In-depth Analysis of the Underlying Reasons for Ethereum's Poor Price Performance

Since 2022, Ethereum (ETH) has been a major asset in the cryptocurrency market, and its price performance has shown a significant gap from market expectations. Although its ecosystem still dominates in the decentralized finance (DeFi) sector, the price of ETH has been sluggish for a long time, with its growth surpassed by some emerging public chains, even facing doubts of "a thriving ecosystem but unfulfilled token value." This article will analyze the complex logic behind Ethereum's weakness from multiple perspectives.

1. Market Expectation Mismatch: Narrative Shift and the Unexpected Effects of ETFs

Ethereum was once the core driver of the DeFi and NFT waves. However, in recent years, as market hotspots have shifted towards artificial intelligence, real-world asset tokenization, and popular coins, its dominant position has been challenged. Many emerging projects have chosen to develop on other platforms, leading to Ethereum gradually becoming marginalized in emerging narratives.

The Layer 2 scaling solutions of Ethereum have alleviated the bottleneck of the mainnet's performance to some extent, but their feedback effect on the ecosystem is not significant. The internal competition issue of Rollup technology is particularly prominent, with developers overly focusing on infrastructure improvements while neglecting innovation at the application layer. This allocation of resources has not expanded the user base; instead, it has caused trading volume and activity to flow to other competitive public chains.

In addition, unlike the influx of funds during the launch of the Bitcoin ETF, there has been capital outflow after the listing of the ETH ETF, partly due to the selling pressure from certain investment institutions' old products. However, paradoxically, institutional interest in ETH in the long term continues to rise. Some analysts predict that ETH may become an "asset favored by institutions" in the coming years due to mechanisms such as staking rewards, smart contract locking, and ETF absorption. This misalignment between short-term and long-term expectations highlights the market's confusion over ETH's value capture capability.

2. The Double-Edged Sword of Technological Upgrades: From "Deflation Narrative" to Ecological Imbalance

Technical upgrades have been the core narrative of Ethereum in recent years, but they have also brought many unexpected side effects. Although Ethereum's multiple upgrades have successfully achieved supply deflation, the latest upgrade, which reduced data storage costs, has instead weakened the mainnet's revenue sources, indirectly affecting the appreciation potential of ETH. In addition, the community's expectations for the future technological roadmap have changed, but the new development strategy has failed to substantially expand the user base.

The internal disagreements within the Ethereum community regarding the development roadmap have intensified the technical dilemma. Some core members criticize the existing roadmap as "too conservative" and call for an acceleration of the upgrade plan; while other developers question the current scalability strategy and advocate for a large-scale upgrade of the mainnet. This fluctuation in the technical direction exposes the shortcomings of Ethereum's decision-making mechanism. Although community leaders have repeatedly emphasized that "price is not a priority goal," the asset disposal actions of some core institutions are still interpreted by the market as a lack of confidence.

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

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

Despite the weak prices, institutional funds have quietly entered the market. Reports from some cryptocurrency exchanges indicate that the limited supply of Ether, staking rewards, and compliance make it the "preferred smart contract platform for institutional adoption." Some institutions even predict that the total amount of Bitcoin held by enterprises may soon exceed that of the founders, while Ether may regain capital favor due to trends like stablecoins, tokenization, and AI applications.

At the same time, the selling behavior of some core institutions has triggered a chain reaction. Reports indicate that certain institutions have cashed out multiple times at price peaks, and large holders have accurately "escaped the top" by transferring large amounts of ETH to exchanges, exacerbating the market's concerns about "insiders being bearish." This capital movement forms a hedge against institutional entry, leading to ETH being trapped in a "value discovery" stalemate.

4. The Contradictions of Community Leaders: The Dilemma of Development Direction and Ecological Transformation

Ethereum community leaders have stated that they "fear the bull market," revealing the core contradiction of Ethereum:

• Decentralization Challenge: While Ethereum's DeFi culture has cemented its early position, it has also led to an over-reliance on financial arbitrage within the ecosystem. The community is calling to "move out of the DeFi shadow" and shift towards practical scenarios that integrate with Web2 (such as prediction markets and identity verification), but progress has been slow.

• Balancing Regulation and Innovation: The ambiguous stance of US regulatory agencies towards Ethereum (such as the prolonged lack of clarity regarding its securities status) has dampened institutional confidence. Although the policy environment may bring opportunities, Ethereum still needs to find a new balance between compliance and decentralization.

V. Future Outlook: Path to Breakthrough and Potential Catalysts

Although the price performance of Ethereum may still be constrained in the short term by internal selling pressure, market sentiment, and a narrative vacuum, its future remains promising in the long run.

If Ethereum can embrace the trend of modularization and position itself as "settlement layer + data availability layer," while also incorporating the advantages of other high-performance public chains, it may be able to restructure the discourse power system. In addition, accelerating the implementation of privacy technologies could open up new scenarios such as AI agents and decentralized storage.

In the coming years, the shift in U.S. stablecoin legislation and regulatory policies may open a compliance channel for ETH. If the staking ETF is approved or a physical creation mechanism is introduced, institutional demand for ETH may experience a surge. At the same time, the entry of corporate funds and sovereign 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 does not stem from a single factor, but is a necessary pain that must be experienced during the ecological transformation 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 pivot points can be found in modularization, compliance, and de-financialization, ETH is still expected to return to a growth trajectory.

With the accelerated launch of ETH staking ETFs and institutions' renewed understanding of the value of Ethereum, the revaluation of ETH is just a matter of time. Analysis firms predict that Ethereum is expected to break through the $8000 barrier in the coming years.