Ethereum (ETH) has been facing downward pressure, dropping over 5.1% in the last 24 hours, trading below $2,600. Meanwhile, Bitcoin (BTC) also slipped 2.9%, hovering near $95,700. This decline has contributed to a 4% drop in the CoinDesk 20 Index, reflecting a broader market downturn.
While market-wide concerns—such as President Trump’s new tariff plans sparking fears of a trade war—have affected risk assets, Ethereum’s underperformance is being driven by additional factors unique to its ecosystem.
1. ETH Supply Growth Reverses Post-Merge Expectations
One of Ethereum’s biggest selling points post-Merge was its deflationary supply mechanism. The shift to Proof-of-Stake (PoS) was expected to reduce ETH issuance, making it a scarcer asset over time.
However, recent data shows Ethereum’s supply has now grown by 8,242 ETH since the Merge—a stark contrast to initial expectations.
- The reason? Lower transaction fees have resulted in less ETH being burned.
- The trend flipped after April’s “Dencun” upgrade, which reduced data fees on Layer-2 networks and introduced transaction blobs to lower costs.
This reduction in fees helped users but slowed down the ETH burn rate, increasing the total circulating supply and reducing the scarcity effect that previously supported ETH’s price.
2. SEC Delays Decision on Ethereum ETF Options
Ethereum also took a hit after the Securities and Exchange Commission (SEC) delayed its decision on allowing options trading for BlackRock’s iShares Ethereum Trust (ETHA).
- The approval of spot Bitcoin ETFs earlier this year boosted BTC’s price, and many expected a similar effect for Ethereum if ETF options were approved.
- However, the SEC’s delay has created uncertainty, leaving investors hesitant about ETH’s near-term prospects.
3. Ethereum Struggles Against Growing Competition
Ethereum is also losing ground to competitors like Solana (SOL) and Layer-2 solutions, which offer cheaper and faster transactions.
- ETH’s market dominance relative to BTC has dropped to its lowest level since 2021.
- JPMorgan analysts recently stated that Ethereum lacks a compelling narrative compared to Bitcoin’s strong position as a digital gold asset.
The Ethereum Foundation has also faced increasing restrictions, further complicating the ecosystem’s growth prospects.
4. A Possible Rebound? Strong OTC Demand
Despite the bearish sentiment, some analysts see signs of a potential bounce-back.
- Jake Ostrovskis, an OTC trader at Wintermute, noted that he is seeing strong over-the-counter (OTC) demand for ETH, suggesting that large investors may be accumulating at lower levels.
- Santiment analysts pointed out that the number of ETH holders in profit has significantly dropped, a pattern that historically preceded a strong recovery once market conditions stabilize.
What’s Next for Ethereum?
Ethereum’s price action remains influenced by broader market fears, supply concerns, and regulatory uncertainty. However, analysts are keeping an eye on:
- The SEC’s next move on Ethereum ETF options
- Macro factors like U.S. trade policies impacting risk appetite
- Potential accumulation by institutional investors
If the market stabilizes and demand picks up, ETH could see a rebound, similar to past bullish cycles. But for now, traders are advised to stay cautious and monitor key support levels.
