Why is ETH Price Continuing to Weaken Despite Wall Street's Interest in Ethereum?

Layer 2 networks dilute returns, and ETF funds are continuously flowing out, presenting unprecedented challenges to Ethereum's value model.

Written by: Alex O'Donnell

Compiled by: Saoirse, Foresight News

The Ethereum network is gaining recognition from Wall Street, but investors remain cautious about ETH.

In recent months, institutional acceptance of Ethereum has significantly increased. Since May, several financial institutions, including JPMorgan, Robinhood, and Morgan Stanley, have launched various Ethereum-related products and services. In July, several former members of the Ethereum Foundation established a non-profit independent organization, Ethereum Institutional, aimed at accelerating the adoption of Ethereum by major institutions.

At the same time, Ethereum co-founder Vitalik Buterin released a major network upgrade roadmap titled "Lean Ethereum," aimed at enhancing Ethereum's privacy capabilities and resistance to quantum attacks.

However, the market has not responded positively. At the time of writing, ETH was trading slightly above $1,900, down over 60% from its historical peak of around $4,950 in August 2025. Analysts generally believe that it will be difficult for ETH to return to its previous highs in the short term. On July 1, Citigroup lowered its 12-month price forecast for Ethereum from $3,175 to $2,240, citing weakening investor demand and continuous net outflows from Ethereum ETFs.

The research team at Galaxy stated that the disconnect between market performance and fundamentals is clear: more and more investors are confused about the value growth logic of ETH.

Wall Street's Expansion in the Landscape

Today, institutional applications of blockchain are no longer limited to pilot attempts, and Ethereum is one of the biggest beneficiaries of this trend.

In May, JPMorgan Asset Management launched its second tokenized money market fund, JLTXX, on the Ethereum public chain. In July, online brokerage Robinhood introduced Robinhood Chain, a Layer 2 network built specifically for financial services and tokenized assets.

Morgan Stanley is also pushing ETH further into mainstream securities accounts. Qualified E*TRADE users can now trade and hold Ethereum, Bitcoin, and SOL.

The continuous investment in Ethereum by major institutions is due to its mature developer ecosystem and a large, decentralized network of validating nodes, suggesting that institutional engagement is likely to accelerate.

Joe Lubin, CEO of ConsenSys, mentioned in a statement on July 1 that the vast majority of stablecoin issuances, tokenized assets, decentralized finance, and various on-chain financial infrastructures will prioritize Ethereum.

Ambitious Upgrade Plans

In addition, Ethereum is about to undergo a comprehensive technological overhaul, which will further enhance its attractiveness to various institutions.

In July, Buterin publicly announced the "Lean Ethereum" development plan, with a reconstruction cycle of three to four years. He stated that the scale of this upgrade is comparable to the full network upgrade when Ethereum transitioned to a proof-of-stake consensus mechanism in 2022.

This upgrade aims to reduce Ethereum's usage costs, enhance network security, and optimize user privacy protection—an aspect that institutional traders highly value. If the upgrade is successfully implemented, Ethereum is expected to become one of the first blockchains with reliable resistance to quantum attacks.

Justin Drake, a researcher at the Ethereum Foundation, stated in July that strong security features would become a natural advantage in attracting global institutions to migrate to Ethereum.

Economic Fundamentals Full of Uncertainty

Despite a series of positive news, ETH's price remains sluggish.

One root cause lies in Ethereum's scaling solutions. Ethereum heavily relies on Layer 2 blockchains to achieve lower costs and higher efficiency in transaction processing.

In theory, the higher the on-chain activity, the more fees generated, and the greater the market demand for ETH. However, data from L2Beat shows that since 2024, the vast majority of transactions in the Ethereum ecosystem have been handled by Layer 2 networks, which only periodically complete final settlements on the Ethereum mainnet.

The scaling solutions have significantly reduced transaction costs, helping Ethereum accommodate more traffic, but they have also severed the connection between on-chain activity and ETH demand: a large number of transactions have shifted off the mainnet, resulting in fewer fees earned by the Ethereum mainnet.

Researchers at 21Shares stated in January that such changes benefit ordinary users but present both advantages and disadvantages for ETH holders. Unless overall on-chain transaction volumes surge enough to offset the decline in fees, the reduction in fees will decrease the amount of ETH burned.

Diverging Market Predictions

Currently, Ethereum is likely to grow into a core infrastructure in the financial sector, but it remains uncertain how much profit ETH holders will ultimately reap. The price predictions from various industry players vary widely.

Citigroup predicts that ETH will be priced just above $2,000 in 12 months; Standard Chartered is much more optimistic, forecasting ETH to reach $4,000 by the end of 2026 and $40,000 by 2030.

Tom Lee, chairman of BitMine, is even more aggressive, believing that ETH's long-term price could reach as high as $250,000, corresponding to a total market value of about $30 trillion.

In summary, the probability of Ethereum becoming a mainstream core financial infrastructure is increasing, but whether ordinary holders can fully share in the industry's development dividends remains full of uncertainty.