Ethereum's Valuation Dilemma: Bullish Fundamentals vs. Bearish Risks in 2025

The Bull Case: Network Resilience and Scaling Success

Ethereum's 2025 fundamentals paint a picture of a network adapting to scale while maintaining relevance. Daily transaction volume has surged to nearly 1.9 million per day, driven by DeFi protocols and stablecoin transfers ETH Transaction Volume Climbs on Price Rally, Cheaper DeFi^[2]. This growth is underpinned by a 50% increase in the gas limit since March 2025, enabling higher throughput without proportional cost increases ETH Transaction Volume Climbs on Price Rally, Cheaper DeFi^[2].

Gas fees, once a major pain point, have plummeted to an average of $0.41 per transaction in 2025, a 97.5% drop from 2023 levels Gas Fee Markets on Layer 2 Statistics 2025^[1]. The Dencun upgrade (March 2024), which introduced EIP-4844, has been transformative. By enabling "blob" data storage for Layer 2 (L2) rollups, it reduced L2 fees by 50–90% in many cases Gas Fee Markets on Layer 2 Statistics 2025^[1]. Layer 2 networks like Base and Arbitrum now process 6.65 times more transactions than the Ethereum mainnet, with Base capturing $185,291/day in average revenue—tripling Arbitrum's $55,025/day Gas Fee Markets on Layer 2 Statistics 2025^[1].

Staking has further solidified Ethereum's value proposition. With 25 million ETH staked on the Beacon Chain (as of early 2025), the network's security and decentralization have improved, while stakers earn yields in a market increasingly starved of risk-free returns Ethereum Network Growth: Gas Fees, Staking & Usage Stats^[3].

The Bear Case: Revenue Erosion and Competitive Pressures

Despite these gains, Ethereum faces existential challenges. Daily gas revenue has collapsed by 70% since its peak of $23 million/day, now hovering at $7.5 million Gas Fee Markets on Layer 2 Statistics 2025^[1]. This decline threatens validator incentives, as sequencer revenue from priority fees (e.g., Base's $156,138/day) accounts for 86.1% of its daily earnings Gas Fee Markets on Layer 2 Statistics 2025^[1]. While EIP-4844 reduced costs, it also compressed margins, leaving Ethereum vulnerable to competition from zero-fee chains like Solana and Avalanche ETH Transaction Volume Climbs on Price Rally, Cheaper DeFi^[2].

Layer 2s, while beneficial for users, have hollowed out the mainnet's economic model. Over 1.9 million daily transactions now occur off-chain, with L2s capturing 62.7% of weekly active addresses Ethereum Network Growth: Gas Fees, Staking & Usage Stats^[3]. This shift raises questions about Ethereum's ability to monetize its infrastructure. Meanwhile, mispriced micro-transactions on some rollups create risks of denial-of-service attacks or arbitrage losses Gas Fee Markets on Layer 2 Statistics 2025^[1].

The bearish narrative is further fueled by active address growth being concentrated in L2s. While Ethereum's mainnet processes 1 million daily transactions, its Layer 2 ecosystem handles 1.9 million—suggesting a potential long-term migration of value away from the base layer Gas Fee Markets on Layer 2 Statistics 2025^[1].

Balancing the Scales: A Network in Transition

Ethereum's valuation hinges on its ability to balance innovation with economic sustainability. The bullish case rests on its role as the bedrock of digital finance, with 27 million addresses holding ETH and a 99.95% reduction in energy consumption post-Merge Ethereum Network Growth: Gas Fees, Staking & Usage Stats^[3]. Yet the bear case warns that without a robust revenue model, Ethereum risks becoming a "gas-free highway" where value accrues to L2s and competitors.

For investors, the key question is whether Ethereum's technological depth—its EVM compatibility, developer ecosystem, and brand—can offset the erosion of gas revenue. While Layer 2s and EIP-4844 have bought time, the network's long-term success may depend on novel value capture mechanisms, such as tokenomics reforms or cross-chain bridges.