Source: Cointelegraph Original: "{title}"

Since its establishment, Ethereum has been experiencing one of its most unstable periods. The usage rate of the base layer has plummeted, with core metrics nearing multi-year lows, and even co-founder Vitalik Buterin has proposed a radical architectural reform plan.

Institutional investors have not been passive observers. Blockchain data shows that long-term supporters like Galaxy Digital and Paradigm have been reducing their ETH holdings in recent weeks.

Since April, Ethereum's base layer activity has continued to shrink. Network fees have decreased, and the inflation rate has risen. Although layer two networks continue to develop, they are eroding the value capture of the base layer.

However, this story is not entirely about Ethereum's decline. Some large whales are viewing this drop as a rare buying opportunity. Even those investors selling ETH cannot fully let go.

Institutions are selling Ethereum, but it feels like an ex they have been keeping an eye on. Ethereum is not completely out of the picture; it is just temporarily sidelined as institutions explore other options like Solana.

In recent weeks, blockchain analysts monitoring large cryptocurrency transfers have found that several institutions have moved ETH out of their tagged wallets, likely for sale. Lookonchain reported that Galaxy Digital deposited 65,600 ETH (approximately $105.5 million) to Binance. According to Arkham data, the investment firm's ETH exposure peaked at around 98,000 ETH in February but has since dropped to nearly 68,000 ETH at the time of writing.

Although Galaxy's holdings have decreased in recent weeks, they remain above the levels at the beginning of the year. Its ETH holdings reflect the overall trend of Ethereum investment products. According to CoinShares data, ETH funds saw an outflow of $26.7 million last week, bringing the total outflow over the past eight weeks to $772 million. However, the fund flow for the year to date remains positive, with a net inflow of $215 million.

While Galaxy has reduced its ETH holdings, Lookonchain reported that it also withdrew 752,240 SOL (approximately $98.37 million). Ethereum has lost significant development momentum, while Solana has become the preferred public chain during much of the meme coin frenzy in 2024 and early 2025. Although it eventually cooled down due to rampant scams, bots, and low-quality tokens, it also served as a technical showcase for Solana—demonstrating its ability to handle a large number of transactions without significant spikes in fees or network interruptions.

Paradigm is another investor reducing its ETH holdings. On April 21, it transferred 5,500 ETH (approximately $8.66 million) to Anchorage Digital. On-chain analyst EmberCN noted that since January 2024, Paradigm has transferred about 97,000 ETH (approximately $301.57 million) to Anchorage, which were subsequently moved to centralized exchanges.

"While institutional investors initially embraced the narrative of 'super resilient currency,' they now face a reality: declining protocol revenues and weakening token economics have raised reasonable concerns," said Jayendra Jog, co-founder of Sei Labs, in an interview with Cointelegraph.

ETH deflation has been a selling point attracting Ethereum investors. This was achieved through two major upgrades. First, the London hard fork in August 2021 introduced Ethereum Improvement Proposal 1559, which partially burned transaction fees. Then, in the merge upgrade in September 2022, Ethereum transitioned to a proof-of-stake network, significantly reducing new token issuance.

After the merge, the supply of ETH continued to decline until April 2024, when ETH inflation began to accelerate. By early February 2025, the total supply of ETH had exceeded the levels at the time of the merge.

Part of the ETH inflation is due to the decrease in ETH burned as a result of lower fees. According to IntoTheBlock data, Ethereum collected 1,873.52 ETH in fees between April 14 and 21. This is slightly higher than the 1,697.61 ETH collected in the week starting March 17, which was the lowest fee collected (measured in ETH) since July 31, 2017.

On April 20, Buterin proposed using the RISC-V instruction set to replace the current Ethereum Virtual Machine contract language, aiming to improve the speed and efficiency of the network's execution layer. Some view this proposal as a surrender to the existing architecture.

"Vitalik's RISC-V proposal essentially acknowledges that the EVM infrastructure has reached its limits. When the founder of Ethereum proposes to replace the core virtual machine that supports the entire ecosystem, it indicates not evolution, but a recognition of design limitations that cannot be improved through incremental means," Jog stated.

Cointelegraph has contacted the Ethereum Foundation and will update this article upon receiving a response.

This proposal comes at a time when the Ethereum Foundation is undergoing leadership adjustments amid increasing scrutiny of the project's direction.

Ethereum's predicament is partly attributed to its rollup-centric network scaling solution. This plan envisions building layer two scaling networks that transfer transactions off the base chain while still leveraging its security. While this does alleviate congestion during peak network demand, it also brings new issues, such as a decrease in ETH burned and the decentralization of the Ethereum ecosystem.

However, according to Tomasz Stańczak, the newly appointed co-executive director of the Ethereum Foundation, there is currently an increased focus on layer one scaling. Stańczak stated on the X platform that the Ethereum Foundation will shift its focus to recent goals, such as layer one scaling and support for layer two scaling.

Some large whales have already taken advantage of Ethereum's lower prices to accumulate. On April 23, Lookonchain discovered two wallets accumulating millions of dollars worth of ETH. This blockchain monitoring agency also found another wallet on April 22 that had accumulated over $100 million worth of ETH since February 15. ETH has currently retreated from its high of over $4,000 set in December, but it rose more than 10% on April 23, breaking through $1,800.

Standard Chartered recently lowered its price forecast for ETH in 2025 from $10,000. However, for whales accumulating at current price levels, there is still room for growth, as the bank still predicts a year-end target price of $4,000.

Geoff Kendrick, head of digital asset research at the bank, attributed this more cautious outlook to Ethereum's structural decline, noting that layer two networks aimed at improving scalability are now capturing most of the fee revenue that would have been earned by the base layer.

Related: Ethereum (ETH) price rebounds, market dominance recovers from historical lows.

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