Ethereum Is Dying... Or Is It a Hidden Gem for 2025?

Ethereum has been having a tough time lately. Despite a strong bull market, its price remains far from its all time highs. Take a look at this chart. The value of ETH versus BTC has been in a steady decline for about three years. The sentiment has been overwhelmingly negative, with many wondering if Ethereum's best days are behind it. But could this stagnation actually be hiding a major opportunity? Is Ethereum on the verge of an unexpected comeback in 2025? In this video, we'll explore the reasons behind Ethereum's underperformance and whether an inversion of the trend could be on the horizon. As always, this isn't financial advice, just an educational look at the current state of Ethereum. I'm Giovanni. Let's jump right in. Ethereum has lost almost 70% of its value relative to Bitcoin since 2022. There are multiple reasons for that. One reason comes down to narrative and competition. Bitcoin has a clear, simple narrative. It's digital gold, a store of value, and has no competition in that role. Ethereum, on the other hand, is harder to explain. It's meant to be a decentralized global supercomputer, the backbone of a new Internet. During the last bull market in 2020, 2021, Ethereum was the undisputed leader for smart contracts, NFTs, DeFi, meme coins. Everything was happening on Ethereum. Despite high transaction fees, there were basically no other alternatives. Solana, its main competitor, was still in its infancy. Then came the bear market. Solana took a massive hit due to its ties to the FTX collapse, cementing Ethereum's dominance. But flashing forward to today, the picture has dramatically changed. Solana has made a strong comeback and its ecosystem is thriving. Additionally, the more competitors like Avalanche and SUI are increasingly gaining traction. Just look at this chart. Ethereum has been steadily losing ground in terms of trading volume on decentralized exchanges and was recently overtaken by Solana. Last year, Solana attracted more new developers than Ethereum. Even the meme coin scene has shifted. Trump Coin, for example, was built on Solana, not Ethereum. But competition and narrative are just the surface. The causes of Ethereum's price stagnation are in its tokenomics. In 2021, Ethereum introduced EIP 1559, an upgrade designed to make the network deflationary by burning part of its transaction fees, essentially removing some ETH from circulation with every transaction. The goal was to reduce ETH's total supply over time, which in turn would drive its value up. However, this hasn't worked. As expected, Ethereum's supply growth is now close to zero, but meaning it is not really deflationary. The main reason is that on chain activity has largely stagnated. Fewer transactions on the Ethereum mainnet mean fewer ETH tokens are being burned, so there is less pressure on the supply. But why has activity on Ethereum stagnated? This brings us to the core of the issue, the so called Layer two conundrum. During the last bull market, fees on Ethereum sparked so high that the network was basically unusable. To address that scalability issue, Ethereum started increasingly relying on Layer two protocols, blockchains that process transactions off chain while settling them on the Ethereum mainnet. This reduces congestion, making transactions cheaper and faster. But here's the While Ethereum's mainnet remains the backbone of security and decentralization, much of the actual economic activity and value Exchange happens on layer 2. Here's an example. On Ethereum's layer 1 swapping tokens might cost $20 in Gas FE, all of which goes to Ethereum validators. But on a layer 2, the same swap could cost just $0.50, with most of those fees going to the layer 2, not to Ethereum.

The problem with ETH's roadmap is that it explicitly said we don't want these cash flows, we're going to give them to the L2s. So what eth did with the rollup centric roadmap is it said we're not going to do execution anymore. We're going to have the L2s do execution and that's where all the money is made.

However, some Ethereum supporters disagree. They argue that over time, if enough activity takes place in Ethereum's layer 2s, value will eventually flow back to the base layer.

Profit margins for L2s are very high, which again is a very good thing because it incentivizes more and more corporations to build their own layer 2s. Once we 10x the activity, once we get to real institutional use and a real user base, that will actually also accrue value to Ethel one at a much higher scale. Which is, which is the whole design point of Ethereum layer 2s.

But a big question remains when and if that level of activity will materialize. Right now, the trend isn't looking promising. To make things worse, critics highlight that the proliferation of Layer two solutions has increased complexity and led to a significant user experience problem. At the end of the day, users don't want to think about layer 1s versus layer 2s. They just want cheap and smooth transactions.

Open the Fantom wallet, use it on Solana, then open the Metamask wallet and use a Dex on Ethereum, you're gonna see that Solana is much more prepared for the web, three world smartphones, etc. And Ethereum, it stuck like five or 10 years ago. In terms of UX, Ethereum has a problem that's not gonna be solved over the next six months.

Why are the same UX issues that plagued the wallets that everyone used in 2021 still there today? The infrastructure on ETH doesn't tell you what you own. You have contract address and you have to add the asset. Like that is an absurd workflow that's been existed like on the ETH side of things for years.

But that's not all. All these challenges have led to growing criticism of the Ethereum foundation, the organization largely in charge of Ethereum's development. Criticized for being ineffective and overly powerful, the foundation has also dealt with conflict of interest scandals. Ethereum co founder Vitalik Buterin has stuck stepped in to oversee leadership changes. So is Ethereum doomed? Not necessarily. There are several factors that could turn things around in 2025. Despite its challenges, Ethereum still boasts the largest developer community and the highest total value locked in defi most real world tokenized assets, including stablecoins are built on Ethereum, positioning it as the preferred platform for institutional investment. While the Ethereum spot ETF a Slow start in 2024, things are looking more promising now. With a pro crypto stance from the Trump administration, the chances of an ETH ETF that allows users to earn yields on their holdings are becoming more likely. If this happens, it could spark a surge in institutional demand for eth.

The EVM and the Ethereum ecosystem has the first mover advantage. That may not matter from a technology standpoint, but from an institutional adoption standpoint it does. You want to be on the chain that's been running the longest. You want to be on the chain with the least amount of downtime. Institutional L2s. So Deutsche bank launching their own L2 or announcing their own L2 in November, it de risks the L2 model for the rest of Wall street for traditional finance. And Coinbase is making so much money and making so much. I know getting so much adoption with their L2, it's inevitable other enterprises will follow that. Sony just launched their L2 as well, so that will catalyze ETH adoption. All this flows through Ethereum itself and it'll raise the awareness of the ETH.

Asset y some say that base the Ethereum layer 2, launched by crypto exchange Coinbase, could be a game changer with over 110 million users, Coinbase serves as a major gateway to the Ethereum ecosystem, potentially driving wider adoption and increasing use of Ethereum.

When you have Coinbase, the world's biggest centralized exchange in the US with more than 50 million active clients, you have something different to offer. If the base network grows, it could save Ethereum from the competition.

However, all these external factors won't likely be enough to reverse Ethereum's decline unless its deeper structural issues are addressed. For Ethereum to regain momentum, it will need to make fundamental changes. The current economic model should be restructured to bring more value back to the main chain.

If Vitalik decides, okay, so we need to charge somehow these layer twos. They start paying fees for data processing capability on layer one or for storage of data. So this could certainly drive up Ethereum's price.

The way that ETH asset accrues value is by scaling the L1 and taking those execution fees. You have to compete directly against the L2s to do that. If they do not, I expect ETH price performance to be sideways to down.

Some experts, including consensus leader Joseph Lubin, suggest Ethereum should focus more on scaling Layer one rather than relying too heavily on Layer two solutions. Some steps have already been taken in that direction. Earlier this month, Ethereum increased its gas limits for the first time since 2021, which should help improve transaction capacity on the main chain. So here are a few final thoughts on this 2025 is likely to bring favorable conditions for crypto Potential regulatory support from the Trump administration could boost its price, but that alone won't reverse Ethereum's struggles. The real challenge is that the competition is moving fast, other protocols are quickly catching up, and Ethereum needs to address its structural issues before its dominance is further eroded. To remain competitive, Ethereum must adjust its Layer one and Layer two model to ensure it stays economically sustainable. It can't afford to wait much longer. If these issues aren't fixed soon, Ethereum risks losing its position in the market. And now it's your turn. Do you agree with this analysis, and are you bullish or bearish ON Ethereum for 2025? Thanks for watching. If you found this video helpful, don't forget to like, share and subscribe for more updates. See you in the next.

Sam.