Ethereum’s Two-Year PoS Anniversary: Why Has ETH Price Stalled?

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Two years after Ethereum’s historic transition to Proof-of-Stake (PoS), the network stands at a pivotal crossroads. While the Merge successfully reduced energy consumption and laid the groundwork for scalability, ETH’s price performance has lagged behind expectations—especially when compared to Bitcoin (BTC) and emerging blockchains like Solana (SOL). Despite fundamental improvements in security and efficiency, Ethereum faces growing scrutiny over its value accrual mechanisms and competitive positioning in a rapidly evolving ecosystem.

This article dives into the deeper structural challenges behind ETH’s price stagnation, analyzing key metrics including transaction fees, Layer 2 (L2) adoption, blob usage, staking trends, and Total Value Locked (TVL). By uncovering the interplay between protocol upgrades and market dynamics, we aim to answer a critical question: Is Ethereum still on track to fulfill its long-term vision as the leading smart contract platform?

ETH Underperforms BTC and SOL Despite Post-Merge Gains

At first glance, Ethereum’s price trajectory since the Merge appears positive. Over the past two years, ETH has appreciated approximately 44.28% against the U.S. dollar, briefly reclaiming the $4,000 mark in 2023 and currently trading above $2,300—a level that remains near its two-year high.

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However, this performance pales in comparison to other major cryptocurrencies:

These shifts signal a loss of relative strength. While ETH has grown nominally, it has significantly underperformed both Bitcoin and Solana, raising concerns about investor confidence in Ethereum’s future value proposition.

One common narrative blames declining transaction fee revenue. Although fee reduction was an intended outcome of Ethereum’s scaling roadmap—particularly with EIP-1559 and blob-carrying transactions—the timing has created unintended consequences.

Data from CryptoQuant shows that monthly tip-based transaction fees averaged **$32.8 million** over the past 24 months (excluding September 2024). Between November 2023 and July 2024, fees consistently exceeded $33 million, peaking above $60 million during periods of high activity.

Yet a downturn began in August 2024, with fees dropping to $27.96 million**, and early September data suggests a further decline toward **$25.68 million. This reversal coincides with broader market uncertainty and intensifies debate over whether Ethereum can sustain value accrual amid lower direct user fees.

Layer 2 Explosion: Scaling Success or Value Leakage?

The rise of Layer 2 solutions—powered by innovations like blob transactions—has been one of Ethereum’s greatest technical achievements. Blob-carrying transactions drastically reduce data storage costs on Layer 1, enabling L2 rollups to scale efficiently while maintaining security through Ethereum’s consensus layer.

Three leading L2 networks—Arbitrum One, Base, and OP Mainnet—have seen explosive growth in throughput after adopting blob support:

Notably, Base now outperforms Ethereum’s own average TPS by 158.85%, and Arbitrum exceeds it by over 60%. This shift underscores a new reality: most user activity is migrating off-chain, reducing congestion but also diluting direct economic feedback to ETH holders.

The Blob Fee Paradox

While L2s are thriving, their cost to Ethereum remains minimal. According to Dune Analytics data:

This raises a critical concern: Are we solving scalability at the expense of value capture?

Ethereum sacrificed short-term fee revenue to enable long-term scalability. But if L2s continue growing while paying negligible fees, the network risks becoming a “security backend” without proportional economic returns—a trend that may undermine ETH’s role as a settlement asset.

Still, there’s optimism: as demand increases and network congestion returns, blob pricing could become more dynamic, potentially boosting future revenue.

Staking Growth Slows as Competition Heats Up

Another cornerstone of Ethereum’s post-Merge economy is staking. With over 34.38 million ETH staked—a 150.18% increase since the Merge—the network enjoys robust decentralization and security.

However, momentum is waning:

While liquid staking protocols like Lido, Coinbase, and ether.fi dominate holdings, newer entrants such as Renzo and Everstake are gaining traction with double-digit percentage gains.

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Yet staking alone isn’t enough to drive price appreciation. For ETH to function as a true settlement currency, it must balance three attributes:

  1. High demand for transaction settlement
  2. Long-term price stability
  3. Sufficient liquidity

Current trends suggest tension between these goals—especially as competing chains offer faster execution and lower costs.

DeFi TVL Growth Lags Behind Solana

Ethereum remains the dominant force in decentralized finance, with current DeFi TVL at $44.68 billion—up 50.12% year-to-date and 50.53% over two years.

But again, relative performance tells a different story:

Even more striking: Solana started from a much smaller base yet achieved nearly five times the annual growth rate.

This rapid ascent reflects strong developer momentum, low-latency execution, and vibrant community-driven projects—factors increasingly influencing capital allocation decisions.

Frequently Asked Questions (FAQ)

Q: Did Ethereum fail after transitioning to PoS?

A: No. The Merge was a technical success—energy use dropped by ~99.95%, security improved, and staking became accessible. However, economic value accrual has not kept pace with expectations due to shifting user behavior and competition.

Q: Are lower fees bad for Ethereum?

A: Not inherently. Lower fees improve user experience and enable mass adoption. The challenge lies in ensuring that reduced direct revenue doesn’t weaken long-term value feedback loops to ETH.

Q: Can Ethereum regain its dominance?

A: Yes—but it will require continued innovation in scaling (e.g., danksharding), stronger ecosystem incentives, and clearer articulation of ETH’s role as a settlement layer and store of value.

Q: Is ETH still a good investment?

A: Many analysts believe so, citing its large developer base, institutional backing, and foundational role in DeFi and NFTs. However, investors should monitor L2 fee contributions, staking yields, and competitive threats closely.

Q: What is the “Ethereum Killer” narrative?

A: Chains like Solana are often labeled “Ethereum killers” due to faster speeds and lower costs. While none have fully displaced Ethereum yet, they highlight areas where Ethereum must improve to maintain leadership.

Final Thoughts: Rebalancing Innovation and Value Accrual

Ethereum’s two-year PoS journey reflects both triumph and transition. It solved urgent problems around sustainability and scalability but now faces deeper questions about economic sustainability.

The core issues revolve around two tensions:

  1. Layer 1 vs Layer 2 value flow: Can Ethereum capture sufficient economic value from off-chain activity?
  2. Staking vs liquidity: Can ETH maintain yield appeal without sacrificing usability?

For Ethereum to thrive long-term, it must evolve beyond being just a secure settlement layer—it needs mechanisms that ensure value flows back to ETH holders even as most activity occurs off-chain.

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The path forward likely involves deeper integration between L2s and L1 economics—through shared fee models, accrual mechanisms like EigenLayer restaking, or protocol-level revenue sharing.

As the ecosystem matures, Ethereum’s ability to adapt will determine not just ETH’s price trajectory, but its position as the backbone of web3.

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