Risk assets are stuck between a market bottom and a top.
From a technical perspective, this makes sense. Usually, top-caps show a clear directional bias after about five weeks of sideways trading. What about this cycle though? The market is past seven weeks, and there’s still no confirmed move.
Consequently, the stakes are rising as top-caps push deeper into leveraged liquidity. However, Ethereum [ETH] appears to be caught in its own internal tug-of-war. Notably, that $3k-level is now starting to look like a real test.
ETH shows scalability gains amid institutional headwinds
No doubt, Ethereum flipped the script in Q4, posting -28.28% returns.
In fact, this was ETH’s weakest quarter versus Bitcoin [BTC] since the 2019 cycle. Given that backdrop, it’s not completely unreasonable to see why some are calling Ethereum’s latest round of upgrades a “failure.”
However, the on-chain data tells a different story. Smart contract deployments on Ethereum just hit a record 8.7 million, while average transaction fees dropped to around $0.17 – Marking a massive shift from pre-upgrade levels.
Source: EtherScan
To put that into perspective, ETH fees spiked to nearly $200 back in 2022.
Since then, however, fees have stayed in a clear downtrend, even after a jump to $8.48 following the October crash that triggered a market-wide liquidation event.
Sure, at first glance, that might raise scalability concerns. However, the data suggested otherwise. Ethereum recently hit 2.2 million daily transactions, showing the network can push higher throughput without kicking fees higher. Bottom line? The upgrades clearly weren’t a failure.
And yet, institutional flows are still leaning against Ethereum.
Naturally, with fundamentals improving but price action lagging, the “undervaluation” case starts to make sense. Put simply, the market isn’t fully pricing in the “dip.” However, what if institutions have a reason to stay out?
Ethereum’s technical setup faces overvaluation debate
On the technical side, Ethereum has been showing a textbook breakout setup.
ETH has been stuck in a tight $2.7k–$3.2k range for the past six to seven weeks. Even so, on-chain activity like transactions and smart contract deployments remains strong, pointing to a potential bottom forming.
Worth pointing out though that ETH ETFs saw $72 million in outflows, with all nine funds selling, capping off 2025 on a red streak. Notably, this divergence has fueled an “overvaluation” debate, with some seeing ETH’s $3k-level as pricey.
Source: SolScan
From an investor perspective, that argument can’t be ignored.
According to the aforementioned chart, Solana [SOL] clocked 232 million in total transactions, with about 25% non-vote transactions. Compare that to Ethereum’s 1.2 million, and SOL is clearly outperforming on-chain.
Meanwhile, Bitcoin’s Q4 outperformance keeps it in its “digital gold” lane, with ETH still lagging. In essence, this market divergence is putting Ethereum’s relevance as a decentralized network under the microscope.
Against this backdrop, the lack of institutional flows isn’t a coincidence.
Instead, it may reflect strategic investor reshuffling into Solana, with smart money viewing Ethereum as relatively overpriced compared to faster, more scalable alternatives that also serve as a market hedge.
Final Thoughts
- Record smart contract deployments, low fees, and 2.2 million daily transactions highlight scalability gains, even as ETH struggles near $3k.
- ETF outflows, SOL outperformance, and Bitcoin’s Q4 strength suggest Ethereum may be relatively overpriced.
