Analysts named the main problems that led to the decline in popularity of Ethereum (ETH). The Dynamics of Ethereum Ethereum lost more than 44% of its value in the first quarter. The cryptocurrency network has also seen record sales in the past three months. CryptoQuant CEO Ki Young Ju explains this to an unprecedented wave of sales. Due to massive sell-offs, Ethereum's market dominance level has dropped significantly. According to CoinMarketCap, at the time of writing it stands at 8.5% - the lowest level since 2020. This situation has sparked active discussions on social network X (formerly Twitter), where analysts are trying to explain the reasons for the fall of Ethereum. ”What happened to Ethereum?” - asked Tron founder and Huobi Global advisor Justin Sun in his post . The Impact of Layer 2 Blockchains Analyst Camila Russo believes that Ethereum's decline is due to the rise of Layer 2 (L2) blockchains. These scaling solutions improve network performance and reduce the load on the main Ethereum network. However, the listed pros have no effect on the price of ETH. ”There's a path to fix Ethereum L2 fragmentation and horrible UX. superchain interop, intents etc. It's gonna happen, eth community is galvanized around unifying Ethereum and they'll fix it,” Rousseau explained. Technical Basis In addition to problems with scaling L2 blockchains, some Ethereum developers are concerned about the blockchain's technical foundation, which calls into question its long-term viability. Uncle Rockstar Developer has called Ethereum an ”absolute cesspit”. He says the network has strayed far from its promise of becoming the world's premier decentralized blockchain. ”To cover up major flaws, needless complexity kept increasing... This occasionally leads to hacker attacks like the one that cost Bybit 400,000 ETH (about $1.5 billion),” he declared. The developer also criticized Ethereum's governance, arguing that it has become a centralized startup that mainly benefits its co-founder Vitalik Buterin. Lack of a Compelling Narrative Blockstream advisor Tür Demeester said the lack of a compelling narrative was another major factor in Ethereum's decline. ”It has run out of stories,” joked Demeester. He was referring to a tweet from 2017 that warned that cryptocurrencies that depend on interest rather than utility will face challenges. This view is based on the assumption that the market is creating new narratives faster than Ethereum can support them. Regulatory uncertainty and institutional indecision Regulatory issues also cloud Ethereum's future. Unlike bitcoin, which is already recognized as a commodity, staking and revenue-generating features leave room for Ethereum to be classified as a security. Francisco Quartin de Macedo noted that Ethereum's monetary policy has become less transparent since The Merge update. This update reduced activity on the network, leading to inflationary pressures instead of the expected deflation. Macedo also emphasized that Ethereum lacks the institutional support that the endorsement of the BTC-ETF has given bitcoin. In addition, bitcoin's positioning as digital gold strengthens its credibility. ”Frankly, Ethereum still seems like an institutional choice, but it's unclear how this will affect its price,” noted Macedo. He pointed out that Ethereum's fragmented l2 ecosystem and regulatory uncertainty have scared some investors away from long-term investments in ETH. How ETH feels At the time of writing, ETH traded at $1,897. Over the last month and year, the asset has fallen in price by 28% and 52%, respectively. The altcoin has a market capitalization of nearly $229 billion, with daily trading volume sitting at over $17 billion.
