanism helping to control supply, has slowed down. Fees from platforms like Uniswap, MetaMask, and Tether have dropped over 95% from late 2024. With decreased transactions on the Primary Network, Ethereum's inflation rate is increasing. DeFi analyst Michael Nadeau warns that Ethereum inflation may soon surpass Bitcoin.
Major Reduction Causes
One primary reason for fee reduction is the increase of L2 solutions. These networks operate on the Ethereum platform and help users conduct faster and cheaper transactions. Coinbase's Base network is leading, processing over 80 transactions per second, surpassing any other L2 network. The Dencun upgrade, launched in March 2024, made L2 transactions cheaper. Consequently, many users are avoiding Ethereum's Primary Network and choosing L2 alternative solutions, leading to fewer transactions and reduced fees.
ETH/BTC Performance Hits 5-Year Dip
Ethereum is not only facing network issues but also struggling against Bitcoin. From early 2025, ETH's performance weakened, dropping from over 3,300 USD to 1,805 USD on April 4th. Meanwhile, Bitcoin rose to 109,000 USD before dropping only 10%, while ETH dropped 45%, pushing the ETH/BTC ratio to a 5-year low.
Ethereum's Long-Term Prospects
Despite numerous challenges, long-term investors remain optimistic. IntoTheBlock revealed that Ethereum "whales" have accumulated over 130,000 ETH when prices dropped below 1,800 USD, demonstrating a strong "buy-the-dip" sentiment. Some analysts still believe ETH could reach 5,000 USD by the end of 2025, with more positive predictions suggesting it might exceed 10,000 USD in the future. Additionally, the upcoming Pectra upgrade, expected in May, could provide the necessary boost for Ethereum, improving network performance and long-term prospects.
