Ethereum (ETH), the second largest cryptocurrency by market cap, has experienced a significant price downturn in 2025. Despite this drop, Ethereum’s network activity is declining and transaction fees have fallen to their lowest point since 2020. A new wave of Layer-2 solutions has contributed to these lower fees as users seek faster and cheaper alternatives on top of the Ethereum blockchain. 2025 saw a sharp decline in Ethereum’s total transaction fees, falling nearly 60% in Q1 to a mere $208 million by early April. This marks a significant shift from a period where network activity was high, driven largely by DeFi applications and institutional investment. 2025’s first quarter saw a significant decline in the Ethereum burn rate as well, with fees from platforms like Uniswap, MetaMask, and Tether decreasing by over 95% since late 2024. This lower volume on the main network has led to a surge in inflation rates, with analysts warning that Ethereum’s inflation could soon rival Bitcoin’s. A major reason for this price decline is the rise of Layer-2 (L2) solutions like Coinbase’s Base, which process transactions faster and cheaper than the Ethereum Mainnet. The Dencun upgrade, launched in March 2024, further boosted L2 adoption and led to a significant shift away from Ethereum’s main network. This has resulted in fewer transactions on the Ethereum main chain, leading to a decline in transaction fees. Ethereum’s performance against Bitcoin has also been impacted by this shift, with ETH experiencing a dramatic 45% price drop since early 2025. The ETH/BTC ratio has now fallen to its lowest point in five years. Despite the current dip, some long-term investors remain optimistic about Ethereum’s future and believe that it could reach $5,000 by year’s end. This optimism is reflected in the actions of large whales who bought a significant amount of ETH when prices dipped below $1,800. The upcoming Pectra upgrade, expected in May 2025, is anticipated to provide Ethereum with another boost, potentially improving its network performance and long-term outlook.