Ethereum, once the undisputed leader in the smart contract blockchain space, is facing mounting pressure as its performance relative to Bitcoin reaches multi-year lows. The ETH/BTC ratio has dropped below 0.022, marking its weakest level since December 2020. This sharp decline reflects more than just price movement—it signals a broader shift in market dynamics, user behavior, and competitive positioning within the Layer 1 (L1) ecosystem.
With rivals like Solana gaining traction and Ethereum’s own network activity fragmenting across Layer-2 solutions, questions are emerging: Is Ethereum losing its dominance? And can it reclaim its leadership in the next market cycle?
ETH/BTC Ratio Hits Multi-Year Low
The ETH/BTC ratio is a powerful metric that reveals how Ethereum is performing against Bitcoin—the benchmark asset of the crypto market. A falling ratio suggests that ETH is underperforming BTC, either due to weaker demand for Ethereum or stronger institutional and retail confidence in Bitcoin.
As of early 2025, the ETH/BTC ratio has plunged to 0.022, down from around 0.085 in September 2022—a staggering loss of over 73% in relative value. This means that for every Bitcoin, you can now buy significantly fewer Ether than just a few years ago.
At current prices, ETH trades around $1,880**, down **9%** in the past week and a steep **62%** from its all-time high of **$4,890 in November 2021. In contrast, Bitcoin remains near $84,300, down only 10% year-to-date. Ethereum’s 46% YTD decline is more than four times steeper than Bitcoin’s, underscoring a growing divergence between the two giants.
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This weakening performance isn't isolated—it reflects Ethereum’s eroding influence in key areas like decentralized finance (DeFi), user adoption, and institutional interest.
Ethereum’s Declining Market Metrics
Several on-chain indicators point to a softening foundation beneath Ethereum’s ecosystem:
- Total Value Locked (TVL): As of April 1, 2025, Ethereum’s TVL stands at approximately $50.5 billion, representing 52.5% of the total DeFi market. While still dominant in absolute terms, this marks a clear decline from 61.64% in February 2024, indicating capital outflows to competing chains.
- Rise of Competitors: Solana has emerged as a major beneficiary, growing its TVL from $1.8 billion to $6.69 billion in just over a year—increasing its market share from 2.84% to 7.24%. This growth is fueled by fast, low-cost transactions and a surge in speculative activity around meme tokens and high-frequency trading.
User behavior also highlights a critical divide:
- Ethereum attracts users focused on passive strategies like yield farming and staking.
- Solana, by contrast, draws active traders and retail investors chasing volatility and quick gains.
While Ethereum’s core use cases remain robust, they may no longer align with where the most dynamic user activity is concentrated.
High Fees and Speed Limitations Persist
Despite improvements—average gas fees dropped to just 1.12 GWEI in March 2025—Ethereum remains relatively expensive and slow compared to newer blockchains. For small transactions or frequent trades, users often find better experiences on faster, cheaper alternatives.
Solana processes over 4,322 transactions per second (TPS), while Ethereum’s mainnet handles only 10–62 TPS, with actual throughput averaging around 16 TPS. This performance gap continues to drive developers and users toward more scalable platforms.
Layer-2 Growth Comes at a Cost
Ethereum’s scaling strategy has pivoted heavily toward Layer-2 rollups like Arbitrum, Optimism, and Base. These solutions process transactions off-chain and settle them on Ethereum, reducing congestion and fees.
While L2s have improved accessibility, they’ve also created unintended consequences:
- Transaction fees and user activity are shifting away from Ethereum’s mainnet.
- Arbitrum and Optimism now capture significant fee revenue, while Ethereum’s base layer sees declining organic usage.
- Some observers describe the mainnet as turning into a “ghost town,” dominated by bots and address-poisoning attacks rather than innovative dApps.
Standard Chartered analyst Geoff Kendrick argues that platforms like Base have diverted around $50 billion in economic value from Ethereum’s mainnet. This reduces the amount of ETH burned through gas fees—undermining Ethereum’s deflationary model.
ETH Is Now Net Inflationary
After EIP-1559 introduced fee burning to counteract new ETH issuance, many expected a deflationary supply trend. But with activity fragmented across dozens of L2s and sidechains, fee burns have dropped sharply.
As a result, ETH has become net inflationary at an annualized rate of 0.5%—a major shift from the “ultrasound money” narrative promoted during the bull market. Meanwhile, staking yields have fallen below 2.5%, making ETH less attractive compared to stablecoin strategies offering over 4.5% returns in DeFi.
Even upcoming upgrades like Pectra, which increases blob capacity for better data availability, are seen as insufficient to reverse structural challenges. Analysts doubt it will meaningfully impact the declining ETH/BTC ratio or restore mainnet vitality.
Market Sentiment Turns Bearish
Trader positioning reflects growing pessimism:
- Short positions in Ethereum surged 40% in early February 2025 and are up over 500% since November 2024.
- According to The Kobeissi Letter, “Never in history has Wall Street been so short on Ethereum.”
Despite this institutional bearishness, retail investors continue to “buy the dip,” suggesting a split between professional traders and individual sentiment.
Meanwhile, Ethereum’s market dominance has fallen below 8.4%, its lowest level in over four years. As Milo from Milocredit noted, capital is clearly flowing into alternatives like Bitcoin, Solana, and emerging L1s capitalizing on Ethereum’s slowed momentum.
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Technical Outlook: Is the Bottom In?
From a technical perspective, Ethereum’s chart paints a concerning picture:
- Price failed three times to break above the $4,000 resistance zone.
- It has since broken below its mid-range support and a long-standing upward trendline.
- With no strong support visible until the $1,060–$1,000 range, a retest of 2022 bear market lows is possible.
Bloomberg strategist Mike McGlone warns that if U.S. equities decline further amid high interest rates and inflation, ETH could “potentially revisit the $1,000 level.”
However, not all signals are bearish:
- Trader Michaël van de Poppe sees a potential bullish deviation if ETH breaks above $2,100–$2,150, which could trigger a rapid move toward $2,800.
- A recent drop in the U.S. Dollar Index (DXY) may support risk assets in Q2 2025.
Still, any recovery depends on reclaiming key technical levels and improved macro conditions.
Frequently Asked Questions (FAQ)
Why is the ETH/BTC ratio important?
The ETH/BTC ratio shows how Ethereum is performing relative to Bitcoin. A falling ratio indicates that ETH is underperforming BTC, often due to weaker demand or stronger confidence in Bitcoin as a safe haven.
Is Ethereum still the leading smart contract platform?
In terms of total value locked and developer activity, Ethereum remains influential—but its dominance is shrinking. Chains like Solana are gaining ground due to faster speeds and lower costs.
Why are Layer-2s hurting Ethereum’s mainnet?
While L2s improve scalability, they divert transaction fees and user engagement away from the base layer. This reduces ETH burned through gas fees and weakens its deflationary mechanics.
Can Ethereum recover its dominance?
Recovery depends on successful protocol upgrades, increased adoption of native applications on mainnet, and regaining developer momentum. Without structural changes, competition will likely intensify.
What price levels matter for Ethereum?
Key resistance lies between $2,100–$2,150—a breakout above could signal recovery. Major support is near **$1,060**, with a break below risking a test of $1,000.
Is staking ETH still worth it?
With staking yields below 2.5%, it's less attractive than higher-yielding DeFi strategies. However, staking remains crucial for network security and long-term holders.
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Final Thoughts
Ethereum is at a crossroads. Once the epicenter of innovation in crypto, it now faces existential challenges from faster competitors and internal structural shifts driven by its own scaling solutions.
The collapse of the ETH/BTC ratio to multi-year lows is not just a technical signal—it's a reflection of changing market priorities. Investors are rewarding speed, cost-efficiency, and user engagement over legacy dominance.
Whether Ethereum can adapt and reclaim leadership—or cede ground permanently—will depend on how well it integrates innovation back into its core layer while maintaining decentralization and security.
For now, caution prevails. The risks outweigh the catalysts—but opportunity may emerge from the downturn for those who act wisely.
Disclaimer: This article is for informational and educational purposes only and does not constitute financial or investment advice.