Previously, Ethereum stands at a significant turning point in its fate, with a life-and-death battle for a breakthrough imminent. Recently, the utilization rate of the Ethereum underlying network has plummeted, and core indicators continue to hit new lows, prompting co-founder Vitalik Buterin to throw out a radical architectural reform proposal, ushering in a wave of change.
The movements of institutional investors have become the focus of the market. On-chain data acts as a precise 'monitor', capturing the reduction of holdings by long-term supporters such as Galaxy Digital and Paradigm. In recent weeks, these institutions have been significantly selling off Ethereum (ETH), quietly initiating a withdrawal action.
In April, the Ethereum mainnet is mired in a 'dismal quagmire': network transaction fees continue to decline, yet inflation rises against the trend. Although the second layer network is thriving, beneath the surface of prosperity lies a hidden concern about the weakening of the mainnet's ability to sustain value.
However, the future of Ethereum is not entirely bleak. Some whales in the crypto space view the current moment as an excellent entry opportunity and are boldly bottom-fishing. Those institutions that choose to sell ETH have not completely 'parted ways' with Ethereum; rather, they seem to be temporarily 'putting it on the shelf', turning their attention to emerging tracks like Solana in search of opportunities.
Taking Galaxy Digital as an example, Lookonchain reports that it transferred 65,600 ETH to Binance, worth over $100 million. Although the holdings have decreased, they remain at a high level compared to the beginning of the year. CoinShares data also confirms this trend, with $26.7 million flowing out of ETH investment funds in the past week, totaling $772 million over eight weeks, although there has still been a net inflow of $215 million overall since the beginning of the year. At the same time, Galaxy has also withdrawn a significant amount of SOL, reflecting to some extent that Solana has captured Ethereum's market heat due to its outstanding performance during the memecoin craze.
Another institution, Paradigm, is also reducing its ETH holdings. On April 21, it transferred 5,500 ETH to Anchorage Digital. Since January 2024, Paradigm has transferred out approximately 97,000 ETH, worth over $300 million.
Jayendra Jog, co-founder of Sei Labs, pointed out that institutional investors initially bought ETH due to the 'supersonic currency' concept, but now they have to face the reality of declining protocol revenues and a deteriorating token economic model.
The deflationary characteristics that once enhanced ETH are now gradually 'failing'. The London hard fork and the merge upgrade had granted ETH a deflationary mechanism, but starting from April 2024, ETH will return to an inflationary state, and by early February 2025, the total supply will exceed the levels at the time of the merge. The decrease in network transaction fees leading to a reduction in ETH burn is the primary reason for inflation.
On April 20, Vitalik proposed replacing EVM with RISC-V, a radical proposal that many interpret as a 'desperate move' against the existing architecture. Sei Labs co-founder candidly stated that this indicates the EVM's underlying architecture has reached a developmental bottleneck.
Ethereum's current predicament is not unrelated to its Rollup centralized expansion strategy. However, the newly appointed co-executive director of the Ethereum Foundation stated that community interest in Layer 1 expansion is increasing, and the foundation will refocus on this goal.
It is noteworthy that the market is not entirely pessimistic. Whales have started to buy on dips, and ETH prices have also seen a rebound. Although Standard Chartered has lowered its ETH price expectations for 2025, it still maintains a target price of $4,000 by the end of the year. For investors willing to position themselves during the lows, Ethereum may still hold significant opportunities. In this fierce game concerning Ethereum's future, who will ultimately come out on top? Let us witness together.