Why will Ethereum's performance in 2025 be a "mixed bag" of extremes? The real signals behind institutional strategies

The Ethereum of 2025 presents a seemingly contradictory phenomenon: the token price has fallen 15% since the beginning of the year, reaching a high of $4,953 before retreating to $3.21K, yet fundamental data continues to set new records. What signals are hidden behind this?

Two Major Upgrades in Seven Months, Ethereum is “Reborn”

From the Pectra upgrade (May) to the Fusaka upgrade (December), Ethereum has demonstrated the meaning of “transformation” through action. These two upgrades are not mere patches but systemic evolution.

Core logic of the Pectra upgrade: Make Ethereum “user-friendly.” Ordinary users can now pay Gas fees with stablecoins, authorize multiple transactions in one go, and say goodbye to tedious repeated confirmations. Meanwhile, the validator staking cap has increased from 32 ETH to 2,048 ETH, effectively “lightening the load” on the network—more efficient capital utilization, fewer active validators needed for maintenance, and significantly reduced network pressure.

The ambition of the Fusaka upgrade: Solve Layer 2 data bottlenecks. Through PeerDAS technology, validators can verify data without downloading everything, increasing Ethereum’s data capacity by 8 times. At the same time, the mainnet Gas Limit has gradually increased from 30M to 60M, doubling Ethereum’s throughput. In simple terms, Ethereum is becoming faster, cheaper, and more capable of handling data.

Institutional Capital’s “Secret Deployment” Changes Ethereum’s Supply Structure

While the token price declines, Wall Street and traditional finance are quietly positioning. This phenomenon indicates market segmentation: retail investors focus on price, institutions focus on fundamentals.

Currently, the Ethereum treasury company and spot ETFs hold a total of 10.7% of the circulating ETH supply—about 6.81 million ETH (worth approximately $20.14 billion), with ETF holdings of 6.13 million ETH (about $18.12 billion). What does this mean? It means Ethereum’s market liquidity is being “anchored,” and the rising institutional holdings set an invisible lower limit on the token price.

Meanwhile, the supply of Ethereum stablecoins has grown 45% in 2025, surging from $111.8 billion to $162.5 billion. This is no coincidence—large institutions are preparing for upcoming financial applications.

How Ethereum Consolidates Its “Global Asset Settlement Center” Crown

In competition with other public chains, Ethereum has not been beaten but has instead strengthened its position. This is reflected in several key data points:

Resilience of TVL share: 56% at the start of the year, briefly dropping to 51%, then rebounding to 62% in August, and finally stabilizing at 58%. Every time new capital flows into a new public chain’s hot spot, Ethereum’s TVL share experiences short-term setbacks but always recovers. What does this indicate? That truly “sticky” large funds ultimately return to Ethereum.

Absolute dominance in the RWA market: Real-world asset tokenization (RWA) is the gateway for traditional finance to embrace blockchain. Ethereum’s share in this field is as high as 65.46%, far surpassing the second place. This is not just a number; it represents the collective backing of institutional products like JPMorgan’s MONY fund, BlackRock’s BUIDL fund, and others. Their choice of Ethereum signifies a preference for a secure, liquid, and mature settlement layer.

Three Key Words for 2026: Efficiency, Privacy, Financial Integration

Entering 2026, Ethereum’s next strategic moves are already laid out.

Keyword 1: The Revolution of Parallel Processing

The Glamsterdam upgrade (expected mid-2026) will introduce “parallel transaction processing” and the proposer-builder separation (ePBS) mechanism. To use a simple analogy: past Ethereum was like a one-way street—one car passes, then another can go; after the upgrade, it becomes a multi-lane highway. Meanwhile, the Gas Limit is expected to increase from 60M to 200M, directly boosting Ethereum’s throughput, making it a truly “financial-grade” settlement network.

Keyword 2: Balancing Privacy and Compliance

The Kohaku upgrade (expected end of 2026) targets the most critical concern of financial institutions: “privacy.” By introducing the Railgun privacy protocol and Privacy Pools mechanism, enterprises and individuals can hide transaction details while proving the legitimacy and compliance of their funds. In other words, you can be “invisible” to the entire network but still prove that you are “clean.” This is a compelling attraction for financial institutions needing to protect trade secrets.

Keyword 3: The Official Operation of Wall Street’s Connection Hub

Etherealize, supported by the Ethereum Foundation and Vitalik Buterin himself, led by veteran Wall Street trader Vivek Raman and core Ethereum developer Danny Ryan, is a significant development—breaking the stereotype that Ethereum “only understands code, not finance.”

Vivek Raman’s involvement is especially crucial. As a Wall Street operator, he understands the pain points of traditional finance: mortgage securitization, bond trading, credit products—all systems with low efficiency. Etherealize’s mission is to turn these “sleeping” assets into tokenized products on Ethereum, unlocking liquidity.

At the same time, Etherealize is pushing for the construction of a “modern settlement engine.” Traditional T+1 or T+2 settlement processes will be optimized into 24/7 real-time settlement, elevating capital efficiency by an order of magnitude. What does this mean for global financial markets? It means hundreds of trillions of dollars in assets will have a new, more efficient operational model.

Laying the Infrastructure for the “AI Economy”

The Ethereum Foundation’s dAI Team, established in September 2025, aims to make Ethereum the preferred settlement platform for AI and machine economy. Two core protocols are particularly noteworthy:

ERC-8004 addresses the “trust issue” in AI. Using zero-knowledge proofs or Trusted Execution Environments (TEE), AI agents can obtain verifiable digital identities and credit records. Imagine an AI assistant needing to call another AI’s service; it must prove itself “trustworthy.” ERC-8004 is that digital ID.

x402 Protocol, designed by Coinbase, embeds payment functions into the network’s core protocol, allowing AI agents to autonomously perform micro-payments and transaction settlements. In simple terms, AI can finally “spend money” like humans.

The combination of these two protocols opens the door for AI economy operations on-chain.

The True Test of 2026: Balancing Technical Reliability and Decentralization

But opportunities come with challenges. The core of the Glamsterdam upgrade relies on the healthy development of the “proof market.” If ZK proof generation becomes overly concentrated among a few vendors, Ethereum could repeat the current MEV Relay scenario—appearing decentralized but actually controlled by a small group of participants.

Additionally, while ePBS enables parallel processing, it also introduces new risks. During extreme market volatility, block production could be affected by a 6% interference rate, posing a deadly threat to financial institutions seeking millisecond-level settlement.

Ethereum at the Crossroads

In 2025, Ethereum delivered a fundamental performance report: 58% TVL share, 10.7% institutional holdings, 65% RWA share. These data points prove that Ethereum is transforming from a “social experiment” into a “global financial infrastructure.”

But the weak price also reminds the market: this transformation is not smooth. Entering 2026, all strategic pieces are in place, but the real test has just begun. Whether Ethereum can prove its irreplaceability amid risks and efficiency battles will determine if it can truly become the ultimate “world computer.”