If cryptocurrency believers were to list the most disappointing major crypto asset so far in 2024, Ethereum would undoubtedly top that list.
In the previous market cycle, Ethereum shone brightly with innovative applications like DeFi and NFTs, reaching an all-time high near $4,800 and delivering returns of over 20x for early investors. As Bitcoin soared to new heights, expectations for the number two cryptocurrency were equally high.
However, in this new cycle, while Bitcoin has surged past $90,000, Ethereum has struggled to maintain footing above $3,000. After briefly touching $4,000 earlier this year, it retreated to around $2,200, leaving many hopeful investors—including some institutional players—temporarily holding depreciated positions. The Ethereum-to-Bitcoin exchange rate has since fallen to a historic low of 0.034.
Yet, as the old saying goes, "After the darkness comes the dawn."
The current challenges facing Ethereum are a natural phase in the early evolution of the Web3 industry. While Bitcoin has firmly established itself as digital gold, Ethereum’s vision of a "world computer" has encountered structural growing pains. These have, for now, limited its ability to reflect its full market value. But these obstacles are surmountable—we are on the cusp of a new beginning.
Understanding Ethereum’s Current Challenges
This bull cycle differs fundamentally from the last two in one key aspect: Ethereum is no longer the primary driver of narrative and technological excitement. While the 2017 cycle was defined by ICOs and the 2020 surge by DeFi Summer, the current cycle is largely dominated by memecoins, many of which reside on Solana.
Concepts championed by Ethereum, such as Layer 2 scaling and restaking, have had mixed effects. While enhancing transaction capacity, they have also introduced new complexities.
Layer 2 Fragmentation and Economic Impact
The proliferation of Layer 2 networks, while improving transaction speed and reducing costs, has also fragmented liquidity and user attention across numerous chains. The introduction of EIP-4844 (blob transactions) further reduced fee revenue, impacting Ethereum’s staking yields and economic security.
With reduced on-chain activity, the burn rate of ETH has occasionally fallen below issuance, leading to brief periods of inflation. This has weakened the narrative of Ethereum as a deflationary asset and a strong store of value, especially when compared to Bitcoin’s perceived stability in that role.
Leadership and Community Alignment
Vitalik Buterin’s profoundly idealistic and technical vision for Ethereum’s future—emphasizing decentralization, security, and scalability—is both a strength and a challenge. Some of these long-term goals can seem distant from the immediate profit-seeking motives of much of the current market.
At times, this has created a perception of a gap between the core developers and the wider community’s desire for tangible, wealth-generating applications in the short term. However, it is this very principled stance that has established Ethereum’s reputation for integrity and long-term thinking.
The Dawn of a New Era for Ethereum
Despite the current narrative favoring other chains, Ethereum’s foundation is being strengthened for the next wave of growth.
The Strategic Value of Layer 2 and Restaking
While presenting short-term challenges, Layer 2 solutions are critical for enabling Ethereum to scale globally. By drastically lowering costs and increasing throughput, they pave the way for applications with mass adoption potential. Similarly, restaking mechanisms enhance network security and decentralization by incentivizing ETH holders to participate actively in securing the ecosystem.
Discussions are ongoing within the community to refine EIP-1559 and adjust ETH’s monetary policy, aiming to restore a deflationary pressure and strengthen its value proposition.
Ethereum’s Unmatched Ecosystem
Bitcoin and Ethereum are not simply competitors; they serve different and complementary roles within the digital asset space. Ethereum’s programmable nature supports a vast array of applications—from decentralized finance and NFTs to identity and supply chain management.
This versatility creates a powerful network effect that no other smart contract platform has yet been able to replicate. The so-called "Ethereum killers" often emerge not because they are technically superior, but because they temporarily capitalize on specific market trends. Ethereum’s depth of development and established community provide a moat that is incredibly difficult to overcome.
The path forward involves balancing long-term, principled development with immediate, practical utility—ensuring each new application acts as a stepping stone toward a more robust and valuable network.
The Path to $10,000
A conservative yet optimistic projection suggests Ethereum could reach the $10,000 milestone by mid-2026. This outlook is shared by institutions like Standard Chartered, whose analysts have publicly reaffirmed a $10,000 price target for Ethereum by the end of 2025.
Several catalysts could drive this growth.
Traditional Finance Enters Through ETFs
The potential approval and success of U.S. spot Ethereum ETFs would be a game-changer. These financial products provide a familiar and regulated gateway for traditional investors to gain exposure to ETH without directly holding the asset.
Data from Farside Investors showing a record single-day net inflow of $134.4 million into Ethereum ETFs in November 2024 is an early sign of this demand. ETF investors typically have long-term horizons, and their participation would significantly increase stable demand for ETH. For those already invested in Bitcoin ETFs, Ethereum represents a natural next step for portfolio diversification into a more application-rich ecosystem.
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Consolidation and Maturation of Layer 2
The current fragmentation within the Layer 2 space is likely temporary. As the technology matures, we can expect a period of consolidation where weaker projects fade and leading solutions become more integrated with the Ethereum mainnet.
This process will improve user experience, bring liquidity back to the base layer, and increase gas fee revenue for the network, helping to stabilize its economic model. By the first half of 2025, this consolidation could help Ethereum establish a stronger price floor between $3,000 and $5,000.
The Rise of New Applications: DePin and RWA
The next wave of growth will be fueled by practical, high-value applications. Decentralized Physical Infrastructure Networks (DePin) and Real World Assets (RWA) are two sectors poised for explosive growth. As Layer 2 solutions mature, they will enable more complex financial instruments and seamless on-chain/off-chain interactions.
The tokenization of real-world assets like real estate, commodities, and bonds on Ethereum could unlock trillions of dollars in value. By the second half of 2025, these emerging use cases could propel Ethereum’s value into the $6,000 to $8,000 range.
A Favorable Macro and Regulatory Environment
Shifting political attitudes in the U.S., particularly increased support for crypto innovation, could lead to more clear and supportive regulations. A favorable regulatory environment reduces uncertainty and encourages institutional adoption.
Furthermore, in a global context of economic uncertainty and currency devaluation, digital assets like Ethereum are increasingly viewed as a viable hedge. If major economies adopt clearer crypto regulations in the next 1-2 years, Ethereum would be a primary beneficiary. By early 2026, these combined factors could create the perfect conditions for a decisive breakout toward $10,000.
Frequently Asked Questions
Why has Ethereum's price underperformed compared to Bitcoin's recently?
Ethereum’s underperformance is largely due to narrative cycles. The current market excitement is centered around Bitcoin ETFs and memecoins, which often reside on other chains. Meanwhile, Ethereum is undergoing a complex technical transition focused on scaling, which has introduced short-term economic headwinds like lower transaction fees affecting staking yields.
What is the most important factor that could drive Ethereum's price to $10,000?
The single largest catalyst would be massive inflows from a U.S. spot Ethereum ETF. This would open the floodgates for institutional capital that currently finds it difficult to invest directly in ETH. Combined with the growth of new sectors like RWA tokenization, this could create unprecedented demand.
How do Layer 2 networks actually help Ethereum's value in the long term?
Layer 2 networks make using Ethereum cheap and fast for everyone. This enables millions of new users and complex applications that wouldn't be feasible on the mainnet. Ultimately, this increased utility drives demand for ETH, which is needed to pay for security and settlement on the base layer.
Is Ethereum's inflation a major concern for investors?
The shift to inflation is currently minor and temporary, linked to reduced network activity. The community can propose adjustments to the ETH issuance model if it becomes a prolonged issue. The long-term deflationary mechanism via EIP-1559 remains intact and will become more potent as network usage increases.
What are RWA and DePin, and why are they important for Ethereum?
Real World Assets (RWA involve representing physical assets like gold or real estate as tokens on the blockchain. DePin (Decentralized Physical Infrastructure Networks) uses crypto incentives to build real-world infrastructure like wireless networks. Both are killer use cases that could bring immense value and users onto Ethereum.
Will other blockchains overtake Ethereum?
While other chains may excel in specific areas, Ethereum’s combination of security, decentralization, and a massive developer community creates a powerful network effect. It remains the preferred platform for serious applications that prioritize long-term security and stability over short-term gains.