
Ethereum’s price trajectory has weakened due to internal tensions at the Ethereum Foundation and the rising dominance of Solana in the decentralized application (DApp) market. Ether (ETH) has been unable to consistently surpass $3,500 since January 7th, despite a 6% growth in the overall cryptocurrency market during the same timeframe. This stagnation is partly due to a significant 38% drop in Ethereum-based DApp activity over a seven-day period, according to DappRadar, with on-chain volumes falling to $36.5 billion.
When compared to peers, Ethereum has lagged considerably. The BNB Chain saw a 112% surge in activity while Solana experienced a 36% increase. Ethereum-based platforms like Balancer, Morpho, and Uniswap saw volume decreases of 65% and 40%, respectively. Furthermore, between January 14th and 21st, Ethereum recorded merely $46 million in fees, placing it outside of the top five blockchains for weekly fees. Solana, on the other hand, collected a total of $309 million, significantly outpacing Ethereum.
A key criticism facing Ethereum is its reliance on layer-2 scaling solutions that involve rollups, an approach criticized for its transaction cost inefficiency. The debate revolves around how to balance affordable transaction costs while still offering adequate incentives for ETH staking. Solutions being considered include fee increases or reducing the inflation rate. Currently, Ethereum’s leading scaling solutions — Base, Arbitrum, Polygon, and Optimism — are responsible for a collective $25.8 billion in weekly decentralized exchange (DEX) volumes.
Despite facing significant competition, Ethereum remains dominant in total value locked (TVL), maintaining a steady $66 billion week-over-week as reported by DefiLlama. Additionally, deposits in Ethereum layer-2 solutions have grown to $8.2 billion, covering Base, Arbitrum, Polygon, and Optimism. However, Solana’s deposits surged by 29% in just seven days, hitting an all-time high of $11.2 billion, posing additional challenges and uncertainty for ETH investors.
A further strain on Ethereum’s outlook comes from leadership disputes within the Ethereum Foundation. In May 2024, a conflict-of-interest policy was implemented after some researchers received paid advisory roles at EigenLayer. More recently on January 21st, Ethereum co-founder Vitalik Buterin asserted his leadership authority amid criticism of inefficiencies during the tenure of the foundation’s executive director, Aya Miyaguchi, who has been in the role since 2018.
These internal and external challenges are exacerbating Ethereum’s struggle to maintain its market momentum, while Solana is capitalizing on the memecoin boom, putting Ethereum’s dominance in jeopardy. As of now, no clear catalysts have emerged to help Ethereum outperform its competitors in the near future.