The market adjustment provides an opportunity to re-evaluate the allocation.
Author: ChandlerZ, Foresight News
In the early morning of March 5, Ethereum briefly fell below $2,000, with a daily drop of 7.00%, hitting a low since late November 2023.
The consecutive declines have already shaken the confidence of some Ethereum whales.
Dujun, the executive director and CEO of New Fire and the founder of ABCDE, wrote in a post, "Ethereum is back to $2,000 today. After calculating, the paper loss from increasing my Ethereum position in the past year has exceeded $20 million. I really can't buy anymore, so I'll use the money to incubate projects. Even if they fail, I can still gain experience and a team."
"Is Ethereum dead?" The giant public chain that has carried the dreams of countless developers and the expectations of investors is now facing the most severe multiple challenges since its inception, including macroeconomic headwinds, application dilemmas, doubts about centralized governance, and the rise of strong competitors. The questioning voices are echoing in the market again.
Whether this "darkest hour" for Ethereum can become a turning point for its transformation and upgrade is unknown. But from a historical perspective, when market sentiment falls into extreme pessimism, investors flee, and criticism reaches a climax, innovators often manage to build a more solid foundation on the ruins.
Dujun also emphasized, "I won't sell at a loss. I remain optimistic about the Ethereum ecosystem and its value to the industry. I'm considering selling other assets to increase my Ethereum holdings and lower the cost basis."
Changing Market Sentiment and Macroeconomic Pressure
The negative performance of Ethereum's price is a typical multi-layered causal relationship. From a broader perspective, the policy tailwind of including virtual assets in the strategic reserve by the Trump administration quickly dissipated, and market sentiment has returned to rationality from a brief state of euphoria. Furthermore, the significant deterioration of the global macroeconomic environment, particularly the strengthening signals of stagflation in the US, has played a role. The sharp downward revision of the US first-quarter GDP growth forecast, the market panic triggered by the shift in tariff policy, and the substantial rise in the VIX fear index all indicate a drastic decline in investor risk appetite. The Trump administration's sudden decision to suspend military aid to Ukraine has further exacerbated geopolitical uncertainty, triggering a widespread sell-off of risk assets.
In this broader context, Ethereum, as a high-risk asset, has been hit hard. Market sentiment has shifted from excessive optimism to cautious, even pessimistic. Ethereum accumulated a large amount of profit-taking positions during its rally from the end of 2023 to the beginning of 2024. When the price reached a key technical resistance level, the selling pressure from profit-taking increased significantly. Meanwhile, the theft of funds due to security vulnerabilities in exchanges has also undermined market confidence, and the market cleansing process of the stolen funds has formed additional selling pressure.
The widespread application of quantitative trading strategies and algorithmic trading has further amplified market volatility. When the price broke below the critical psychological level of $2,000 and the technical support, it triggered more stop-loss orders and technical sell-offs, forming a chain reaction of price declines.
Technical Factors and Network Activity Data
From a technical perspective, some of the fundamental indicators of the Ethereum network have shown a certain degree of weakness. On-chain transaction activity has decreased compared to the previous peak, although it remains at a relatively high historical level. More specifically, the number of daily active addresses has remained relatively stable but lacks growth momentum, and the growth rate of new addresses has slowed, which to some extent reflects a weakening of market participation enthusiasm.
According to Etherscan data, Ethereum's on-chain Gas has dropped to 0.683 Gwei, with an average Gas of 0.684 Gwei. Based on the current Gas fees, the average cost of token transactions is around $0.03. Gas fee revenue has decreased significantly compared to the bull market peak, directly impacting Ethereum's economic model, especially after the implementation of EIP-1559, as lower transaction fees mean a reduced ETH supply through the burning mechanism, weakening its deflationary effect.
Centralization Controversy in Ethereum Foundation Governance
In addition to market and on-chain factors, the recent focus on the centralization of decision-making within the Ethereum Foundation (EF) may also affect investors' trust in the Ethereum ecosystem. In early 2025, Vitalik Buterin publicly stated that he has the final decision-making power in the EF and expressed dissatisfaction with the community's persistent pressure for leadership reform. He warned that excessive external pressure could lead to the loss of core talents.
This centralization trend has a complex impact on the Ethereum ecosystem. On the one hand, the concentrated decision-making of the core team ensures the continuity and consistency of the technical roadmap, avoiding the fragmentation of the ecosystem due to excessive forking. On the other hand, the concentration of decision-making power also increases the risk of single point of failure, and the development direction of the network may not be fully aligned with the broader community interests.
In fact, there has been long-standing criticism in the industry about the lack of transparency in the EF's decision-making process, such as personnel changes often being decided by a small number of internal members, with the community often passively informed of the decisions afterwards. This organizational governance centralization is at odds with Ethereum's decentralization ideology. Many observers point out that Vitalik's outsized influence on community affairs as a technical leader, while the EF is relatively weak in market communication and governance transparency.
The above governance controversies, combined with previous concerns about the EF's financial operations, such as the repeated allegations of the foundation selling ETH at market highs, have raised market awareness of "insider behavior." Although the EF has recently adjusted its strategy, not directly selling, but transferring 45,000 ETH to DeFi to earn passive income.
In early March, the Ethereum Foundation announced a new leadership structure, appointing Hsiao-Wei Wang and Tomasz Stanczak as joint executive directors effective March 17. Hsiao-Wei has been a core researcher at the Ethereum Foundation for seven years and is a key contributor to the Ethereum Beacon Chain. Tomasz Stańczak has led the team in building the Nethermind execution client. Tomasz will continue to be involved with Nethermind but is gradually transitioning out of his CEO role.
However, the change in leadership seems to have not effectively solved the core problem of the EF's centralization tendency. This trust-level concern may amplify negative sentiment when the market is in a downturn, becoming the last straw that breaks the camel's back.
In addition to this, the rise of blockchains like Solana has indeed had a certain diversion effect on Ethereum, but the overall application scenarios of blockchain technology are still in the early stages, and the market is far from saturation. A diversified blockchain ecosystem is more likely to present a "differentiated coexistence" rather than a "winner-takes-all" pattern. For investors, the current market adjustment provides an opportunity to re-evaluate their allocations. This period of pain is both a challenge and an opportunity. While short-term volatility may be uncomfortable, it also provides a window to re-evaluate project fundamentals and optimize resource allocation.
At this stage, both excessive optimism and pessimism are not conducive to rational judgment. Maintaining a cautious and neutral attitude, focusing on technological development and actual application progress, may be a wiser strategy.
