Risk assets find themselves caught in a tug-of-war between a market bottom and a peak. From a technical standpoint, this aligns well. Typically, large-cap assets exhibit a distinct directional trend following approximately five weeks of lateral movement. What’s the outlook for this cycle, though? The market has been stagnant for over seven weeks now, with no confirmed movement in sight. As a result, the stakes are escalating as leading assets delve further into leveraged liquidity. However, Ethereum seems to be ensnared in its own internal struggle. Significantly, the $3k-level is beginning to appear as a genuine challenge. ETH demonstrates scalability improvements despite facing challenges from institutional players. Without a doubt, Ethereum turned the tables in Q4, recording -28.28% returns. Indeed, this marked ETH’s most challenging quarter against Bitcoin since the 2019 cycle. In light of the current situation, it’s understandable that some are labeling Ethereum’s recent upgrades as a “failure.”
Nonetheless, the on-chain data reveals an alternative narrative. Smart contract deployments on Ethereum have reached an unprecedented 8.7 million, with average transaction fees now hovering around $0.17 – Signifying a significant change from pre-upgrade levels. To provide some context, ETH fees surged to almost $200 in 2022. Since then, fees have consistently trended downward, despite a spike to $8.48 following the October crash that initiated a market-wide liquidation event. At first glance, that could indeed raise some scalability concerns. However, the data indicated a different story. Ethereum has recently achieved 2.2 million daily transactions, demonstrating the network’s capability to handle increased throughput without raising fees. The upgrades undoubtedly proved successful.
Despite the current landscape, institutional flows continue to show a preference away from Ethereum. With fundamentals on the rise while price action remains sluggish, the argument for “undervaluation” begins to gain traction. In straightforward terms, the market has yet to fully account for the “dip.” On the technical front, Ethereum has been demonstrating a classic breakout setup. ETH has remained confined within a narrow range of $2.7k to $3.2k for the last six to seven weeks. Despite the fluctuations, on-chain activity such as transactions and smart contract deployments continues to show resilience, suggesting that a potential bottom may be forming. It’s important to note that ETH ETFs experienced $72 million in outflows, with all nine funds reporting sales, concluding 2025 on a negative trend. Notably, this divergence has sparked a “overvaluation” debate, with some considering ETH’s $3k-level to be expensive. From an investor perspective, that argument is certainly noteworthy.
As highlighted in the chart, Solana recorded a total of 232 million transactions, with approximately 25% classified as non-vote transactions. When you look at Ethereum’s 1.2 million, it’s evident that SOL is clearly outperforming on-chain. In the meantime, Bitcoin’s strong performance in Q4 solidifies its status as “digital gold,” while ETH continues to trail behind. This market divergence is critically examining Ethereum’s significance as a decentralized network. In light of the current situation, the absence of institutional flows is not merely a coincidence. Instead, it could indicate a strategic repositioning by investors towards Solana, as savvy players perceive Ethereum as somewhat overpriced in comparison to quicker, more scalable options that also act as a safeguard in the market. Record smart contract deployments, low fees, and 2.2 million daily transactions underscore significant scalability advancements, despite ETH’s challenges hovering around the $3k mark. ETF outflows, SOL outperformance, and Bitcoin’s Q4 strength indicate that Ethereum could be seen as relatively overpriced.