Is Ethereum obsolete?

Ethereum: Current Status and Market Position

Amid significant shifts in crypto market trends, the question “Is Ethereum (ETH) obsolete?” is sparking debate among investors and the community. To address this, it’s critical to understand Ethereum’s evolution and its current challenges.

This article offers a thorough analysis of Ethereum’s fundamental traits, the issues it faces, and its future outlook. We will examine whether ETH is truly declining or retains growth potential, evaluating from multiple angles—including market data, technical progress, and institutional investor activity.

Ethereum (ETH): Fundamentals and Development History

Ethereum, conceptualized by Vitalik Buterin in 2013 and launched in July 2015, is an innovative crypto asset platform. At launch, ETH traded around ¥380,000, with a market cap near ¥45 trillion, consistently holding the second spot after Bitcoin. This commanding presence has earned Ethereum global respect among investors and developers.

Ethereum’s core innovation is its smart contract capability—automated contracts executed by code without central intermediaries. Developers use this feature to build a wide variety of decentralized applications (dApps) on Ethereum’s blockchain.

Of special note is Ethereum’s rapid growth in DeFi (decentralized finance) and NFTs (non-fungible tokens). DeFi removes traditional financial middlemen, allowing direct peer-to-peer transactions. NFTs have become a major technology for verifying ownership of unique digital assets like art and gaming items. Many projects have chosen Ethereum as their main platform, fueling explosive ecosystem growth in recent years.

Why Ethereum Is Labeled “Obsolete”

Negative sentiment toward Ethereum is driven by several structural challenges and changing market conditions. Here are the key factors:

Stagnant Price Trends and Difficulty Reaching New Highs

Previous crypto market cycles saw massive bubbles. During these times, ETH hit its all-time high of $4,900. The subsequent crash, however, halved its price.

More troubling was the lack of clear growth for roughly three years afterward. This extended stagnation prompted some investors and analysts to claim Ethereum’s growth potential had dried up.

Quinn Thompson, CIO at Lekker Capital, sharply criticized Ethereum: “Ethereum (ETH) faces declining trading activity, sluggish new user growth, and falling fee revenue, which severely undermine its appeal as an investment.”

Backing this argument, ETH fell below $2,000, and its ETH/BTC ratio hit a four-year low of 0.02210. Even after Ethereum completed its move to Proof of Stake (PoS), ETH dropped 74% versus Bitcoin—showing that technical advances don’t always lead to price appreciation.

Volatility Risks

Extreme price volatility is a hallmark of all crypto assets, and Ethereum is no exception. Its sharp swings fuel concerns that it could lose value.

Many crypto projects have collapsed and lost value in the past, spreading fears among some investors that Ethereum might follow suit.

Yet, a close look at Ethereum’s long-term price chart reveals something interesting. Despite multiple steep short-term drops, ETH maintains a steady upward trend over the long run. This highlights the importance of holding for the long term and weathering volatility.

The Rise of “Ethereum Killer” Competitors

Projects challenging Ethereum’s leadership have increased rapidly, collectively known as “Ethereum killers.” They are designed to address Ethereum’s weaknesses.

Major competitors include:

Solana (SOL): With fast transaction processing and low fees, Solana is a popular choice for new DeFi and NFT projects. Its speed far exceeds Ethereum’s, processing thousands of transactions per second.

Avalanche (AVAX): Avalanche’s unique consensus mechanism delivers high scalability and low latency, with strong Ethereum compatibility for easy dApp migration.

Sui (SUI): Sui’s parallel processing architecture enables large-scale applications beyond what traditional blockchains could handle.

These platforms use low fees and high transaction throughput to lure developers and users from Ethereum. Some major projects have announced moves to these platforms.

However, none have truly threatened Ethereum’s market cap yet. By completing its PoS transition, Ethereum has tackled two major issues—energy use reduction and scalability improvement—earning high marks from environmentally focused and institutional investors.

Stablecoins’ Rise and Delayed Alt Season

Reports from major crypto platforms and Block Scholes offer deep analysis of capital flows in the crypto market.

Historically, about 230 days after Bitcoin’s halving events, investors shifted funds from Bitcoin into altcoins including Ethereum—a trend called “alt season,” where many altcoins saw large price surges.

Recent post-halving cycles, however, show a different pattern. Bitcoin’s dominance stays high, and altcoin inflows are weaker than expected, delaying alt season for Ethereum and other alts.

Another key factor is the rapid jump in stablecoin supply—up 66% since the start of the year. This indicates investors are favoring stablecoins over volatile crypto assets, and this shift is holding back price gains for Ethereum and other altcoins.

The Structural Paradox Between Utility and Store of Value

Ethereum’s most serious challenge is the structural contradiction between its “utility” and “store of value” roles.

Experts point out that as Ethereum’s smart contract capabilities improve and more dApps are built, demand for ETH itself doesn’t necessarily rise. Investor demand splits among the various tokens issued on Ethereum—DeFi tokens, NFTs, and other utility tokens—creating a cannibalization effect for ETH’s own value.

Pursuing utility can also erode stability as a store of value. While Bitcoin is dedicated to “digital gold,” Ethereum’s multifunctional platform makes it inherently tough to fulfill both roles. This paradox is critical for Ethereum’s long-term value proposition.

Ethereum’s Strengths and Future Prospects

Despite these issues, Ethereum retains many positive features and strong future expectations. Here’s a closer look at its main strengths and growth potential.

Spot ETF Approval and Institutional Entry

The SEC has approved eight spot Ethereum ETFs from global giants like BlackRock and Fidelity—a milestone following Bitcoin ETF approval and a major turning point for crypto markets.

This approval lets institutions invest in Ethereum via regulated products, driving a surge in ETF inflows.

Since launch, Ethereum ETFs have attracted roughly $3.2 billion in cumulative inflows, with a single-day record of $428.5 million. This flood of capital is closely tied to growing optimism in crypto markets after the US administration change.

The SEC has also approved options trading for BlackRock’s “iShares Ethereum Trust (ETHA),” enabling investors to deploy advanced hedging and leverage strategies.

Options trading is expected to impact the market in three ways:

1. It encourages more institutional participation, as options offer flexible risk management and make the market more accessible to cautious institutions.

2. It boosts liquidity, as arbitrage between spot and options markets improves price discovery.

3. It accelerates market maturity, with derivatives signaling crypto’s convergence with traditional finance.

Strategic Adoption by Leading Corporations

Ethereum is strongly backed by the Enterprise Ethereum Alliance (EEA), a nonprofit with more than 500 major companies worldwide. This broad corporate network is powerful evidence of Ethereum’s utility and future potential.

Members include Japan’s Mitsubishi UFJ Financial Group and Sumitomo Mitsui Bank, manufacturing giant Toyota, tech leaders Microsoft, JP Morgan, and Intel.

These companies value Ethereum for both its technical strengths and practical business use. Visa is a notable example.

Visa launched “VTAP (Visa Tokenized Asset Platform),” a fiat-backed token issuance platform for financial institutions built on Ethereum. VTAP aims to tokenize real-world assets and bridge traditional finance with blockchain.

Key features and use cases include:

24/7 Fund Transfers: Blockchain enables instant transfers any time, bypassing banking hours.

Efficient Cross-Border Payments: Direct blockchain settlements cut time and costs for international transfers.

Enhanced Transparency: All transactions are recorded on-chain, making audits and compliance easier.

Ethereum-based pilot tests are planned, and success could drive global adoption of new financial services.

Growing real-world adoption by major enterprises is expanding the Ethereum ecosystem, helping it become business infrastructure—not just a speculative asset.

Staking Yield Versus US Interest Rates: The Potential for Reversal

Ethereum staking’s economic appeal is gaining attention. Staking yields (CESR: Consensus Staking Rewards—block rewards plus transaction fees) may soon exceed US policy rates (EFFR: Effective Federal Funds Rate).

FalconX reports that while staking yields were previously lower than US rates, they are likely to turn positive, based on two key factors:

US Rate Declines: CME futures data show an 85% chance the US policy rate falls below 3.75% by March, and 90% chance it drops to 3.5% by June, driven by easing inflation and slowing growth.

Rising Staking Yields: Ethereum staking yields hover near 3.2%. As network activity grows and transaction fees rise, yields are expected to increase. More active DeFi and NFT platforms could boost fee income and staking rewards.

Together, these factors could make staking yields higher than US rates, a meaningful shift for investors.

Traditionally, US Treasuries and other risk-free assets are seen as safe, stable investments. If staking yields beat US rates, Ethereum staking becomes a highly attractive option—even with a slight risk premium.

FalconX notes a caveat: higher staking yields don’t necessarily drive ETH price recovery. The real driver is Ethereum’s growth as DeFi infrastructure. In short, ecosystem development matters more than short-term yield.

Dominant Share in the RWA Tokenization Market

Tokenizing real-world assets (RWAs) like real estate, stocks, bonds, and commodities on blockchain is a major trend. This enables more efficient trading and management.

Ethereum dominates this market: about 80% of tokenized assets—including stablecoins, stocks, bonds—are issued on Ethereum or its Layer 2s like zkSync.

With additional Layer 2s (Optimism, Arbitrum, Polygon), Ethereum-related networks hold well above 80% market share, thanks to:

High Security: Ethereum’s long track record and robust security make it the preferred platform for financial asset tokenization.

Deep Liquidity: Ethereum is the most traded smart contract platform, ensuring liquidity after asset issuance.

Strong Developer Ecosystem: Top global developers build on Ethereum, offering the best infrastructure and tools for tokenization.

Regulatory Favor: Ethereum’s relationships with major regulators make it a top choice for compliance.

The RWA market is expected to grow rapidly, potentially reaching trillions of dollars. If Ethereum maintains its lead, its value may rise substantially.

Revolutionary Scalability Improvements

Improving scalability—transaction processing power—is one of Ethereum’s top technical priorities, and breakthrough results are expected.

Justin, a core Ethereum developer, says Layer 1 EVM performance will grow dramatically with zkVM (Zero-Knowledge Virtual Machine) technology.

Currently, Ethereum handles about 10 TPS (transactions per second), but could scale to 10,000 TPS—a 1,000x increase—using SNARK (Succinct Non-interactive Argument of Knowledge) zero-knowledge proofs instead of traditional re-execution.

Details will be shared at “Ethproofs Call #1,” where 17 zkVM project founders will present updates. This is the most active area in Ethereum development.

For most users, Layer 2 solutions will remain central, with rollups, Danksharding, and network advances potentially reaching 10 million TPS total.

Layer 1 EVM may handle only 0.1% of all processing, but that’s not a problem. The core issue is maintaining Ethereum’s network effects and ecosystem value.

The keys:

Shared Security (Native Rollup): All Layer 2s share Layer 1 security, keeping the ecosystem safe.

Interoperability (Base Rollup): Seamless asset transfers and data sharing between Layer 2s enhance user experience.

Intrinsic ETH Value: ETH remains the settlement asset for all transactions, sustaining demand.

If these elements work, Ethereum can maintain its competitive edge over other blockchains.

Next Upgrade: “Pectra” Brings Functional Enhancements

The “Pectra” upgrade is Ethereum’s next major milestone, scheduled in two phases, and is expected to greatly improve usability and efficiency.

Key Improvements in Pectra 1:

Network efficiency improvements will boost transaction speed and reduce wait times. Security upgrades will cut smart contract vulnerabilities and hacking risks. Enhanced transaction convenience will make complex operations much easier.

Details on Prague/Electra Upgrades:

“Prague” will upgrade the execution layer for more efficient smart contract execution. “Electra” will strengthen the consensus layer for faster and safer block approvals.

“PeerDAS (Peer Data Availability Sampling)” will also be introduced to improve data consistency and network reliability.

Innovative EIP-3074 Features:

EIP-3074 dramatically enhances wallet functionality and user experience.

Key features include:

Batch Transactions: Multiple actions can be bundled into a single transaction—for example, approving and swapping tokens together—saving fees and simplifying workflows.

Sponsored Transactions: Third parties can pay users’ transaction fees, allowing new users to access dApps without holding ETH and lowering onboarding barriers.

Improved Wallet-dApp Integration: Wallets and dApps interact more smoothly, making complex operations intuitive.

Raised Staking Cap:

Validators’ maximum ETH stake will increase from 32 ETH to 2,048 ETH, offering:

Greater efficiency for large stakers, reduced operating costs, enhanced network security, and optimized validator numbers for better consensus and scalability.

These upgrades will make Ethereum more user-friendly, efficient, and secure.

Ethereum’s Challenges and Future Outlook

CoinShares notes that while Ethereum’s ecosystem is steadily developing, network transaction activity remains concentrated.

Current Issues:

Ethereum network transactions focus mainly on NFTs and lesser-known token trading. Uniswap dominates decentralized exchange fees and market share.

This shows Ethereum is still used mostly for speculative trading, and practical applications like supply chain management, digital ID, and voting haven’t reached broad adoption.

Future Directions:

For Ethereum’s long-term success, key priorities include:

Diversifying Use Cases: Expanding practical applications beyond NFTs and trading to attract wider users—such as supply chain systems for businesses and digital ID for governments.

Improving User Experience: Blockchain remains complex for average users. Making wallets and transactions more intuitive will lower barriers for non-technical participants.

Delivering Long-Term Value: Focusing on stable fee income, ongoing network usage, and real-world adoption rather than short-term speculation.

Healthy Ecosystem Growth: Building an ecosystem that appeals to developers, users, investors, and enterprises alike.

Outlook for Staking Demand

Regulation significantly affects Ethereum staking. SEC approval of spot ETH ETFs was groundbreaking, but also exposed new challenges.

Current Constraints:

Due to regulatory concerns, ETF issuers are not offering staking to clients, so institutional investors using ETFs cannot earn staking rewards.

This restriction is a major drawback for institutional staking, as missing out on 3–4% annual rewards reduces investment appeal.

Future Potential:

This could change as regulations and market conditions evolve. Analyst Jamie Coutts (Real Vision) notes:

As regulatory clarity increases, ETF issuers may start offering staking. If rivals provide staking-linked ETFs, competitive pressure will drive others to follow suit.

Still, given regulators’ caution, large-scale institutional staking likely won’t happen immediately. Gradual regulatory loosening and market maturity should drive incremental growth in staking demand.

Staking’s Importance:

Staking isn’t just about returns—it’s vital for network security and decentralization. Broader staking participation boosts network safety and reduces risks like 51% attacks.

Thus, regulatory improvements and expanded staking are crucial for Ethereum’s long-term health.

Conclusion: Ethereum Is Not in Decline

Our detailed analysis shows that while Ethereum faces numerous challenges and fierce competition, it still boasts powerful network effects and strong growth potential.

Challenges Recap:

Concerns include stagnant prices, high volatility risks, the rise of “Ethereum killer” competitors, NFT market cooling, and temporary drops in overall crypto interest.

Growth Potential:

Yet, many positives outweigh these negatives: institutional entry via spot ETF approval, increased enterprise adoption, rising staking yields, dominant RWA share, and ongoing network upgrades like Dencun and Pectra—all signal steady ecosystem progress.

Technical Excellence:

Ethereum’s greatest strengths are its robust technology and vibrant developer community. The PoS transition, Layer 2 growth, and zkVM adoption show Ethereum’s commitment to innovation.

Network Effect:

Its unmatched developer base, active dApps, and corporate adoption give Ethereum lasting competitive advantages.

Conclusion:

All these factors together make it clear: “Ethereum is obsolete” is a premature claim. In fact, ongoing upgrades and real-world adoption position Ethereum for sustained growth as a core force in the crypto asset market.

Investors and developers should focus on Ethereum’s technological progress and ecosystem development from a long-term perspective, not be swayed by short-term price moves or sentiment.

FAQ

What is Ethereum’s current market position? How does it compare to Bitcoin?

Ethereum is the second-largest crypto asset by market cap behind Bitcoin. Its smart contract capabilities and role in DeFi and NFT markets are key strengths. Ethereum offers greater flexibility and scalability than Bitcoin.

What technical improvements did Ethereum 2.0 bring?

Ethereum 2.0’s switch to Proof of Stake cut energy consumption by 99.95%. Sharding greatly expanded processing power and lowered transaction fees, delivering major gains in scalability and network sustainability.

Is Ethereum losing to competitors like Solana and Polygon?

No. Layer 2 solutions have dramatically improved speed and reduced fees. Ethereum maintains industry-leading security and decentralization, and Layer 2 platforms like Polygon support its expansion.

Has Ethereum’s gas fee problem been solved?

Layer 2 solutions (Optimism, Arbitrum, etc.) have significantly reduced gas fees. Optimism cuts fees by over 90% and boosts transaction speed 10–100x. Users can now use Layer 2 to nearly eliminate high gas fees.

Does Ethereum still have investment value?

Yes. Layer 2 scaling, smart contract advances, and an expanding dApps ecosystem are expected to push prices to around $5,800 in 2026 and above $8,000 in 2030.

What are Ethereum’s scalability challenges and solutions?

Ethereum’s scalability is limited by block times and block size. Solutions include sharding, Layer 2s (Arbitrum, Optimism), and Proof of Stake in Ethereum 2.0, all of which have greatly improved transaction processing capacity.