Ethereum, the world’s second largest cryptocurrency by market capitalization, is experiencing tough times. The ETH/BTC ratio, an indicator of Ethereum’s strength compared to Bitcoin, has dipped to 0.022. This is the lowest point the ratio has experienced since December 2020, indicating a significant drop in Ethereum’s performance relative to Bitcoin.
To put things into perspective, since September 2022, when the ETH/BTC ratio stood at around 0.085, Ethereum has seen a more than 73% decrease in value compared to Bitcoin. Currently, Ethereum trades at about $1,880, which is a 9% decline over the last week and a dramatic 62% drop from its peak of $4,890 in November 2021. In contrast, Bitcoin has only fallen by 10% year-to-date, trading at $84,300, while Ethereum has plummeted 46% within the same period.
This downward trend signifies Ethereum’s waning dominance in the fields of smart contracts and layer 1 ecosystems, areas it once led without competition. As new layer 1 platforms like Solana, Binance Chain, and Avalanche begin to rise in prominence, Ethereum seems to be struggling to maintain its status.
Now, let’s explore the factors behind this shift, see if Ethereum is truly falling behind, and examine what this means for the future of the layer 1 blockchain landscape.
Looking at Ethereum’s current metrics, some signs of weakening are evident. As of April 1st, Ethereum’s total value locked (TVL) is about $50.5 billion, which accounts for 52.5% of the entire market. This is a noticeable drop from February 2024, where it held 61.64% of the market, demonstrating a slow but steady loss in the decentralized finance arena.
The decline is partly attributable to the emergence of rivals, such as Solana, which has seen its TVL increase significantly. Solana’s share has expanded from 2.84% to 7.24%, bringing its total TVL to $6.69 billion—a rise over 2.5 times within just over a year.
User behavior trends also differ across platforms. Ethereum continues to attract those engaged in passive decentralized finance activities like yield farming and staking, while Solana is capturing the interest of more active traders, particularly in speculative meme tokens and high-frequency DeFi. This suggests that while Ethereum’s use cases are strong, they may not align with where retail users are moving.
While historically burdensome gas fees have improved, with average prices dropping to 1.12 GWEI in March 2025, Ethereum remains relatively costly and slower for smaller transactions compared to newer blockchains.
Adding to the challenges, while Bitcoin ETFs have drawn over $36 billion in inflows so far, Ethereum ETFs haven’t captured as much interest, with net flows into ETH ETFs experiencing a 9.8% dip in March 2025, totaling $2.43 billion.
On the trading front, sentiment around Ethereum is dimming, with short positions surging 40% in early February and climbing more than 500% since November 2024. Analysts note this as an unparalleled bearish stance against Ethereum, even as retail investors continue to buy during downturns.
With Ethereum’s overall market dominance now below 8.4%, the lowest in over four years, it indicates that capital is moving away from ETH and into alternatives like Bitcoin and other layer 1 solutions.
Ethereum’s goal to scale up remains largely unresolved despite multiple upgrades. Its mainnet, as of early 2025, still handles only 10 to 62 transactions per second, a stark contrast to Solana’s impressive 4,322 TPS. Although the transition to proof-of-stake via the 2022 Merge slashed energy use by over 99%, it didn’t tackle the core issue of throughput capacity.
Ethereum has turned to layer-2 rollups like Arbitrum and Optimism to scale transactions off-chain before settling them back on the mainnet. While this approach has reduced costs for users, it’s also shifted activity—and transaction fees—away from Ethereum’s mainnet.
Analysts suggest that layer-2 networks, notably high-volume platforms like Coinbase’s Base, are redirecting billions in transaction fees that would traditionally move through Ethereum’s main layer. This transfer of activity is likely weakening ETH’s deflationary mechanics, further compounded by the fragmentation of activity across different rollups and sidechains, affecting overall ETH burning through gas fees.
The inflationary aspect of ETH has resurfaced with a 0.5% annual rate, while staking yields have decreased below 2.5%, making stablecoin strategies more appealing with returns exceeding 4.5% via DeFi platforms. The forthcoming upgrade, Pectra, is designed to boost L2 efficiency by increasing data capacity but isn’t expected to reverse the broader ETH/BTC decline or address Ethereum’s foundational structural concerns.
The drying activity on Ethereum’s mainnet is causing bots to take up more top contract usage by gas, reducing the number of organic applications deploying directly on the base layer. Critics have likened Ethereum’s mainnet to a ghost town, which, though exaggerated, highlights its diminished position as the primary on-chain innovation site.
Turning to Ethereum’s price outlook, market should brace for a range of scenarios, although the risks seem to outweigh potential benefits for ETH. Strategist Mike McGlone from Bloomberg asserts that Ethereum is closely linked to risk assets, meaning its fortunes will likely mirror movements in U.S. equities and risk-sensitive sectors.
Further declines in stock markets during 2025, driven by high interest rates, ongoing inflation, or global growth hiccups, could increase pressure on Ethereum. McGlone cautions that in such a macroeconomic downturn, Ethereum might revisit the $1,000 mark, a nearly 50% decrease from current levels.
Technically, Ethereum’s chart does display fragility, with notable failures in breaking the $4,000 resistance during this cycle. Analyst Mags pointed out these setbacks along with supportive levels lost, suggesting a bearish period ahead for ETH.
Conversely, trader Michaël van de Poppe sees potential signs of a turnaround. He notes a possible "deviation" and believes breaking above the $2,100 to $2,150 zone could spark a rise to $2,800. A weaker U.S. dollar presents a positive macro backdrop, potentially aiding a crypto recovery in Q2 2025.
However, any optimistic forecasts depend on Ethereum regaining crucial technical levels and broader market conditions improving. Until then, downside risks remain evident.
In the near term, Ethereum’s path is closely tied to macroeconomic dynamics and Bitcoin’s influence. A clear recovery would hinge on surpassing $2,150; without this, Ethereum might struggle due to ongoing technical and structural pressures.
Always approach investments with caution, only committing what you’re prepared to lose.
Disclosure: This article is not investment advice. The information is for educational purposes only.
