Ethereum’s (CRYPTO: ETH) price story in 2025 has been shaped by Layer 2 networks. These scaling solutions made transactions faster and cheaper, but they’ve also created some headaches for Ethereum’s value model. With activity moving off the main chain, fee revenue and token burns slowed down, raising questions about long-term price growth.
That said, institutional adoption and upgrades like Fusaka and Pectra could bring momentum back. Whether Layer 2 networks strengthen or dilute Ethereum’s value will define its path into 2026. Right now, opportunity and risk sit side by side.
Ethereum’s Price Trend Over the Last Six Months
Ethereum’s had a volatile six months as the network adjusts to the growing role of Layer 2 ecosystems. ETH started May 2025 around $3,600 and climbed through summer to hit $4,953 on August 24.
That strength didn’t last. Traders took profits as attention shifted to the expanding Layer 2 world. By early November, Ethereum fell to $3,064, losing almost a third of its peak value. As of November 16, ETH was trading around $3,056, roughly 39% below August but still up from last year.
The pullback reflects a shift in investor sentiment: hope about scalability gains versus fear that Layer 2 networks are siphoning value and fee revenue away from the main chain. Ethereum’s in a tricky spot. It’s proving resilient but facing pressure from the very technologies designed to scale it.
Are Layer 2 Networks Helping or Hurting Ethereum’s Price?
Layer 2 networks have become central to Ethereum’s growth. They boost speed and cut costs while relying on the main chain for security. Platforms like Arbitrum, Optimism, Base, and zkSync reshaped user activity across the ecosystem.
Arbitrum leads with roughly 3.4 million daily transactions and nearly $20 billion locked, easing mainnet congestion but limiting fee returns to ETH holders. Optimism processes close to 1 million transactions daily, advancing Ethereum’s roadmap through modular design.
Base, Coinbase’s network, dominates retail activity with about 8 million daily transactions. Most of that volume bypasses the mainnet. Meanwhile, zkSync focuses on privacy and zero-knowledge scaling but pulls users off-chain.
These Layer 2 networks expanded Ethereum’s reach. But they’ve also sparked debate over whether they’re adding value or just relocating it away from ETH itself.
How Layer 2s Are Boosting Ethereum’s Ecosystem
Layer 2 networks have become Ethereum’s growth engine. They’re making the platform faster, cheaper, and more accessible while building toward institutional readiness. Here’s how they’re helping:
Cheaper Transactions, Bigger Opportunities
The Dencun upgrade in 2024 slashed transaction costs across Layer 2 networks by over 90%. What used to cost a few dollars now runs $0.01 to $0.10. That drop opened Ethereum to new users and new business models.
There’s been a boom in DeFi, NFTs, and gaming transactions. Platforms like Uniswap, Aave, and Lido each reported higher liquidity and more users. Layer 2 networks such as Arbitrum, Optimism, and Base now process millions of transactions daily, turning Ethereum into a fast-moving financial system.
Developer Growth and Network Expansion
Ethereum’s Layer 2 ecosystem attracts developers. Arbitrum leads with thousands of active users and over $7 billion locked across projects like Radiant Capital and GMX.
This developer influx created a reinforcing cycle: more adoption draws more builders, and their products attract more users. It’s a pattern that strengthens Ethereum’s network effects and guarantees ongoing innovation in DeFi, gaming, and enterprise apps.
Institutional Adoption and Mainstream Access
The Pectra upgrade in 2025 made Ethereum friendlier for institutions and retail users by doubling blob capacity and introducing account abstraction. Users can now pay gas fees with stablecoins like USDC and DAI, which sounds technical but basically means fewer headaches for traditional businesses and newcomers.
Institutions exploring blockchain integration now see Ethereum as a practical platform for real-world asset tokenization, compliant DeFi, and digital treasury management.
Deflationary Supply and Staking Stability
Even as activity moves to Layer 2s, Ethereum’s base chain stays financially solid. Over 35% of ETH supply (around 30% of circulation) is staked, earning 3-4% annually. Lido holds about 41 billion staked ETH.
The network keeps burning transaction fees, cutting overall supply by roughly 350,000 ETH since the Merge. This gradual deflation, combined with strong staking activity, supports Ethereum’s long-term price stability and reinforces confidence in its economic model.
Where Layer 2 Networks May Be Hurting Ethereum’s Price
Ethereum’s Layer 2 boom solved scalability but created new economic challenges. While L2 activity keeps growing, the rapid rise is reshaping Ethereum’s core revenue model and token value dynamics.
Falling Fees and Slower ETH Burn
Ethereum’s mainnet revenues collapsed since the Dencun upgrade. Gas fees dropped nearly 99%, hitting record lows around 0.067 Gwei, and daily ETH burns fell to roughly 100 ETH. That flipped Ethereum’s annualized inflation rate from negative to slightly positive, reversing its deflationary trend.
Total Layer 1 fees, which once topped $30 million daily, now hover near $500,000. This steep drop in network income shook investor confidence, particularly among those who view ETH as a yield-bearing asset tied to fee burns and network demand.
Value Draining to Layer 2 Networks
Layer 2 networks started keeping more value than they return to Ethereum. Coinbase’s Base chain, for instance, earned over $94 million in profit but contributed just $4.9 million to the mainnet in blob fees.
This imbalance raises concerns that L2s are extracting value without proportionally supporting ETH’s core economics. As these networks grow, more fees stay off-chain, weakening Ethereum’s revenue base and lowering its perceived utility as a deflationary asset.
Scaling Success, Structural Weakness
The success of Layer 2s has ironically cut demand for mainnet blockspace. As transactions shift off-chain, fewer fees get burned, eroding Ethereum’s scarcity narrative. This trend forced institutions to reassess long-term value expectations.
Even Standard Chartered analysts reduced their ETH price projection, citing lower fee burn as a major risk. Ethereum’s price momentum might stay subdued even with a healthy ecosystem unless it can find new ways to capture value from L2 activity.
Centralization and Institutional Unease
Critics argue that many L2s, including Arbitrum and Optimism, rely on centralized sequencers that process and batch transactions. That conflicts with Ethereum’s decentralization ethos. Though both networks pledged gradual decentralization, this concentration of control raised red flags among investors.
Institutional sentiment cooled too. Fund flows show heavy ETH outflows in October, with firms like BlackRock reducing exposure. Unless Ethereum addresses these concerns, it might struggle to attract the long-term capital inflows needed to counter its shrinking revenue base.
Ethereum 2026 Price Forecast: Bullish, Base, and Bearish Projections
Ethereum’s future in 2026 represents a stark contrast between a robust ecosystem and an increasingly strained economy. The outcome will depend on upgrades, institutional interest, and how Layer 2 activity evolves.
Bullish Case
In the most optimistic scenario, Ethereum could reach between $7,320 and $7,609 by late 2026. This outlook assumes the Fusaka upgrade delivers smoother scalability and faster settlement, reigniting demand across both Layer 1 and Layer 2.
The Pectra upgrade, which doubles blob capacity and cuts fees, could drive more on-chain activity. Institutional adoption through ETFs would fuel steady capital inflows. If global monetary policy eases and liquidity improves, Ethereum’s expanding ecosystem—especially in tokenization, staking, and DeFi—could push prices higher, reinforcing its status as the leading smart contract platform.
Base Case
Ethereum’s base case points to moderate growth, projecting a range of $5,000 to $5,500 by late 2026. This scenario assumes stable execution of upgrades and continued L2 adoption, but limited revenue return to the mainnet.
Ethereum would maintain its position as the preferred network for DeFi and tokenization, though investor caution might temper upside potential. Competition from faster chains like Solana could cap gains, while macro uncertainty and regulatory shifts keep traders measured.
Bearish Case
The bearish outlook sees Ethereum falling toward $2,500-$3,000. This happens if Layer 2 adoption accelerates without new mechanisms to transfer value back to ETH holders.
Further institutional outflows and lower fee burn could intensify selling pressure. Stricter global liquidity or regulatory setbacks might damage sentiment further. In this scenario, Ethereum’s ecosystem wouldn’t collapse, but its token value might lag behind growth due to structural headwinds on long-term investor confidence.