Key takeaways:
Ethereum’s base layer activity has slowed, with both fees and TVL declining, indicating reduced demand despite recent price recoveries.
Layer-2 networks are rapidly expanding, helping to support Ethereum even as base layer usage diminishes and traders remain cautious.
Ether (ETH) surged to a three-week high near $3,400 on Tuesday following weak US job market data, which bolstered expectations for a sooner-than-expected easing of US monetary policy.
Despite the 11.2% weekly gains, traders remain concerned that sluggish Ethereum network activity and limited demand for bullish leverage could limit short-term upside.
Data from Nansen reveals that Ethereum’s 30-day network fees have plummeted by 62%, a more substantial decline compared to the approximately 22% drop seen on Tron, Solana, and HyperEVM during the same period.
Notably, some activities stood out: transactions on Base increased by 108%, while Polygon saw an 81% boost, highlighting continued momentum in Ethereum’s expanding layer-2 ecosystem.
The Ethereum Fusaka upgrade on December 3 brought improvements aimed at enhancing rollup efficiency, likely contributing to the lower network fees observed throughout the month.
On Tuesday, the annualized funding rate for ETH perpetual futures remained around 9%, indicating a fairly balanced distribution of leveraged positions between buyers (longs) and sellers (shorts). Typically, this indicator fluctuates between 6% and 12% to accommodate capital costs; figures above this range generally indicate stronger bullish positioning.
Traders became more defensive following the US Bureau of Labor Statistics report of 1.85 million layoffs in October, the highest count recorded since 2023. Markets are now anticipating a 0.25% interest rate cut by the US Federal Reserve on Wednesday, while focusing also on Fed Chair Jerome Powell’s statements post-Committee meeting.
Ethereum’s layer-2 growth offsets base layer fee declines
Despite the recent bullish trend, Ether continues to trade 32% below its all-time high of $4,597 from August. To understand whether demand for the Ethereum network is genuinely waning, it’s helpful to assess the effects on decentralized applications (DApps).
Ethereum-based decentralized exchanges recorded volumes of $13.4 billion over seven days, a decline from $23.6 billion four weeks earlier. Similarly, revenues from decentralized applications plummeted to a five-month low of $12.3 million during the same stretch. Overall, demand for Ethereum’s base layer processing has been decreasing since its peak in late August.
Several prominent DApps on Ethereum experienced a significant decline in total value locked (TVL), including Pendle, Athena, Morpho, and Spark. Overall TVL on Ethereum’s base layer decreased to $76 billion from $100 billion two months ago. Nevertheless, Ethereum maintains a solid dominance with a 68% market share, while runner-up Solana holds less than 10%.
Proponents of Ether argue that the network’s robust incentives for layer-2 scalability provide a more sustainable framework compared to the heavier demands and centralized oversight required by competing blockchains. Ethereum is well positioned to capture a substantial portion of future growth in decentralized finance (DeFi).
Related: US Treasurys lead tokenization wave as CoinShares predicts 2026 growth
US Securities and Exchange Commission Paul Atkins reportedly mentioned in a FOX Business interview that tokenization of the US market could transpire in “a couple of years,” highlighting blockchain’s “huge benefits” such as predictability and transparency. Atkins noted that the US should “embrace this new technology, bring it onshore where it can work under American rules.”
While Ethereum’s base layer fees have sharply declined, alongside a drop in TVL, activity within the layer-2 ecosystem continues to grow. Currently, neither on-chain nor derivatives data suggest any significant weakness in ETH price dynamics.
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