Ethereum Price Lags 50% Behind All-Time High Amid Scrutiny

Ethereum, the world’s second most valuable blockchain, has faced intense scrutiny this year regarding its current and future direction. Conceived in 2013, Ethereum has experienced significant ups and downs, including a major hack in 2016 and a notable technological upgrade in 2022. The recent scrutiny is largely due to the price of Ethereum, which has been lagging behind Bitcoin. While Bitcoin has reached several all-time highs and garnered interest from Wall Street investors, Ethereum has been trading around $2,500, approximately 50% lower than its all-time high.

Critics have used Ethereum’s price slump to declare the blockchain’s demise. Max Keiser, a prominent Bitcoin advocate, stated that Ethereum is dead, although this is an overstatement. The real question is whether Ethereum’s price slump is a temporary setback or a sign that the blockchain will never fulfill its potential.

Ethereum’s challenges began in 2013 when Vitalik Buterin, a 19-year-old from Canada, envisioned a decentralized blockchain-based computing platform. This platform would allow developers to create code immune to the control of corporate giants. However, as more developers joined Ethereum, gas fees—charges for sending assets on the blockchain—skyrocketed. In 2021, sending a few dollars of cryptocurrency could result in hundreds of dollars in fees, prompting developers to seek solutions.

The solution came in the form of layer-2 blockchains, or L2s, built on top of Ethereum. These L2s, such as Arbitrum, Optimism, and Polygon, bundle user data into one package and post it onto Ethereum, reducing the number of individual transactions the blockchain needs to process. This strategy has significantly lowered transaction costs on Ethereum. However, critics argue that this approach has made the core network of Ethereum less valuable by draining it of user activity that supported Ether’s price.

Paul Brody, chairman of the Enterprise Ethereum Alliance, believes that focusing on the short-term price of Ether misses the point. He views Ethereum as a world computer, not just a deflationary cryptocurrency. Ethereum’s upgrades, rather than efforts to boost Ether’s price, should increase demand for the cryptocurrency. Developers are now optimizing the speed of the layer-1 network, not just its ecosystem of layer-2 chains. Danny Ryan and Vivek Raman, cofounders of the Ethereum advocacy group Ethrealize, believe that the influx of Wall Street and Big Tech firms exploring blockchain technology will drive demand for Ethereum. They even equate Ethereum to “digital oil,” a civilizational infrastructure that institutions can trust.

However, whether Wall Street titans will choose Ethereum over competitors like Solana remains uncertain. Proponents are hopeful that if Ethereum becomes the go-to platform for business, the asset price will take care of itself. The future of Ethereum hinges on its ability to adapt and innovate, addressing the challenges it faces while continuing to attract developers and users to its platform.