Ethereum is Getting Better, But ETH Holders Can't Smile

Author: Baihua Blockchain

BitMine holds 6.06 million ETH, with an unrealized loss exceeding $4 billion. In the past week, this largest Ethereum enterprise globally spent $45.9 million to repurchase its own shares, while only $24.5 million was spent on buying coins.

Buying back its own stock is more cost-effective than buying its own faith.

However, there are 1.37 million ETH on-chain waiting to be locked into the network, which will take 24 days. The ETH/BTC exchange rate has slid to 0.029, nearing a three-month low, with traditional channels withdrawing and on-chain capital being locked. Ethereum has never been so usable, yet ETH cannot fetch a good price.

Bleeding While Waiting

In October, the net outflow from U.S. Ethereum spot ETFs exceeded $1.2 billion, led by BlackRock's ETHA. Since January, funds have only flowed in for two months, with the rest of the months seeing outflows.

The rules are clear: ETFs cannot be staked and do not earn interest. U.S. Treasury bonds can provide decent risk-free returns; who wants to hold a fund that only loses money?

Corporate treasuries have also hit the brakes.

BitMine holds about 6.06 million ETH, accounting for nearly 5% of the circulating supply, approaching its self-imposed limit, with most locked in staking to earn interest. The average cost is about $3,500, while the current price is around $2,300, resulting in a paper loss of over 40%.

The second-ranked SharpLink holds about 889,000 ETH, also deeply in unrealized losses. Together, the two companies account for nearly 6% of the total circulating supply.

The management's calculations are clear: the stock price is only 0.88 times the net asset value, and using cash earned from staking to repurchase discounted shares is much more cost-effective than continuing to increase positions in the market.

From early 2026 to now, BitMine has spent nearly $400 million on buybacks, far exceeding the amount spent on buying coins during the same period. The company is still buying ETH, but the pace has noticeably slowed.

On a micro level, this makes sense. But the largest buyer in the spot market is pulling back.

On-chain tells a different story.

In late October, about 1.37 million ETH are queued to activate staking, waiting more than 24 days; only about 13,000 ETH are queued to exit, which can be completed in just over a day. The queue for incoming transactions stretches out to the street, while the exit has no one at the door.

The Ethereum protocol can handle a maximum of about 57,600 ETH in and out daily, and the 1.37 million ETH in queue indicates that the demand for entry far exceeds the channel capacity. Even though the annualized yield has been diluted to 2.61%, funds still choose to give up liquidity in exchange for on-chain interest.

At the beginning of October, there was another stress test. MetaMask proactively exited about 17,000 validators due to a security incident, causing the exit queue to spike to 850,000 ETH. Three weeks later, the network smoothly digested this, and the total amount staked across the network remained stable at over 43.7 million ETH.

It wasn't a panic exit, but a temporary fluctuation caused by a security incident. The network absorbed the shock without a hiccup.

The price of ETH is not determined by the most steadfast holders, but by who is selling at the margin.

Fees Have Dropped, So What?

Ethereum's mainnet transaction fees in the third quarter dropped by more than 60% year-on-year. In October, the average transaction fee was $0.25. During the network congestion in 2021, the same transaction would often exceed $53. The fee for transferring one ETH three years ago was enough for over 200 transfers now.

How cheap is it? ENS no longer wants to build L2.

Ethereum Name Service (ENS) originally planned to build a dedicated Layer 2 network called NameChain to move domain registration and resolution to Layer 2. In February 2026, the team announced the abandonment of this route, and ENS v2 was directly deployed fully on the mainnet.

With mainnet interactions costing just a few cents, building an L2 would incur disproportionate costs: operational costs, security risks of cross-chain bridges, and liquidity fragmentation. Staying on the mainnet allows the domain system to directly combine with lending, trading, and identity protocols without waiting for cross-chain confirmations.

ENS is the first large protocol to abandon L2 due to the mainnet becoming cheaper, but it won't be the last.

The benefits are obvious, but the costs are hidden in the token model.

Ethereum has an automatic token burning mechanism: the base fee for each transaction is directly destroyed by the network. When the fee rate is high, more is burned than newly issued, making ETH scarcer. This was the narrative of the "super sound currency" that the market once pursued, and at its peak in 2021, Ethereum briefly entered deflation.

Now it has reversed. The base fee rate is only 0.06 Gwei, while to burn the same amount as newly issued requires 13.63 Gwei, a difference of two orders of magnitude. The network is net increasing about 2,954 ETH daily, which translates to nearly $7 million in selling pressure daily at current prices.

The deflation engine has stalled.

Once, the busier Ethereum was, the scarcer ETH became. Now, while the number of users hasn't decreased, the destruction contributed by each transaction is approaching zero.

The chain of transmission between network usability and currency value has broken. The better Ethereum is to use, the wider this gap becomes.

The Tide of L2 Has Withdrawn

In February 2026, Vitalik Buterin published an article that defined the L2 route: "Branded sharding no longer makes sense."

What is branded sharding? Each project builds its own L2, sharing Ethereum's security. It sounds like division of labor, but in practice, it runs into a host of problems.

Vitalik was very direct: Many L2s claim to have thousands of TPS, but assets need to be moved from the mainnet, relying on multi-signature wallets managed by a few people. In name, it is an expansion of Ethereum, but in reality, it is a centralized external database. After running for so many years, most Rollups have not made substantial progress in decentralization, and permissionless fraud proofs have yet to be implemented.

When the mainnet itself becomes cheaper and more abundant, the necessity of Layer 2 networks lacking independent security guarantees is called into question.

A reshuffle is imminent.

Kroma has ceased operations, Kinto has fully shut down, and after the Blast airdrop, TVL has dropped by 97%.

Top protocols are also contracting. As mentioned in the previous section, ENS has returned to the mainnet, while Synthetix and the prediction market Trueo have reduced their deployments on long-tail L2s, refocusing on the mainnet. Aave has not fully migrated back but is gradually shutting down smaller deployments lacking activity, concentrating core liquidity on the mainnet and a few leading Layer 2s.

The direction is clear: those that can return to the mainnet are returning, while those that cannot are contracting. The mainnet is cheap enough to retain flagship applications, while the rationale for L2's existence is weakened. The benefits and drawbacks of low fees ultimately point to the same contradiction.

200 Million Gas Stuck

Ethereum's next major upgrade is called Glamsterdam, with the core goal of raising the block gas limit from 60 million to 200 million, tripling the mainnet throughput. It was successfully activated on the Sepolia testnet on October 6.

Then it stopped.

The plan to launch the Hoodi testnet on October 26 was urgently halted, with no new timetable provided.

The issue lies in a security audit. A report from ChainSecurity on October 13 pointed out that EIP-8037 in the upgrade changed the way the virtual machine handles failed transactions, potentially exposing 13 contracts already running on the mainnet to vulnerabilities.

In simple terms, these contracts were supposed to automatically roll back to protect user funds in case of transaction failure, but the new rules changed the resource refund mechanism during rollback, potentially rendering this protection ineffective. Once code is deployed on the blockchain, it cannot be changed; the development team cannot patch third-party contracts and can only go back to amend the proposal itself.

The delay of Hoodi means that the December mainnet upgrade window is closed, and the 200 million gas limit has no timetable. Ethereum chose security over speed.

Ethereum is not lacking in the confidence to wait. The mainnet carries over half of the stablecoin supply and over $20 billion in tokenized real-world assets; products from BlackRock and Franklin Templeton's treasury bonds are running here. However, the market capitalization of stablecoins also declined in the third quarter, visibly eroded by low-cost networks like Tron. The moat remains, but the water level is dropping.

The foundation is also adjusting. Vitalik said he wants to turn it into "a smaller ship," focusing on security and core development while reducing direct sales of ETH.

The network is getting better, but the token model is lagging behind, and security cannot be compromised.

There is increasing evidence of usability, but value has yet to come.

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