Ethereum continues to host the highest concentration of stablecoins and decentralized finance (DeFi) capital, even as waves of faster networks emerge.

Newer blockchains have promised higher throughput and lower costs, raising questions about whether institutional capital could eventually migrate away from Ethereum.

Kevin Lepsoe, founder of ETHGas and former Morgan Stanley derivatives director in Asia, said he expects Ethereum’s advantage to continue as institutions tend to value depth of capital over flashy results.

“[Transactions per second] is this a metric that excites engineers, but is this what drives capital into blockchain?” – Lepsoe asked in an interview with Cointelegraph.

“The capital is in Ethereum, there are stablecoins there. TradFi checks where the liquidity is,” he said.

Institutional capital ensures the scale and stability of the blockchain ecosystem. Large asset managers and tokenized fund issuers are moving capital in volumes that deepen liquidity and anchor the stablecoin supply. Their presence could establish a chain beyond the hype-driven retail business that grows during booms and wanes during downturns.

Liquidity puts Ethereum ahead of faster rivals

If institutions prefer to operate where most of the money already resides, simply creating a faster blockchain will not divert capital away from Ethereum.

Over the last few cycles, performance has become a weapon to attract users. Solana has emerged as a fast alternative to Ethereum, dubbed the “Ethereum killer”, although this label is debated. It introduced retail traders during the non-fungible token (NFT) boom and memecoin craze, but the increased activity did not sustain in the long run.

Related: Can Solana shed its memecoin image in 2026?

Solana now has its own generation of “Solana killers” who advertise higher theoretical transactions per second (TPS). However, Ethereum’s liquidity allows for tighter spreads, less slippage on large trades, and the ability to absorb institutional-sized trades without significant price distortion.

“I think of Ethereum as the center of the city,” Lepsoe said.

“You can build a marketplace somewhere in the suburbs and get prices there that are significantly different from the market, maybe it will be more convenient, maybe you will like the atmosphere. But if you want the most liquidity, go to the center and that is Ethereum.”

While previous cryptocurrency booms have been characterized by high-stakes retail speculation, the next phase is shaping up to include more institutional capital. In the current environment, institutional players have expressed interest in practical use cases such as stablecoins and real-world assets (RWAs).

Even the world’s largest asset manager is leaning towards RWA products. BlackRock’s USD Liquidity Fund (BUIDL) is a tokenized treasury fund that started on Ethereum and has expanded to several blockchains. Ether holds over 30% of BUIDL’s market capitalization.

Ethereum is also the largest stablecoin network, as Samara Cohen, global head of market development at BlackRock, says. he said “they are becoming a bridge between traditional finance and digital liquidity.”

Ether tips According to DefiLlama, the industry has a stablecoin market capitalization of $160.4 billion.

Ethereum’s L2 liquidity returns to L1

While Lepsoe said the depth of liquidity shapes institutional preferences, network performance cannot be completely discounted.

Ethereum is adapting its own technical profile. Transaction fees, which once routinely rose to virtually useless prices, have dropped significantly as Layer 2 rollups eased the pressure on the main chain. These solutions created new problems. Rollups fragment liquidity across multiple environments.

Related: 2026 is the year Ethereum begins to scale exponentially thanks to ZK technology

Lepsoe described liquidity fragmentation as a blessing in disguise for Ethereum. He argued that if L2s had not taken away liquidity from the main chain, capital would have flowed to competitors.

“I think it actually saved liquidity in the event of a move to another L1 where it probably wouldn’t have been able to get it back,” he said.

Recently, Ethereum has had a renewed focus on mainchain scaling. Co-founder Vitalik Buterin said that many Layer 2s have failed to decentralize, while the main chain is currently scalable enough.

“Both of these facts, for separate reasons, mean that the original vision of L2 and their role in Ethereum no longer makes sense and we need a new path” – Buterin he said in X’s last post.

Scaling improvements strengthen Ethereum’s liquidity advantage

Following the cap on transaction fees, Ethereum is expected to fork Glamsterdam in 2026, raising its block gas limit to 200 million from 60 million and over time pushing its Layer 1 on the way to 10,000 TPS.

In the case of Ethereum, this moment coincides with the moment when institutions are evaluating blockchain infrastructure for next-generation financial services.

In addition to protocol updates, infrastructure providers are experimenting with ways to improve execution performance. Projects like Lepsoe’s ETHGas aim to optimize the Ethereum block building process through off-chain execution and coordination, while the Psy protocol uses zero-knowledge technology to combine multiple transactions into one.

Marcin Kaźmierczak, co-founder of blockchain Oracle RedStone – which provides data sources for tokenized assets and institutional blockchain applications – said Ethereum has an advantage because institutions prefer blockchains that have been battle-tested and have been around “for a very long time.” However, while institutions are “aggressively” expanding their operations to Ethereum, they are also looking around for it.

“They are looking at Solana, which is gaining good traction. Canton is extremely vital to them because it gives them privacy, which they very, very much value,” Kaźmierczak told Cointelegraph.

Lepsoe said he sees “zero threat” from Solana or Canton, arguing that Ethereum still has the deepest liquidity pool, which is the main source of attracting large allocators.

For institutional capital, improved efficiency may expand Ethereum’s capabilities, but liquidity remains its distinct advantage. In blockchain markets, speed may attract users during boom times, but capital tends to stay where the deepest markets already exist.

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