Ethereum’s rough start to 2025 has crypto investors asking tough questions. After Bitcoin’s weak Q1, ETH tumbled even further — down 45% from its highs. Since the Dencun upgrade, ETH has struggled, leading to one big question: Is Ethereum losing relevance in a world powered by L2s and new DeFi rails?

How Ethereum Shifted: From Leader to L2 Launcher

Ethereum was once the king of smart contracts, peaking at nearly $4,878 in 2021. But in the years since, its role has changed. Today, Ethereum acts more like the foundation for Layer 2s than a place where users directly transact.

The Dencun upgrade made L2s much cheaper to operate — and that’s fueled their success. Take Coinbase’s Base chain, for example: it’s printed $94M in profit, while paying just $4.9M in fees back to Ethereum.

Are L2s Helping Ethereum — or Hurting It?

That’s the hot debate. Some say Layer 2s scale Ethereum’s mission. Others argue they’re draining value without returning it. Why?

• ETH burn rates are down
  
• Transaction fees are dropping
  
• And ETH’s supply is growing again — not shrinking
  

ETH’s “ultrasound money” meme isn’t looking so sound lately. According to Ultrasound Money, supply is back to +0.9% per year. Not ideal.

Institutional Money: Cooling Down on ETH?

There’s more:

• ETH ETFs in the U.S. have underperformed
  
• Ethereum Foundation has trimmed its holdings
  
• Big money is asking, “Where’s the return?”
  

Old-school metrics like TVL and tx count are out. New focus? Revenue, burn rate, and protocol profits.

Pectra Upgrade: Tech Wins, But Can It Save ETH Price?

Later this year, Ethereum rolls out Pectra — its next major update.
Highlights include:

• EIP-7702: Gasless transactions
  
• EIP-7691 & EIP-7623: More efficient L2 data handling
  

Developers are hyped. But for institutions and traders, it might not be enough. No built-in KYC, compliance, or TradFi hooks = no real onboarding bridge.

ETH Volatility Is Spiking — What Now?

📊 According to Derive.xyz:

• Implied volatility: Jumped from 71.5% to 122%
  
• ETH has a 1 in 3 chance of dropping below $1,400 by end of May
  

Market’s shaky. ETF flows are dry. And macro pressure is still rising.

Ethereum’s Dilemma: Tech Scaling vs. Value Capture

Right now, Ethereum is growing — just not where it counts for ETH holders. The tech is scaling, but the token isn’t mooning.

If Ethereum wants to reclaim its leadership, it needs more than upgrades.
It needs to bridge value back to ETH itself — or risk being the infrastructure everyone uses, but no one buys.