Citigroup's Cautious Call: ETH Faces Crossroads Between Adoption and Overvaluation

Citigroup has issued a cautious outlook for Ethereum (ETH), projecting that the second-largest cryptocurrency may close 2025 at $4,300, a price below its current level of around $4,500. This base-case forecast, outlined in a recent report, reflects the bank's conservative stance amid broader market uncertainties and evolving network dynamics. Alongside the base case, Citigroup has also outlined a bull case of $6,400, driven by strong adoption and capital inflows, and a bear case of $2,200, citing risks such as weaker network usage and tighter global liquidity.

The bank’s analysts have emphasized that network activity remains a foundational driver of Ethereum’s value. Increased usage in decentralized finance (DeFi), transactions, and applications can generate demand for ETH, thereby supporting its price. However, a shift in activity toward layer-2 scaling solutions—such as rollups and sidechains—has introduced a layer of complexity. While these platforms reduce congestion on Ethereum’s mainnet by enabling faster and cheaper transactions, they do not always translate into direct benefits for the base layer. According to Citigroup, only 30% of layer-2 activity meaningfully contributes to Ethereum’s valuation. By this measure, ETH is currently trading above its fair value, though this overextension is attributed to institutional inflows, enthusiasm around tokenization, and the increasing role of stablecoins on Ethereum’s network.

The introduction of Ethereum-focused exchange-traded funds (ETFs) has added another dimension to the asset’s valuation. While ETF inflows for ETH are currently smaller than those for Bitcoin, their price impact per invested dollar is greater due to Ethereum’s smaller market capitalization. Citigroup notes that institutional demand for ETH ETFs is likely to remain limited compared to Bitcoin, primarily due to Ethereum’s smaller market profile and lower visibility among first-time crypto investors. Nevertheless, the bank acknowledges that ETFs have played a supportive role in Ethereum’s price action, even if they are not expected to be a major driver of long-term value.

On a macroeconomic level, Citigroup has identified limited upside for Ethereum. With U.S. equities already trading close to the bank’s S&P 500 target of 6,600, the broader risk asset environment offers little room for additional gains. This means that Ether’s price is likely to be more influenced by network usage, investor flows, and the adoption of new applications rather than traditional macroeconomic trends.

While Citigroup’s base case is relatively cautious, other industry commentators and institutions have offered more bullish forecasts. For example, Standard Chartered recently raised its year-end ETH target to $7,500, projecting potential upside of up to $25,000 by 2028 under favorable conditions. These divergent views highlight the high degree of uncertainty in Ethereum’s valuation and underscore the importance of continued monitoring of both network activity and macroeconomic indicators.