Ethereum, the world’s second-largest cryptocurrency, is facing significant challenges as it grapples with a sharp decline in user activity, a dip in network demand, and growing competition. In 2025, Ethereum’s performance has taken a downward turn, with key indicators showing worrying signs for the blockchain’s future. The platform is showing its lowest user engagement levels this year, leading to questions about Ethereum’s ability to retain its position as a leader in the blockchain space.

Decline in User Activity Raises Concerns

One of the most concerning trends for Ethereum in 2025 is the significant drop in user activity. Ethereum’s daily active addresses and the number of new wallet creations have reached their lowest points this year, signaling waning interest and a potential reduction in overall demand for the network.

On March 16, Ethereum recorded just 361,078 active addresses, marking the lowest daily figure of 2025. This sharp decline is a clear sign of reduced on-chain activity, which is a crucial metric for measuring the demand for Ethereum transactions. Lower transaction volume means fewer fees are being generated, which is a key component in maintaining the network’s health and sustaining its value.

The drop in user engagement has major implications. Ethereum’s deflationary narrative, which has been a significant part of its appeal, is weakening as fewer transactions lead to fewer ETH tokens being burned. This creates inflationary pressure on the network, which could further erode investor confidence.

Dwindling Demand: A Worrying Trend

The reduction in Ethereum’s user base is not an isolated incident. On Sunday, March 18, the number of new ETH addresses created fell to 86,539, another 2025 low. This decline in wallet creation suggests that speculative interest in the platform is cooling, and fewer new users are onboarding the network. For Ethereum, this is particularly troubling, as it points to a broader decrease in both organic and speculative participation.

This shift in user behavior is tied to several factors, including rising competition from faster and more cost-effective blockchain alternatives. Ethereum has long been the go-to Layer-1 blockchain for decentralized applications (dApps) and smart contracts, but with networks like Solana and Avalanche offering quicker and cheaper transaction speeds, Ethereum’s once-dominant position is increasingly in jeopardy.

Impact on ETH’s Supply and Inflationary Pressure

The decline in user activity has begun to impact Ethereum’s supply dynamics. Over the past month, the circulating supply of ETH has increased by over 71,000 ETH, worth approximately $135 million. The total supply has now surpassed 120 million ETH, contributing to inflationary pressure on the network.

Ethereum’s economic model, which was designed to be deflationary with the Ethereum 2.0 upgrade, is being tested by this influx of new tokens. The upgrade was initially intended to reduce the overall supply of ETH by burning a portion of transaction fees, thus making the asset more scarce over time. However, the current downturn in on-chain activity has caused fewer tokens to be burned, resulting in an increase in circulating supply.

With fewer ETH being removed from circulation, the network’s inflationary pressure is mounting, which could have significant implications for its price stability. If demand does not pick up soon to counteract this increased supply, ETH could experience sustained downward pressure on its price.

Ethereum’s Price Struggles to Regain Momentum

Ethereum’s price has mirrored the decline in user activity. As of March 19, 2025, ETH was trading around $1,894, having suffered a 1.6% drop in the last 24 hours. The Relative Strength Index (RSI), a tool used to measure market sentiment, remains below 40, suggesting that bearish sentiment continues to dominate, with weak buying pressure preventing any meaningful rallies.

The On-Balance Volume (OBV) indicator, which tracks the volume of trading activity, has also decreased sharply, further reinforcing the lack of investor interest in Ethereum. While the Moving Average Convergence Divergence (MACD) indicator is hinting at a potential bullish crossover, it remains firmly in negative territory, which means that any short-term recovery would likely be fragile and short-lived unless backed by a significant increase in trading volume.

Ethereum’s price action has been relatively stagnant since the early March sell-off, hovering just above $1,850. The cryptocurrency has struggled to break the $2,000 mark, which could signal the threshold for a potential price rebound. However, unless Ethereum sees a dramatic shift in sentiment or a boost in demand, it may continue to face price declines.

Looking Ahead: Is Ethereum in Trouble?

As Ethereum continues to face challenges in 2025, the big question is whether the network can recover and maintain its dominance. The declining user activity and growing inflationary pressure are concerning signs for investors, and Ethereum’s ability to regain momentum will largely depend on its ability to attract new users and increase transaction volume.

The competition from faster and cheaper blockchains like Solana, Binance Smart Chain, and Avalanche will only continue to intensify, further eroding Ethereum’s market share unless it can address its scalability issues and reduce transaction costs.

While Ethereum still has a large user base and strong developer activity, these indicators suggest that the network may be at a crossroads. Without significant changes to its user engagement and network economics, Ethereum could face ongoing challenges in maintaining its market position and price stability.

For now, investors and crypto enthusiasts will be watching closely to see if Ethereum can turn things around and regain the confidence of its user base.

Conclusion

Ethereum’s struggles in 2025 are a reflection of broader challenges facing the cryptocurrency and blockchain industry. As user activity dwindles and inflationary pressure builds, the future of ETH hangs in the balance. Whether Ethereum can regain its foothold or succumb to competition will depend on the network’s ability to innovate and adapt in a rapidly changing landscape. Only time will tell if Ethereum can overcome these hurdles and continue to thrive in the competitive blockchain space.