Today ETH is trading at $1,605, which means that the cryptocurrency exchange rate has collapsed by 60 percent over the past year!

In addition, the ratio of the value of Ethereum to Bitcoin has now dropped to almost a five-year low, which makes Vitalik Buterin's cryptocurrency project a frankly unsuccessful investment compared to BTC.

With this in mind, some analysts consider the idea of investing in ETH to be meaningless, although there is another opinion in the market.

Why did Ethereum fall.

The behavior of the Ethereum exchange rate really does not look the best. Still, on December 9, 2024, ETH cost more than 4 thousand dollars, and now the cryptocurrency cannot gain a foothold above $1,700.

(Changes in the value of Ethereum ETH)

Thus, the cost of ether has dropped by 43 percent since January 1, 2025, which is enough to panic investors.

Poor performance is also observed in the trading pair with Bitcoin. Over the past year, the indicator has decreased by 61 percent, and since the beginning of 2025 — by 50 percent!

This means that BTC was a much more profitable investment and would have allowed investors to save more money on the current collapse.

(Changes in the value of Ethereum ETH to Bitcoin)

Quinn Thompson, a representative of the venture capital company Lekker Capital, shared his thoughts on the reasons for this behavior of ETH. He called Ethereum "absolutely dead" in the context of investments and noted a decrease in the activity of cryptocurrency users.

"Make no mistake: from an investment point of view, Ethereum is dead. The network with a market capitalization of $225 billion is showing a decline in transaction activity, user growth, and revenue-related fees. There is no investment case here. As a useful network, yes. As an investment, definitely not."

At the same time, Thompson provided graphs of key indicators of the Eth network. We are talking about the number of transactions carried out, the number of active addresses and the indicators of new addresses.

(Key indicators of activity on the Ethereum network)

As can be seen in the illustrations, the listed indicators have not updated the highs for a very long time. This means that there is no global influx of users, because due to the high fees and low bandwidth of Ethereum, they immediately start using Eth-based L2 networks like Base and Arbitrum. Of course, if we are not talking about modern first-level blockchains, following the example of Solana.

Nick Carter, a partner at Castle Island Ventures, responded to the situation. He believes that second-level chains can really be blamed for what is happening. On this occasion, he said the following:

"The main reason is the greedy L2 solutions based on Ethereum, which suck the value out of the main level (L1), and the public consensus that excessive token issuance is normal. Ethereum was buried under an avalanche of its own tokens. He died through his own fault."

Thompson agreed with what was happening. He believes that it was beneficial for Ethereum lovers to support the launch of various new networks with their tokens in order to make money from it.

"The public consensus among the Eth community in favor of excess emissions arose because endless L2 projects, staking, restaking, DA, etc. brought them profits on growth. But now that the market has made it clear that it was a mistake, no one wants to take the consequences," Thompson said.

Earlier, analysts at the British bank Standard Chartered agreed with this point of view. they stated that the popularity of the Base chain from Coinbase has led to a decrease in the market capitalization of Ethereum by $ 50 billion. In other words, the users transferred this money to the second-level network.

What will happen to Ethereum next?

Polygon founder Sandeep Nailwal predictably believes that criticizing second—tier networks in the context of Ethereum is not the best idea. The same is true for the perception of L2 chains as a competitor for Eth, the developer believes.

Sandeep stated that he is aware of attempts by some representatives of the Ethereum community to put pressure on the Ethereum Foundation. They do this in an attempt to limit the possibilities of such chains in order to increase the popularity of Eth and improve the situation with the cryptocurrency exchange rate.

However, Nailval believes that such a move is capable of destroying the entire social structure of Ethereum.

"It is clear to everyone: if Ethereum does not survive, the second-level solutions will not survive either. The Ethereum community should not put such pressure on developers — I myself should not be able to put pressure on them for the sake of price movement and other things. This can lead to decisions that will completely destroy the social fabric of Ethereum," the expert noted.

At the same time, Sandip described the creator of Ethereum, Vitalik Buterin, as "the DNA of this network», which in addition attracted a huge number of talented developers.

What is happening clearly indicates the problems that have arisen with Ethereum at this stage of the coin market growth. New users want to spend less money on fees, which forces them to switch to second-tier chains. And this directly affects the popularity of Eth and the value of the corresponding asset.