Ethereum Struggles: What’s Behind the Drop in Price and Market Dominance?

Ethereum (ETH), the second-largest cryptocurrency by market value, is having a tough time. The coin has seen a sharp decline in the first quarter of 2025, with a 44% drop in its value. This has led to concerns that Ethereum may be facing one of its worst quarters ever. Despite its ongoing adoption and use, the outlook for Ethereum is looking uncertain, with many experts trying to figure out what’s going wrong.

What’s Driving Ethereum’s Decline?

1. Record Sell-offs
   According to CryptoQuant CEO Ki Young Ju, Ethereum has seen a huge amount of selling activity. In fact, this has led to a drop in Ethereum’s market dominance. As of now, its dominance sits at just 8.5%, the lowest since 2020. This significant selling has raised many questions about where the market is headed.
2. Rise of Layer-2 Networks
   One big reason for Ethereum’s struggles could be the growth of Layer-2 (L2) solutions. These networks aim to make Ethereum faster and cheaper to use, but they’re not helping Ethereum’s price. Analyst Camila Russo points out that while these solutions benefit from Ethereum’s security, they’re not paying enough for the space they use, which could be affecting the overall value of Ethereum itself. Essentially, Layer-2s might be hurting the Ethereum ecosystem by fragmenting its value.
3. Technical Concerns
   Some developers are worried about Ethereum’s technical foundation. One developer criticized the network, calling it a “dumpster fire.” The concern is that Ethereum has moved away from its original goal of being a decentralized world computer. Instead, it has added complex layers that sometimes cause issues, like the Bybit hack where $1.5 billion in ETH was lost.
4. Lack of Clear Vision
   Tuur Demeester, a Blockstream advisor, argues that Ethereum has lost its story. In the early days, Ethereum had an exciting narrative around its potential to reshape industries, but now, it’s struggling to find that next big compelling idea. The lack of a strong vision could make it harder to keep investors and developers interested.
5. Regulatory Uncertainty
   Unlike Bitcoin, which is seen as a commodity, Ethereum has features that could lead it to be labeled as a security. This would bring more regulatory scrutiny and could scare off institutional investors. Some analysts, like Francisco Quartin de Macedo, believe that Ethereum’s uncertain monetary policy (especially after the Merge) has made it harder for investors to commit long-term.

Is Ethereum Losing Its Edge?

While Ethereum is still central to many blockchain applications, its price performance has been lackluster, especially compared to other cryptocurrencies like Bitcoin. Currently, Ethereum is priced around $1,890, showing a modest 1.34% increase in the last 24 hours, but it’s down by more than 40% in the first quarter.

Despite these struggles, some signs indicate long-term confidence in Ethereum. ETH staking has been rising, which means some investors are still betting on Ethereum’s future. However, without a clear narrative, better scaling solutions, and improved market conditions, Ethereum’s price may continue to underperform compared to its competitors.

Looking Ahead

Ethereum’s recent struggles highlight how rapidly the market can change, even for major players. With the rise of Layer-2 solutions, technical concerns, regulatory pressures, and lack of a strong vision, Ethereum has a lot to prove if it’s going to continue as a dominant force in the crypto world. For now, investors are watching closely to see if Ethereum can regain its footing or if it will continue to face challenges.