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Several external dynamics exacerbated the decline of ETH during this period.
In March 2025, global risk aversion intensified: the announcement of reciprocal tariffs between the U.S. and several countries triggered a massive sell-off, where Bitcoin dropped ~9% in 24 hours (to ~$83,000) and dragged the rest of the cryptos down, including Ethereum. At the network level, the accelerated adoption of layer 2 (L2) to scale Ethereum reduced L1 fees to 5-year lows in April (average fee ~$0.16). This is positive for usability but decreased the base layer's revenue: after the Dencun upgrade (March 2024), the net supply of ETH increased (about +730,000 new ETH since April 2024).
In parallel, institutional flows favored Bitcoin over Ethereum. While Bitcoin ETFs have received around $39.6 billion in net inflows since their launch (allocated to investment products), Ethereum ETFs have only accumulated about $2.49 billion (data as of early 2025). This difference partly explains the poorer performance of ETH. Additionally, Ethereum's market dominance plummeted to ~7% (down from 19% in 2024), reflecting that other altcoins gained market share. In summary, the combination of macro pressures (rates, tariffs) and changes in network structure contributed to ETH's initial decline this year.
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