Key takeaways:

• Lower network fees and slowing blockchain usage continue to negatively impact ETH’s performance despite Ethereum’s institutional dominance.

• Ether’s recovery depends on stronger onchain activity, clearer upgrade benefits and renewed inflows from strategic reserve companies.

Ether (ETH) is struggling to regain the $4,000 level last seen on October 29. Since then, any burst of bullish momentum has quickly faded, leaving traders wondering, limiting Ether’s performance despite Ethereum’s dominance in deposits and its forceful institutional demand.

The main reason why investors choose Ether is the profit from staking and its role as a source of computing power for data processing. Therefore, the broad slowdown in blockchain activity naturally puts pressure on prices, even if prior activity was driven by memecoin launches and speculative trading, which are unpredictable and unsustainable over time.

On Ethereum, over the last 30 days, the number of transactions has decreased by 23% and the number of vigorous addresses has decreased by 3%. Meanwhile, Tron and BNB Chain transactions increased by at least 34% over the same period, while Solana’s vigorous addresses increased by 15%.

Competitors, generally perceived as more centralized, now offer lower fees and a smoother user experience. For ETH to regain sustained bullish momentum, the Ethereum network must improve the way decentralized applications interact with wallets and reduce friction in using bridges.

Ethereum’s spot Exchange Traded Fund (ETF) launched in the United States in mid-2024, about 16 months before competing altcoins. Following the successful U.S. debut of the Solana ETF, investors now fear that competition for institutional capital will intensify with the entry of XRP (XRP), BNB (BNB) and Cardano (ADA).

The inflow of funds into Ethereum exchange-traded products fueled Ether’s 140% rally in the 100 days leading up to August 9, when ETH reached $4,200 for the first time since December 2021. A potential rotation from Ether could directly threaten its upward momentum.

Ethereum network fees have fallen 88% since peaking at $70 million per week in tardy 2024, putting downward pressure on yields. Investors are currently seeking clarity on the benefits expected from Fusaka’s upcoming upgrade. While improved data processing through Layer 2 rollups is welcome, there remains little transparency regarding the ultimate benefits to ETH holders.

Traders doubt Ethereum’s dominance will boost DApp revenues

Ethereum’s dominance in total value locked (TVL) and successful Layer 2 adoption are undeniable. Still, investors wonder whether these strengths will translate into higher revenues from decentralized applications (DApps) built on Ethereum. Solana currently holds a competitive advantage in terms of DApps revenue, while emerging players such as Hyperliquid also face increasing challenges.

While Base’s expansion adds moderate value to the Ethereum ecosystem, the easier implementation enabled by native integration with Coinbase does not fully reflect the broader Layer 2 landscape.

Related: The community expects the first US spot XRP ETF to launch on Thursday

The fall in the price of Ether to $3,200 on Thursday led companies accumulating ETH reserves to trade below net asset value (mNAV). In such conditions, the incentive to issue up-to-date shares to acquire ETH disappears, forcing these companies to seek alternative strategies such as taking on additional debt.

Ultimately, Ether’s path back to $4,000 will depend on stronger onchain activity, rising network fees supporting staking profits, greater transparency on the benefits of Fusaka’s upcoming upgrade, and renewed inflows from ETH strategic reserve companies.

This article is for general information purposes and is not and should not be treated as legal or investment advice. The views, thoughts and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.