The Dilemma and Future of Ethereum: A Multidimensional Game of Market, Technology, and Capital

Since 2022, Ethereum has been a major asset in the cryptocurrency market, but its price performance has shown a significant gap from market expectations. Despite its ecosystem still accounting for over 55% of the locked value in the decentralized finance sector, Ethereum's price has been sluggish for a long time, with its growth outpaced by some emerging public chains, even facing the criticism of "ecological prosperity but token value not realized." This article will analyze the complex reasons behind Ethereum's weak performance from multiple perspectives.

1. The Mismatch Between Market Expectations and Reality

Ethereum was once the core driving force behind the decentralized finance and non-fungible token wave. However, in recent years, its dominance has been challenged as market hotspots have shifted towards artificial intelligence, real-world assets, and meme coins. For example, many artificial intelligence projects and certain ecosystem meme coins have not chosen Ethereum as their primary platform, leading to its gradual marginalization in emerging narratives.

At the same time, while Ethereum's Layer 2 scaling solutions have alleviated the bottlenecks in the mainnet's performance to some extent, their feedback effect on the ecosystem is not significant. The competition among scaling solutions is particularly prominent, with developers overly focused on infrastructure improvements while neglecting innovation at the application layer. This resource dispersion has not only failed to expand the user base but has also caused trading volume and activity to flow towards other competitive public chains.

In addition, unlike the influx of funds at the launch of the Bitcoin ETF, there has been capital outflow following the listing of the Ethereum ETF, partly due to the selling pressure from older products of certain investment firms. However, paradoxically, institutional interest in Ethereum for the long term continues to rise. One analyst predicts that Ethereum may become the "asset favored by institutions" in 2025 due to mechanisms such as staking rewards, smart contract locks, and ETF absorption. This discrepancy between short-term and long-term expectations highlights the market's confusion regarding Ethereum's value capture capability.

2. The Double-Edged Sword Effect of Technological Upgrades

Technical upgrades have been the core narrative of Ethereum in recent years, but they have also brought many unexpected side effects. Although multiple upgrades of Ethereum have successfully achieved supply deflation, the latest upgrade, which reduced data storage costs, has instead weakened the mainnet's revenue sources, indirectly affecting Ethereum's appreciation potential. In addition, the community's expectations for shard chains have shifted to layer two networks, but the development strategy of the layer two ecosystem overly relies on commercial narratives and has failed to substantially expand the user base.

The internal divisions within the Ethereum community regarding the development roadmap have intensified the technical dilemmas. Some developers criticize the existing roadmap as "too conservative" and call for an acceleration of the upgrade plan; others question the strategy of "relying solely on layer two network scaling" and advocate for a large-scale upgrade of the mainnet. This wavering in the technical roadmap exposes the problem of Ethereum's lack of strong leadership. Although core developers have repeatedly emphasized that "price is not a priority objective," the Ethereum Foundation's selling behavior is still interpreted by the market as a lack of confidence.

III. Capital Game: The Struggle Between Institutional Entry and Internal Selling Pressure

In terms of capital trends, Ethereum also faces a complex game.

Despite weak prices, institutional funds are quietly entering the market. A report from a trading platform pointed out that Ethereum's limited supply, staking rewards, and compliance make it the "preferred smart contract platform for institutional adoption." Some investment institutions even predict that the total amount of Bitcoin held by enterprises may exceed the holdings of its founders by 2025, while Ethereum may regain capital favor due to trends such as stablecoins, tokenization, and artificial intelligence agents.

At the same time, the selling behavior of insiders, such as the Ethereum Foundation, has triggered a chain reaction. In December 2024, it was revealed that the Ethereum Foundation had cashed out multiple times at high prices, and some had transferred over 100,000 Ether to exchanges at high positions, exacerbating market concerns about "insiders being bearish." This capital movement has formed a hedge against institutional entry, leading Ethereum into a "value discovery" deadlock.

4. The Transformation Dilemma of the Ecosystem

The founder of Ethereum once stated "afraid of the bull market", revealing the core contradiction of Ethereum:

• DeFi Challenges: The decentralized finance culture of Ethereum has contributed to its early position, but it has also led to an over-reliance on financial arbitrage within the ecosystem. The community calls for "stepping out of the shadow of decentralized finance" and shifting towards practical scenarios that integrate with traditional internet (such as prediction markets and identity verification), but progress has been slow.

• Balancing Regulation and Innovation: The ambiguous attitude of regulators towards Ethereum (such as the prolonged lack of clarity regarding its securities status) has suppressed institutional confidence. Although certain policies may bring a turning point, Ethereum still needs to find a new balance between compliance and decentralization.

V. Future Prospects: Potential Paths to Overcome Challenges

Although the price performance of Ethereum may still be constrained by multiple factors in the short term, its future remains promising in the long run.

If Ethereum can embrace the modularity trend and position itself as a "settlement layer + data availability layer", while also incorporating high-performance execution layers from other public chains, it may reshape the ecosystem landscape. In addition, accelerating the implementation of privacy technologies such as zero-knowledge proofs could open up new application scenarios like AI agents and decentralized storage.

In 2025, the shift in legislation and regulatory policies for stablecoins in the United States may open a compliance channel for Ethereum. If the staking ETF is approved or a physical creation mechanism is introduced, institutional demand for Ethereum may see an explosion. At the same time, the entry of corporate funds and sovereign wealth funds could reverse the capital game dynamics.

The weakness of Ethereum is essentially the result of the resonance between the market, technology, and capital. Its predicament is not caused by a single factor, but is an inevitable pain that must be experienced during the ecological transition period. In the short term, price fluctuations will still be constrained by internal selling pressure and a narrative vacuum; in the long term, if new support can be found in modularity, compliance, and de-financialization, Ethereum is still expected to return to a growth trajectory.

With the accelerated landing of Ethereum staking ETFs and the institutional re-evaluation of its value, the revaluation of Ethereum's worth is only a matter of time. Some research institutions even predict that "digital oil" Ethereum is expected to break through the $8000 mark by 2025.