
Ethereum's price and transaction fees sharply declined in Q1 2025 due to increased Layer-2 adoption.
Lower mainnet activity has slowed Ethereum's burn rate, potentially leading to higher inflation than Bitcoin.
Despite recent struggles, long-term investors are optimistic, with upcoming upgrades potentially boosting Ethereum's future.
Ethereum (ETH), the worldโs second-largest cryptocurrency by market value, is going through a rough patch. After nearly a decade of being a major force in the crypto world, ETH has seen a sharp decline in 2025โits price falling by around 46% in the first quarter.
Ethereumโs transaction fees have dropped to their lowest point since 2020, showing a big change in how people are using the network. According to blockchain analytics firm IntoTheBlock, total fees collected on Ethereum fell by nearly 60% in Q1 2025, reaching just $208 million by early April.
Consequences of a Slower Burn Rate
Another concern is Ethereumโs slowing burn rate. This rate is important because it helps reduce the number of ETH in circulation. But with fewer transactions happening, the amount of ETH being burned has dropped. In fact, fees from major platforms like Uniswap, MetaMask, and Tether have dropped by over 95% since late 2024.
As a result, Ethereumโs inflation rate is starting to rise. DeFi analyst Michael Nadeau has warned that Ethereumโs inflation could soon be higher than Bitcoinโs, which could worry long-term holders.
Layer-2 Networks Are Taking Over
A major reason for the drop in fees is the growing use of Layer-2 (L2) networks. These are built on top of Ethereum and offer faster and cheaper transactions. One of the top performers is Coinbaseโs Base network, which now processes more than 80 transactions per secondโmore than any other L2 solution.
Ethereumโs Dencun upgrade, launched in March 2024, made L2 transactions even cheaper. This encouraged users to shift away from Ethereumโs main network to these faster alternatives, which led to fewer transactions and lower fees on the main network.
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ETH/BTC Performance Drop to 5-Year Low
Ethereum is also falling behind Bitcoin in terms of price performance. Since the start of 2025, ETH has dropped from over $3,300 to $1,805 as of April 4. Meanwhile, Bitcoin reached an all-time high of $109,000 and has only fallen about 10%. Ethereum, by contrast, has lost 45% of its value, pushing the ETH/BTC ratio to its lowest point in five years.
Big Investors Still Buying the Dip
Even with all the recent setbacks, some large investors remain confident in Ethereumโs long-term future. IntoTheBlock reports that Ethereum โwhalesโ have bought more than 130,000 ETH after the price fell below $1,800. This shows that many still believe in Ethereumโs recovery.
Some analysts are predicting a strong rebound, saying ETH could reach $5,000 by the end of 2025. Others are even more optimistic, suggesting it could go above $10,000 in the future.
Can the Pectra Upgrade Turn Things Around?
Looking ahead, Ethereumโs upcoming Pectra upgrade, expected in May, could help improve the networkโs performance. If successful, it might give ETH the boost it needs to regain momentum and attract more activity back to the main network.