Ethereum is entering one of its most precarious periods since its inception. Usage on the base layer is plummeting, core metrics are nearing multi-year lows, and even co-founder Vitalik Buterin is proposing a radical architectural overhaul. 

Institutions aren’t waiting to see how it plays out. Blockchain data shows that long-time supporters such as Galaxy Digital and Paradigm have been slashing their Ether holdings in recent weeks. 

So far in April, Ethereum’s base-layer activity has continued to collapse. Ethereum’s network fees are dropping, and inflation has been rising. Though layer-2 networks continue to develop, they’re cannibalizing the base layer’s value capture.

But the story isn’t entirely about Ethereum’s collapse. Some whales are treating this downturn as a rare buying opportunity. Even those who are selling Ether can’t fully let it go.

Ethereum gets dumped by institutions, but for how long?

Institutions are dumping Ethereum, but it’s the ex they keep checking on. It’s not entirely out of the picture — just benched while they explore options like Solana .

In recent weeks, blockchain analysts on the lookout for large crypto movements spotted several institutions moving ETH out of their tagged wallets, likely to sell. Lookonchain reported that Galaxy Digital deposited 65,600 ETH ($105.5 million) to Binance. The investment firm’s Ether exposure rose to as high as around 98,000 coins in February, but that has dropped to almost 68,000 ETH at the time of writing, Arkham data shows.

Galaxy’s holdings may have declined in recent weeks, but they’re still higher compared to the start of the year. Its Ether holdings reflect a broader trend seen in Ethereum-based investment products. According to CoinShares, ETH funds saw $26.7 million in outflows over the past week, bringing total outflows to $772 million over eight weeks. However, year-to-date flows remain positive, with $215 million in net inflows. 

As Galaxy trimmed its Ether holdings, it also withdrew 752,240 SOL ($98.37 million), Lookonchain reported. Ethereum lost considerable momentum to Solana, which became the chain of choice during the memecoin casino frenzy that dominated much of 2024 and early 2025. While that eventually cooled amid rampant scams, bots and low-quality tokens, it also served as a technical showcase for Solana — proving its ability to process massive transaction volumes without major fee spikes or outages.

Paradigm is another investor that has cut back on Ether. On April 21, it moved 5,500 ETH ($8.66 million) to Anchorage Digital. Paradigm transferred around 97,000 ETH (around $301.57 million) to Anchorage from January 2024, which was then moved to centralized exchanges, as onchain analyst EmberCN pointed out.

“While institutional investors initially bought into the ‘ultra-sound money’ narrative, they’re now facing a reality where decreasing protocol revenue and weakening tokenomics create legitimate concerns,” Jayendra Jog, co-founder of Sei Labs, told Cointelegraph.

Ethereum returns to net inflationary state

Ether deflation has been an attractive selling point to Ethereum investors. It was integrated into the network through two major upgrades. First, the London hard fork of August 2021 introduced Ethereum Improvement Proposal 1559, which partially burns transaction fees. Then in the Merge upgrade of September 2022, Ethereum became a proof-of-stake network and drastically cut new token issuance.

Ether’s supply consistently decreased following the Merge until April 2024, when Ether’s inflation began to accelerate. By early February 2025, the total ETH supply had surpassed its Merge level.

Part of Ether’s inflation has been due to dropping fees, which results in less Ether burned. According to data from IntoTheBlock, Ethereum collected 1,873.52 ETH in fees from April 14 to April 21. That’s slightly higher than the 1,697.61 ETH in fees from the week starting on March 17, which was the lowest amount of fees collected (measured in ETH) since July 31, 2017.

Buterin’s radical RISC-V proposal for Ethereum

On April 20, Buterin proposed the RISC-V instruction set to substitute the current Ethereum Virtual Machine contract language, aiming to improve the speed and efficiency of the network’s execution layer. Some view the proposal as a white flag on the existing architecture.

“Vitalik’s RISC-V proposal is essentially an acknowledgment that the EVM’s fundamental architecture has reached its limits. When Ethereum’s founder proposes replacing the core VM that underpins the entire ecosystem, it signals not evolution but recognition of a design limitation that can’t be incrementally improved,” Jog said.

Cointelegraph has reached out to the Ethereum Foundation and will update this article when it answers.

The proposal follows a leadership shuffling in the Ethereum Foundation following rising complaints on the project’s direction. 

Could Ethereum be the one that got away?

Part of Ethereum’s struggles has been attributed to its rollup-centric approach to scaling its network. The idea was to build layer-2 scaling networks that would offload the transactions from the base chain but still utilize its security. That has alleviated congestion issues during times of high network demand but has also created new problems of its own, such as dropping Ether burns and fragmentation of the Ethereum ecosystem.

But there is an increased focus on layer-1 scaling, according to Tomasz Stańczak, the new co-executive director of the Ethereum Foundation. Stańczak said on X that the Ethereum Foundation will shift its focus to near-term goals, such as layer-1 scaling and layer-2 scaling support.

Some whales have taken advantage of Ethereum’s cheaper price tag. On April 23, Lookonchain identified two wallets accumulating millions of dollars worth of ETH. The blockchain monitor identified another wallet on April 22 that has accumulated over $100 million in ETH since Feb. 15. Ether is currently down from the plus-$4,000 it reached in December but rose over 10% on April 23 to over $1,800. 

In a recent client letter, Standard Chartered Bank slashed its 2025 price estimate for Ether from $10,000. However, for whales accumulating at current levels, upside potential remains, as the bank still predicts a year-end target of $4,000.

Geoff Kendrick, the bank’s head of digital assets research, attributed the more cautious outlook to Ethereum’s structural decline, noting that the layer-2 networks designed to improve scalability are now extracting much of the fee revenue once captured by the base layer.