Ethereum price
Ethereum at a crossroads: Institutional adoption vs. market underperformance | Image by Shutter Speed
This report unpacks that tension. We take a closer look at Ethereum’s expanding institutional presence, scaling approach, capital flows, and market performance. The goal: to assess whether the network can close the gap between growing adoption and lagging valuation.
Since its debut in 2015, Ethereum has fundamentally reshaped crypto. It introduced smart contracts to the blockchain world, enabling everything from decentralized finance to tokenized assets and programmable ownership. What started as a niche idea now powers an ecosystem with a market cap exceeding $224 billion (as of April 1st, 2025. Source: CoinMarketCap).
Ethereum peaked at over $550 billion during the 2021 bull cycle, fueled by an explosion in DeFi, NFTs, and institutional exploration. Now, it finds itself at a pivotal moment. While adoption by enterprise and financial giants has never been stronger, Ethereum’s price performance has lagged. Bitcoin and Solana have pulled ahead, shifting attention away from the platform with arguably the strongest on-chain fundamentals.
Ethereum (yellow) has solidified its position as the primary alternative to Bitcoin, consistently capturing significant market share. However, recent trends highlight Ethereum's struggle to maintain its market dominance amidst growing competition from emerging Layer 1 blockchains and stablecoin expansions. Source: Coingecko, as of April 1st, 2025.
Ethereum’s scaling approach has evolved to address network congestion and high transaction fees, with Layer 1 (L1) referring to the base Ethereum blockchain and Layer 2 (L2) solutions built atop Ethereum to enhance transaction speed and reduce costs.
This architecture is intended to help Ethereum scale to billions of users, without sacrificing decentralization or security.
Optimistic Rollups and Zero-Knowledge (zk) Rollups are at the heart of this approach. Both types of L2s are gaining adoption, particularly among institutions seeking speed, efficiency, and regulatory clarity. But despite the momentum, a key question remains: can these scaling solutions bridge the widening gap between Ethereum’s strong institutional adoption and its weaker token performance?
This article explores that very question, through the lens of market cap trends, enterprise use cases, capital rotation, and Ethereum’s evolving infrastructure strategy.
Institutional adoption: Wall Street’s preferred blockchain
Ethereum has emerged as the go-to blockchain for institutional players. More than 50 non-crypto enterprises, including global financial leaders like BlackRock, PayPal, and Deutsche Bank, are building on Ethereum and its L2s.
What’s driving this interest? Ethereum’s expanding role in tokenized real-world assets (RWAs), stablecoin infrastructure, and on-chain finance. In many ways, Ethereum is becoming the institutional foundation for Web3.
Recent milestones include:
- Deutsche Bank’s Layer 2 Rollup: In December 2024, Deutsche Bank unveiled a rollup network using ZKsync, designed to blend public transparency with permissioned access, aligning speed and compliance. This initiative, part of Project Dama 2, showcases Ethereum’s potential to meet both institutional performance and regulatory needs. (Source: Coindesk)
- Sony’s Soneium Launch: Partnering with Startale Labs, Sony introduced Soneium, an Ethereum Layer 2 built using Optimism’s OP Stack. With a focus on gaming, finance, and entertainment, the Minato testnet bridges the Web2/Web3 divide with real-world applications. (Source: Coindesk)
- BlackRock and Tokenized Funds: The world’s largest asset manager launched its BUIDL fund on Ethereum in partnership with Securitize and BNY Mellon. Since then, BlackRock has expanded BUIDL to five protocols – three of them built on Ethereum Layer 2s. (Source: CNBC)
Key institutional Ethereum use cases thriving. Sources: rwa.xyz, The Block
1. Real World Assets (RWAs) on Ethereum: Scale, growth, and dominance
Real World Assets (RWAs) refer to the tokenization of tangible or traditionally off-chain assets, such as treasury bills, commodities, or real estate, on blockchain networks. By bringing these assets on-chain, issuers can enable greater liquidity, transparency, and accessibility within decentralized finance (DeFi) ecosystems.
On Ethereum, RWAs are now distributed across approximately 60,000 unique active wallet addresses, representing a broadening base of participation. The network supports 163 distinct RWA tokens, highlighting the diversity of tokenized asset classes being deployed.
Meanwhile, Ethereum’s stablecoin supply has increased by 70% over the past year, further reinforcing its infrastructure as the primary settlement layer for on-chain financial instruments. As of April 1st, 2025, Ethereum holds over 50% of the total RWA market share, maintaining a dominant position in this rapidly growing sector.
RWA League Table: Ethereum's Unmatched Dominance Amid Emerging Competition - This table highlights the current landscape of real-world asset (RWA) tokenization across top blockchain networks. Ethereum remains the undisputed leader, commanding over 53% of total market share and boasting $5 billion in tokenized assets, far outpacing all other networks combined. Despite emerging challengers like Solana and Arbitrum showing explosive 30-day growth (+93.46% and +40.76%, respectively), Ethereum’s deep issuer base (140) and protocol adoption continue to cement its position as the RWA backbone of Web3. The gap is narrowing, but for now, Ethereum is still the king of tokenized real-world value. Source: rwa.xyz as of April 1st, 2025.
Ethereum's RWA market cap rapidly is approaching $6B. Notably, the recent surge is driven by a diversified mix of assets—like BUIDL, USYC, and PAXG—signaling institutional traction beyond just stablecoins or gold-backed tokens. Source: rwa.xyz as of April 1st, 2025.
2. Stablecoins: Ethereum hold the lead
Ethereum remains the primary network for stablecoin transactions, acting as the backbone for digital dollar settlements across crypto and traditional finance.
According to the block, the network hosts $67 billion in USDT and $35 billion in USDC. These volumes speak to the network’s unmatched liquidity, deep trust, and institutional-grade security.
Despite the emergence of competing blockchains promising lower fees and faster finality, Ethereum's robust infrastructure, security, and deep liquidity pools make it the preferred venue for stablecoin issuers and institutional users alike. The network processed over $850 billion in stablecoin volume in early 2025 alone, demonstrating the scale and resilience of stablecoin activity on Ethereum.
This chart illustrates the monthly on-chain volume of stablecoins on Ethereum over the past year, peaking near $1.5 trillion in July 2024 and showing resilient activity through early 2025. USDT and USDC remain dominant, but Ethereum continues to support a diverse ecosystem of stablecoins, including DAI, USDe, and over a dozen others. Despite some fluctuations, the data confirms Ethereum's sustained role as the primary settlement layer for stablecoin transactions, underpinning both DeFi and RWA growth. Source: The Block, as of April 1st, 2025
3. NFT and Gaming: Transitioning from brand hype to scalable use cases
Non-fungible tokens (NFTs) have been the primary entry point into Web3 for traditional consumer brands, particularly in the luxury fashion and automotive sectors. Major names such as Louis Vuitton, Coach, Porsche, and Lamborghini were early adopters, launching branded NFT collections between 2021 and 2023, when market enthusiasm and valuations were at their peak.
This chart shows the year-to-date NFT trade volume by blockchain, with Ethereum consistently accounting for the largest share of activity. While January 2025 saw a peak above $150 million, NFT volumes have gradually declined through March, reflecting broader market cooldowns. Despite this, Ethereum maintains a clear lead, followed by Bitcoin, Solana, and Polygon. The data underscores Ethereum’s continued role as the primary network for high-value NFT transactions, even as multichain competition persists. Source: The Block
However, as NFT floor prices have significantly declined in recent years, most of these brands have since scaled back or paused their Web3 initiatives. By 2025, few of them are actively minting NFTs on Ethereum or its Layer 2 networks. The hype-driven model of digital collectibles as status symbols has given way to more utility-driven use cases.
The companies that remain active in the NFT space are increasingly focusing on game development as the primary context for NFT issuance.
These projects are being built almost exclusively on Ethereum Layer 2s, such as Polygon, Arbitrum, and Immutable, which offer lower fees and faster transaction speeds, critical requirements for gaming environments that demand scalability and seamless user experience. This marks a clear shift from prestige-led NFT drops to functionally integrated, gamified digital assets.
Market struggles: Underperformance amid adoption
Despite institutional inflows, Ethereum’s price has underperformed, with the ETH/BTC ratio at approximately 0.022 (ETH at $1,873, BTC at $84,019 as of April 1st, 2025 - CoinMarketCap).
Despite Ethereum’s strong institutional presence, the ETH/BTC pair continues to slide, showing a -13.47% drop over the past month and a staggering -56.39% over the past year. The ratio highlights Ethereum’s ongoing market underperformance relative to Bitcoin, reinforcing the growing disconnect between fundamentals and price action. Source: TradingView, April 1st, 2025.
Why Ethereum continues to lag: A Confluence of structural and market challenges
Ethereum has faced persistent market headwinds heading into early 2025, extending a downward trend that began in late 2024. The turning point came in October 2024, when capital began flowing aggressively into high-beta altcoins amid a surge in retail-driven speculation, especially around meme coins and next generation Layer 1s such as SUI. This rotation left ETH underperforming relative to these sectors.
As more user activity shifts to Layer 2s, Ethereum’s base layer captures a smaller share of transaction and priority fees. This shift has reignited concerns about the network’s long-term value accrual and economic sustainability. Ethereum’s underperformance isn’t just about market cycles: it reflects a structural challenge at the heart of its scaling model.
Key pressure points include:
- Rising competition: Chains like Solana and Tron continue to gain market share by offering lower fees and faster transaction speeds, pulling users and liquidity away from Ethereum. Solana has surged 600% against Ethereum since 2023 (Cointelegraph), driven by meme coin mania and high transaction volumes, though recent data suggests this mania has slowed, with Solana’s price dropping nearly 60% from its January peak Bitcoin benefits from the "Trump Trade," with ETF inflows boosting its market cap to $1.943 trillion, six times Ethereum’s $228.4 billion Bitcoin in 2025.
- Fragmented Layer 2 ecosystem: While Ethereum’s L2s have significantly improved scalability and reduced transaction costs, the ecosystem remains fragmented. Over 20 distinct Layer 2 networks have launched, each operating in silos with limited interoperability. This fragmentation forces developers and institutions to navigate multiple disconnected environments, leading to inefficiencies in development and user experience. Moreover, the proliferation of L2s has had an unintended financial consequence: by diverting activity away from Ethereum’s L1, these rollups have cannibalized fee generation. For example, a Uniswap trade on Arbitrum might cost as little as $0.01, compared to $2–$5 on Ethereum mainnet. As a result, Ethereum accrues only a small fraction of the fees from these rollups, putting pressure on its economic model. With low revenue relative to market cap, ETH currently appears expensive on a "Price-to-Earnings" basis, raising concerns about the sustainability of its value accrual model in the multi-rollup future.
- Uncertainty around ConsenSys: The infrastructure giant behind MetaMask and Infura was under SEC investigation for most of 2024, casting a shadow over Ethereum’s legal positioning. However, in a key March 2025 development, the SEC dropped its case against ConsenSys, reducing legal risk and clearing a path for renewed institutional confidence.
- Post-upgrade activity drop: Despite the Dencun upgrade in early 2025 (aimed at improving L2 efficiency and reducing costs), Ethereum’s mainnet activity has sharply declined, with transaction counts hitting their lowest levels since July 2020.
- Institutional adoption not translating into flows: Despite strong infrastructure adoption by firms like BlackRock, Deutsche Bank, and Sony, Ethereum Spot ETFs have seen consistent outflows since early 2025, signaling a disconnect between long-term institutional buildout and short-term investor sentiment.
Ethereum Spot ETF Inflows Turn Negative Amid Price Weakness - This chart tracks the net inflow of Ethereum Spot ETFs alongside the ETH price from July 2024 to March 31, 2025. After strong inflows in late 2024—peaking above 120K ETH—sentiment has sharply reversed in early 2025. Since February, the chart shows persistent net outflows, coinciding with ETH's decline below $2,000. The data signals waning institutional appetite for Ethereum exposure through ETF products, raising questions about near-term price support and investor confidence. Source: Coinglass, as of April 1st, 2025
Ethereum’s scaling strategy: Will Layer 2 deliver?
Ethereum’s Layer 2 (L2) scaling strategy has become the cornerstone of its 2025 roadmap, but it has sparked a deep ideological debate across the ecosystem.
Should Ethereum continue prioritizing L2s and hope that future designs (like based rollups) will better align incentives and fee flows with the mainnet?
Or should it take a Solana-style approach by improving Layer 1 throughput directly to ensure that value accrues at the base layer?
Vitalik Buterin remains firmly committed to the L2-centric model, though there is a modest roadmap for scaling L1. Yet, this vision has been increasingly challenged by market dynamics, as Ethereum’s price stagnates and competitors gain ground.
Ethereum's L2 ecosystem has achieved critical milestones:
- Massive capacity boost: L2s now offer 17 times more transaction capacity than Ethereum’s base layer, with average transaction fees as low as $0.12.
- Advanced technology leading the way: L2s that use zero-knowledge (zk) proofs, like zkSync and StarkNet, are dominating, handling 83% of enterprise smart contracts.
Despite this progress, Ethereum’s L2 ecosystem still faces three big hurdles:
Although alternative chains like Solana offer even lower fees and faster transactions, Ethereum’s evolving L2 ecosystem, especially with expected interoperability improvements in 2025, is well-positioned to remain the foundational layer for scalable, enterprise-grade blockchain applications.
Ethereum’s next chapter: Inflection point ahead
Ethereum is doing what it was built to do. It has become the foundational layer for an expanding universe of real-world asset tokenization, enterprise applications, stablecoins, and decentralized infrastructure. Institutions are not experimenting anymore. They are building. And they are building on Ethereum.
Its Layer 2 ecosystem now delivers massive throughput at a fraction of the cost. Stablecoin volumes remain strong. Capital is moving into tokenized instruments. Developers are still shipping. Every meaningful metric that reflects long-term adoption is pointing in the right direction.
And yet, the market remains skeptical. Ethereum’s price continues to lag Bitcoin. Spot ETF flows have turned negative. The ETH/BTC ratio has slid to multi-year lows. Even after successful upgrades and regulatory clarity, investor sentiment has yet to shift meaningfully.
That skepticism is not without reason. Ethereum’s architecture is still fragmented. Value capture remains imperfect. Rollup standards are still maturing. And competing chains continue to pull attention with faster speeds and lower fees. But while the headlines may focus on what is loud and fast, the signal is coming from what is durable and built to last.
Ethereum’s advantage has always been its depth. Depth of infrastructure. Depth of community. Depth of institutional commitment. With new technical standards gaining traction, and clearer regulatory pathways emerging, Ethereum is entering a new phase: quieter, more composable, and built for scale.
The disconnect between price and participation will not persist forever. It rarely does. Ethereum may not offer the flashiest upside today, but it is building the kind of foundation that markets eventually reward. The fundamentals are not waiting. The question is whether investors are finally ready to catch up to them.
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The full breakdown
In our first article, "Navigating Crypto Volatility: The Advantages of Active Management," we explored how the high volatility and low correlation of digital assets with traditional asset classes create unique opportunities for active managers. We discussed how these characteristics enable active managers to execute tactical trading strategies, capitalizing on short-term price movements and market inefficiencies. Building on that foundation, we now turn our attention to the unique market microstructure of digital assets.
Conducive market microstructure of digital assets
The market microstructure of digital assets - a framework that defines how crypto trades are conducted, including order execution, price formation, and market interactions - sets the stage for active management to thrive. This unique ecosystem, characterized by its continuous trading hours, diverse trading venues, and substantial market liquidity, offers several advantages for active management, providing a fertile ground for sophisticated investment strategies.
24/7/365 market access
One of the defining characteristics of digital asset markets is their continuous, round-the-clock operation.
Unlike traditional financial markets that operate within specific hours, cryptocurrency markets are open 24 hours a day, seven days a week, all year round. This continuous trading capability is particularly advantageous for active managers for several reasons:
- Immediate response to market events: Unlike traditional markets that close after regular trading hours, digital asset markets allow managers to react immediately to breaking news or events that could impact asset prices. For instance, if a significant economic policy change occurs over the weekend, managers can adjust their positions in real-time without waiting for markets to open.
- Managing volatility: Continuous trading provides more opportunities to capitalize on price movements and volatility. Active managers can take advantage of this by implementing strategies such as short-term trading or hedging to mitigate risks and lock in gains whenever market conditions change. For instance, if there’s a sudden drop in the price of Bitcoin, managers can quickly sell their holdings to minimize losses or buy in to capitalize on the lower prices.
Variety of trading venues
The proliferation and variety of trading venues is another crucial element of the digital asset market structure. The extensive landscape of over 200 centralized exchanges (CEX) and more than 500 decentralized exchanges (DEX) offers a wide array of platforms for cryptocurrency trading. This diversity is beneficial for active managers in several ways:
- Risk management and diversification: By spreading trades across various exchanges, active managers can mitigate counterparty risk associated with any single platform. Additionally, the ability to trade on both CEX and DEX platforms allows managers to diversify their strategies, incorporating different levels of decentralization, regulatory environments, and security features.
- Arbitrage opportunities: Different venues often exhibit price discrepancies, presenting arbitrage opportunities. For example, managers can buy an asset on one exchange at a lower price and sell it on another where the price is higher, thus generating risk-free profits.
- Access to diverse liquidity pools: Multiple trading venues provide access to diverse liquidity pools, ensuring that managers can execute large trades without significantly impacting the market price.
Spot and derivatives markets (Variety of instruments)
The seamless integration of spot and derivatives markets within the digital asset space presents a considerable advantage for active managers. With substantial liquidity in both markets, they can implement sophisticated trading strategies and manage risk more effectively.
For instance, as of August 8 2024, Bitcoin (BTC) boasts a daily spot trading volume of $40.44 billion and an open interest in futures of $27.75 billion. Additionally, derivatives such as futures, options, and perpetual contracts enable managers to hedge positions, leverage trades, and employ complex strategies that can amplify returns.
Overall, the benefits for active managers include:
- Hedging and risk management: Derivatives offer a powerful tool for hedging against unfavorable price movements, enabling more efficient risk management. For instance, a manager holding a substantial amount of Bitcoin in the spot market can use Bitcoin futures contracts to safeguard against potential price drops, thereby enhancing risk control.
- Access to leverage: Managers can use derivatives to leverage their positions, amplifying potential returns while maintaining control over risk exposure. For instance, by employing options, a manager can gain exposure to an underlying asset with only a fraction of the capital needed for a direct spot purchase, thereby enabling more capital-efficient investment strategies.
- Strategic flexibility: By integrating spot and derivatives markets, managers can implement sophisticated strategies designed to capitalize on diverse market conditions. For instance, they may engage in volatility selling, where options are sold to generate income from market volatility, regardless of price direction. Additionally, managers can leverage favorable funding rates in perpetual futures markets to enhance yield generation. Basis trading, another strategy, involves taking offsetting positions in spot and futures markets to profit from price differentials, enabling returns that are independent of market movements.
Exploiting market inefficiencies
Digital asset markets, being relatively nascent, are less efficient compared to traditional financial markets. These inefficiencies arise from various factors, including regulatory differences, market segmentation, and varying levels of market maturity. For example:
- Pricing anomalies: Phenomena like the "Kimchi premium," where cryptocurrency prices in South Korea trade at a premium compared to other markets, create arbitrage opportunities. Managers can exploit these by buying assets in one market and selling them in another at a higher price.
- Exploiting mispricings: Active managers can identify and capitalize on mispricings caused by market inefficiencies, using strategies such as statistical arbitrage and mean reversion.
The unique aspects of the digital asset market structure create an exceptionally conducive environment for active management. Continuous trading hours and diverse venues provide the flexibility to react quickly to market changes, ensuring timely execution of trades. The availability of both spot and derivatives markets supports a wide range of sophisticated trading strategies, from hedging to leveraging positions. Market inefficiencies and pricing anomalies offer numerous opportunities for generating alpha, making active management particularly effective in the digital asset space. Furthermore, the ability to hedge and manage risk through derivatives, along with exploiting uncorrelated performance, enhances portfolio resilience and stability.
In our next article, we'll delve into the various techniques active managers employ in the digital asset markets, showcasing real-world use cases.
