Key takeaways:
Activity on Ethereum’s base layer has diminished, with both fees and TVL declining, indicating reduced demand despite a recent price surge.
Layer-2 networks are experiencing rapid growth, providing support to Ethereum even as base layer usage falters and traders adopt a cautious stance.
Ether (ETH) surged to a three-week peak near $3,400 on Tuesday following disappointing US job data, which solidified expectations for a potentially less stringent US monetary policy sooner than anticipated.
Despite a weekly gain of 11.2%, traders remain concerned that the sluggish activity on the Ethereum network and limited demand for bullish leverage may restrict short-term gains.
Data from Nansen indicates that Ethereum’s 30-day network fees plummeted by 62%, significantly more than the roughly 22% decline observed for Tron, Solana, and HyperEVM during the same period.
However, certain activities were notable: transactions on Base increased by 108%, while Polygon saw an 81% rise, indicating persistent momentum within Ethereum’s expanding layer-2 ecosystem.
The Ethereum Fusaka upgrade on December 3 introduced updates aimed at enhancing rollup efficiency, which may have played a role in the lower network fees seen throughout the month.
On Tuesday, the annualized funding rate for ETH perpetual futures was 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 reflect capital costs; values exceeding that range usually denote stronger bullish positioning.
Traders became more defensive after the US Bureau of Labor Statistics reported 1.85 million layoffs in October, the highest since 2023. Markets are now anticipating a 0.25% interest rate cut by the US Federal Reserve on Wednesday, with focus shifting to comments from Fed Chair Jerome Powell after the Committee meeting.
Ethereum’s layer-2 growth offsets base layer fee declines
Despite the recent upward momentum, Ether is still trading 32% below its all-time high of $4,597 from August. To evaluate whether demand for the Ethereum network is genuinely waning, it’s beneficial to assess the effect on decentralized applications (DApps).
Volumes on Ethereum-based decentralized exchanges declined to $13.4 billion over seven days, down from $23.6 billion four weeks ago. Similarly, revenues of decentralized applications dropped to a five-month low of $12.3 million during this timeframe. Overall, demand for Ethereum’s base layer processing has been decreasing since it reached its peak in late August.
Several of Ethereum’s top DApps experienced a significant decline in total value locked (TVL), including Pendle, Athena, Morpho, and Spark. The overall TVL on the Ethereum base layer slipped to $76 billion from $100 billion two months prior. Nevertheless, Ethereum maintains its dominance with a 68% market share, while its closest competitor, Solana, holds less than 10%.
Supporters of Ether argue that the network’s strong incentives for layer-2 scaling provide a more sustainable mechanism compared to the heavier burdens and centralized coordination needed by rival blockchains. Ethereum is well-positioned to capture a considerable portion of future growth in decentralized finance (DeFi).
Related: US Treasurys lead tokenization wave as CoinShares predicts 2026 growth
US Securities and Exchange Commission’s Paul Atkins reportedly mentioned in a FOX Business interview that the tokenization of the US market could happen within “a couple of years,” noting that blockchain provides “huge benefits” such as predictability and transparency. He urged the US to “embrace this new technology, bringing it onshore to operate under American regulations.”
While Ethereum’s base layer fees have significantly decreased along with the drop in TVL, activity within the layer-2 ecosystem is still on the rise. Currently, both on-chain and derivatives data show no substantial weaknesses in ETH price dynamics.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision. While we strive to provide accurate and timely information, Cointelegraph does not guarantee the accuracy, completeness, or reliability of any information in this article. This article may contain forward-looking statements that are subject to risks and uncertainties. Cointelegraph will not be liable for any loss or damage arising from your reliance on this information.
