Ethereum, once the undisputed leader in the smart contract ecosystem, is facing a critical juncture. The ETH/BTC ratio has plunged below 0.022—the lowest level since December 2020—sparking concerns about Ethereum’s relative strength and long-term dominance in the Layer 1 (L1) blockchain race. As Solana surges and Bitcoin reclaims its throne, Ethereum appears to be losing ground, both technically and sentiment-wise.
This article dives deep into the data behind Ethereum’s weakening position, examines structural challenges, and evaluates whether a recovery is still possible.
ETH/BTC Ratio Hits Multi-Year Low
The ETH/BTC ratio is a powerful metric that reflects Ethereum’s performance against Bitcoin, the crypto market’s benchmark. A declining ratio suggests that ETH is underperforming BTC—a worrying sign for Ethereum bulls.
As of early 2025, the ETH/BTC ratio has dropped to 0.022, down from 0.085 in September 2022. That’s a 73% decline in Ethereum’s relative value over just over two years.
At current prices, Ethereum trades around $1,880**, down 9% in the past week and a staggering **62%** from its all-time high of $4,890 in November 2021. In contrast, Bitcoin trades near $84,300, down only 10% year-to-date—making Ethereum’s 46% YTD drop** more than four times steeper.
👉 Discover how top traders are positioning themselves in this volatile market.
This underperformance isn’t just price-based—it reflects a broader shift in capital allocation. Investors are increasingly favoring Bitcoin and emerging L1s like Solana, BNB Chain, and Avalanche, leaving Ethereum struggling to maintain relevance.
Declining Dominance in DeFi and TVL
Ethereum’s dominance in decentralized finance (DeFi) is eroding. As of April 1, 2025, its Total Value Locked (TVL) stands at $50.5 billion, representing 52.5% of the DeFi market—down from 61.64% in February 2024.
Meanwhile, Solana’s TVL has surged to $6.69 billion, capturing 7.24% of the market—a more than 2.5x increase in just over a year. This growth is fueled by high-frequency trading, meme tokens, and active retail participation.
User behavior also reveals a key divergence:
- Ethereum: Dominated by passive strategies like yield farming and staking.
- Solana: Attracts speculative traders and developers building fast-moving applications.
Despite improvements—average gas fees dropped to 1.12 GWEI in March 2025—Ethereum remains relatively expensive and slow for small transactions compared to newer chains.
Even Ethereum ETFs have failed to gain traction. While Bitcoin ETFs have attracted over $36 billion** in net inflows, ETH ETFs saw a **9.8% drop** in March 2025, with net flows falling to **$2.43 billion.
Bearish Sentiment Reaches Record Levels
Market sentiment around Ethereum is deteriorating rapidly.
According to The Kobeissi Letter, short positioning in Ethereum surged 40% in early February 2025 and has risen over 500% since November 2024—the highest bearish positioning in Ethereum’s history.
“Never in history has Wall Street been so short of Ethereum, and it's not even close.”
Yet, retail investors continue to buy the dip, creating a classic clash between institutional skepticism and grassroots support.
Ethereum’s market dominance has now fallen below 8.4%, its lowest level in over four years. As crypto mortgage firm Milocredit noted:
“Capital is flowing away from ETH and toward alternatives, including Bitcoin, Solana, and new L1s.”
This shift signals a structural re-allocation of capital—not just a temporary price correction.
Scalability Promises vs. Reality
Ethereum’s long-term narrative has always centered on scalability. But as of 2025, the base layer still processes only 10 to 62 transactions per second (TPS), with effective throughput hovering around 16 TPS.
Compare that to Solana’s 4,322 TPS, and the gap becomes undeniable.
While the 2022 Merge drastically improved energy efficiency—cutting power use by over 99%—it did nothing to solve throughput bottlenecks.
To compensate, Ethereum now relies heavily on Layer-2 rollups like Arbitrum, Optimism, and Base. These solutions process transactions off-chain and settle on Ethereum, reducing user costs.
But this comes at a cost: mainnet activity is drying up.
“Arbitrum and Optimism are raking in fees… while Ethereum’s base layer is turning into a ghost town.”
Data supports this. High-volume L2s like Base are siphoning billions in transaction fees that would have once flowed to Ethereum’s mainnet. Standard Chartered analyst Geoff Kendrick estimates that Base alone has diverted around $50 billion in economic value from Ethereum.
This fragmentation weakens Ethereum’s deflationary mechanics. After EIP-1559 introduced fee burning, ETH was expected to become deflationary. But with activity spread across dozens of rollups, fee burns have dropped significantly.
As a result, ETH has become net inflationary at an annualized rate of 0.5%—undermining the “ultrasound money” narrative.
Staking yields have also fallen below 2.5%, making ETH less attractive compared to stablecoin strategies offering over 4.5% returns in DeFi.
Upcoming Upgrades: Too Little, Too Late?
Ethereum’s next major upgrade, Pectra, aims to improve L2 efficiency by increasing blob capacity from three to six for data availability. While helpful for rollups, it does little to revive mainnet activity.
Kendrick argues that Pectra is insufficient to reverse the ETH/BTC decline or address structural issues like high fees and low throughput on base layer.
Meanwhile, bots—especially address poisoning bots—are now dominating gas usage on top contracts. Organic app deployment on mainnet has slowed to a trickle.
“ETH mainnet is becoming a graveyard.”
While hyperbolic, the sentiment reflects a growing concern: Ethereum’s core layer is no longer the primary hub for innovation.
Price Outlook: Is the Bottom In?
Market analysts are divided on Ethereum’s future.
Bloomberg strategist Mike McGlone warns that ETH remains tightly correlated with risk assets like U.S. equities. If stocks decline further due to high interest rates or inflation, Ethereum could revisit the $1,000 level—a nearly 50% drop from current prices.
👉 See how macro trends are shaping crypto markets in real time.
Technically, the picture is bleak. Analyst Mags notes that Ethereum has “one of the worst charts of all time,” having failed three times to break above $4,000. The price has since broken below key support and a long-standing upward trendline—opening the door for a retest near **$1,060**, last seen in the 2022 bear market.
“Technically speaking, the bearish scenario looks more likely.”
However, trader Michaël van de Poppe sees a potential bullish deviation. If ETH breaks above $2,100–$2,150, it could surge to $2,800 quickly. He cites a falling U.S. Dollar Index (DXY) as a positive macro signal for Q2 recovery.
But for now, downside risks dominate.
Frequently Asked Questions (FAQ)
Q: What does the ETH/BTC ratio tell us?
A: The ETH/BTC ratio measures Ethereum’s strength relative to Bitcoin. A declining ratio means ETH is underperforming BTC, often signaling reduced investor confidence in Ethereum’s growth prospects.
Q: Why is Ethereum’s TVL decreasing?
A: Competing blockchains like Solana offer faster speeds and lower fees, attracting developers and users. Additionally, much of Ethereum’s activity has shifted to Layer-2 networks, reducing mainnet TVL.
Q: Is Ethereum still deflationary?
A: No. Due to fragmented activity across L2s, fee burns have decreased significantly. ETH is now net inflationary at an annualized rate of 0.5%.
Q: Can Ethereum recover its dominance?
A: Recovery depends on regaining developer momentum, improving base-layer scalability, and reclaiming key price levels like $2,150. Without structural upgrades and renewed adoption, dominance may remain elusive.
Q: Are Ethereum ETFs performing well?
A: No. While Bitcoin ETFs have seen strong inflows, Ethereum ETFs have struggled—net flows dropped 9.8% in March 2025 to $2.43 billion—indicating weak institutional demand.
Q: What could trigger an Ethereum price rebound?
A: A clean break above $2,150 could spark a rally toward $2,800. Broader macro improvements—like rate cuts or dollar weakness—could also support a recovery.
Final Thoughts
Ethereum is at a crossroads. Once the king of smart contracts, it now faces existential challenges from faster L1s and its own fragmented ecosystem.
The falling ETH/BTC ratio, declining TVL share, rising short positions, and net inflationary supply all point to deep structural issues—not just temporary market weakness.
While bullish scenarios exist—especially if macro conditions improve—Ethereum must address scalability, reclaim developer mindshare, and reinvigorate mainnet activity to regain trust.
👉 Stay ahead of market shifts with real-time data and advanced trading tools.
For now, the chart may indeed look “disastrous”—but in crypto, even the deepest corrections can set the stage for powerful comebacks. Whether Ethereum can script one remains to be seen.