Ethereum Price Facing Harsh Reality Amid Slump As Competition Rises

Ethereum’s price downturn has rattled investors as the token plunged 52% from its December high of $4,105 to below $1,870 on March 31. The steep decline makes it one of the worst-performing blue-chip cryptocurrencies, trailing behind rivals gaining market share.

Standard Chartered analysts downgraded their Ethereum price forecast by 60%, slashing their estimate from $10,000 to $4,000. The bank cited growing competition from layer-1 and layer-2 networks, which have eroded Ethereum’s market dominance and revenue growth.

Ethereum price on-chain signals worsen as long-term holders exit

Activity on Ethereum has steadily declined. Data from Santiment shows that daily active addresses dropped to 461,000 as of March-mid, down from 717,000 earlier this year.

Ethereum’s realized cap HODL wave has also collapsed to its lowest level since Aug. 2023, reflecting growing sell pressure from long-term holders.

Meanwhile, the 365-day Mean Dollar Invested Age (MDIA), a metric that reflects coin dormancy, dropped to its Sept. 2023 levels. This decline indicates that ETH coins are moving again—often a sign of selloffs rather than accumulation.

Layer-2 networks take over Ethereum’s volume

Ethereum’s layer-2 solutions, such as Arbitrum, Base, and Optimism, have drawn more users due to lower fees. Data from DeFi Llama shows that decentralized exchanges (DEX) on Ethereum processed $9.8 billion in trading volume over the past seven days.

Arbitrum and Base accounted for $2.87 billion and $2.8 billion, respectively, capturing a share that previously would have belonged to Ethereum’s mainnet. Meanwhile, BNB Chain’s DEX protocols handled over $13 billion in volume, further underscoring Ethereum’s waning dominance.

Ethereum’s high fees and slower speeds have also limited its potential in emerging markets such as Real World Asset (RWA) tokenization. Analysts argue that developers may favor alternative networks like Mantra and BNB Chain, which offer more scalable solutions.

BlackRock’s ETH ETF ‘less perfect’ without staking

BlackRock’s head of digital assets, Robbie Mitchnick, described the firm’s Ethereum exchange-traded fund (ETF) as a “tremendous success.” However, he acknowledged a major limitation—the absence of staking. Speaking at the Digital Asset Summit, Mitchnick said staking remains a crucial factor for investment returns in Ethereum but remains absent in existing ETFs.

“A staking yield is a meaningful part of how you can generate investment return in this space,” he said, noting the regulatory challenges involved in incorporating staking into an ETF structure.

Data from SoSoValue shows Ethereum ETFs held $7 billion in assets as of March 20, with $2.5 billion in inflows. However, the products saw $358 million in outflows over the past 11 days, reflecting broader market struggles.

Ethereum price’s weak on-chain metrics add to concerns

Ethereum’s on-chain activity has also declined, signalling reduced network engagement. Santiment data shows Ethereum had 461,000 active addresses on March 20, down from 717,000 earlier this year.

Ethereum’s realized cap HODL wave—an indicator of long-term holder activity—has dropped to its lowest level since August. The 365-day mean dollar invested age (MDIA), which tracks how long coins remain in wallets, has also fallen to September levels, suggesting an uptick in selling pressure.

Ethereum co-founder Joseph Lubin addressed the growing concerns at the Digital Asset Summit, acknowledging that Ethereum’s complexity makes its narrative harder to communicate to institutional investors.

“We are at our broadband moment,” Lubin said, emphasizing that Ethereum’s future lies in practical applications like decentralized identity, attestations, and social graphs rather than broad theoretical discussions.

Fee pressure weakens Ethereum’s role in real-world tokenization

Ethereum’s transaction costs continue to hamper its appeal in emerging markets like real-world asset (RWA) tokenization.

According to Standard Chartered, developers are now gravitating toward more scalable chains like Mantra and BNB Chain to deploy tokenized real-world assets, citing lower fees and faster speeds.

Although Ethereum introduced staking in Dec. 2020 as part of its transition to proof-of-stake, its technical complexity and high fee structure continue to deter traditional investors and developers. As of Feb. 2024, over $85 billion worth of ETH—about 25% of its circulating supply—was staked, offering annual yields of 2% to 7%. However, the risk of slashing and validator misconduct remains a barrier for risk-averse capital.

Ethereum’s 52% drop reflects more than just a market correction. It exposes a growing disconnect between Ethereum’s institutional narrative, on-chain utility, and investor expectations. With user metrics declining, competitors growing, and ETF outflows rising, the network may face increased pressure to justify its dominant status.

As BlackRock and Standard Chartered continue to recalibrate their positions, Ethereum’s future may depend on its ability to simplify its narrative, scale its tech, and reclaim the volume lost to cheaper, faster chains.