Why Is Ethereum Price Underperforming in 2025?

Ethereum (ETH), the world’s 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 2025—its price falling by around 46% in the first quarter.

Ethereum’s 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 Ethereum’s 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, Ethereum’s inflation rate is starting to rise. DeFi analyst Michael Nadeau has warned that Ethereum’s inflation could soon be higher than Bitcoin’s, 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 Coinbase’s Base network, which now processes more than 80 transactions per second—more than any other L2 solution.

Ethereum’s Dencun upgrade, launched in March 2024, made L2 transactions even cheaper. This encouraged users to shift away from Ethereum’s 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 Ethereum’s long-term future. IntoTheBlock reports that Ethereum “whales” have bought more than 130,000 ETH after the price fell below $1,800. This shows that many still believe in Ethereum’s 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, Ethereum’s upcoming Pectra upgrade, expected in May, could help improve the network’s performance. If successful, it might give ETH the boost it needs to regain momentum and attract more activity back to the main network.