The cryptocurrency exchange Coinbase has released its latest monthly market report, offering a bullish outlook on Ethereum (ETH) despite its underwhelming performance in the first half of 2025. While ETH has lagged behind Bitcoin and some high-performance altcoins year-to-date, Coinbase analysts believe the fundamental and structural trends still favor Ethereum outperforming the broader crypto market in the coming months.
The report emphasizes that Ethereum's unique positioning—bridging the narratives of value storage and technical utility—continues to drive long-term demand. With key developments on the horizon, including growing Layer 2 (L2) adoption, sustained dominance in stablecoin issuance, and the anticipated approval of a spot Ethereum ETF, the foundation for a potential price rebound appears increasingly solid.
👉 Discover how Ethereum’s ecosystem is evolving to support long-term growth
Ethereum’s Dual Narrative: Value Storage Meets Technical Utility
Unlike many altcoins that rely solely on speculative momentum or narrow use cases, Ethereum benefits from a dual identity in the eyes of investors. On one hand, it's increasingly viewed as a digital store of value, especially as staking yields provide passive income and scarcity dynamics take hold. On the other, it remains the leading platform for decentralized applications (dApps), smart contracts, and on-chain innovation—solidifying its role as the foundational technical token of Web3.
This combination has historically allowed ETH to maintain stronger correlations with Bitcoin during risk-off periods while outperforming during phases of technological expansion. Coinbase notes that this duality is becoming more pronounced post-Proof-of-Stake (PoS) transition, where network security, yield generation, and developer activity coexist seamlessly.
Ethereum Still Dominates Decentralized Exchange Volume
Despite rising competition from high-throughput blockchains like Solana, Ethereum continues to lead in decentralized exchange (DEX) trading volume. While alternative chains have gained traction—Solana’s DEX share grew from just 2% to 21% over the past year—Ethereum remains the dominant liquidity hub.
This resilience is attributed to deep liquidity pools, mature protocols like Uniswap and Curve, and strong user trust. Even as users interact via L2 solutions, most of these platforms are settlement-layer secured by Ethereum, meaning trading activity still indirectly strengthens the core network’s economic gravity.
Ethereum Leads in Stablecoin Issuance
When measured by stablecoin supply, Ethereum is still the undisputed leader. Major stablecoins like USDC, USDT, and DAI are predominantly issued on Ethereum and its Layer 2 networks. What’s more, stablecoin supply growth on Ethereum L2s is outpacing that of competing L1s such as Solana.
This trend suggests that real-world capital is flowing into Ethereum’s scalable ecosystems—not abandoning them. While debates around scalability and gas fees persist, the early data indicates that L2s are successfully addressing these concerns without fragmenting the network’s economic center of gravity.
👉 See how stablecoin trends are shaping Ethereum’s future demand
ETH Staking: A Deflationary Supply Dynamic
One of Ethereum’s most underappreciated economic shifts came with its transition to Proof-of-Stake in 2022. Since then, the collective ETH balance held by validators has consistently exceeded new issuance—effectively creating a deflationary pressure on supply.
This stands in stark contrast to Bitcoin’s Proof-of-Work model, where miners must sell a significant portion of newly mined BTC to cover energy and hardware costs. In Ethereum’s case, staking operations have minimal overhead, allowing validators to hold and compound their rewards indefinitely.
As more ETH becomes locked in staking—over 30% of the total supply—the liquid float available for trading continues to shrink. This structural scarcity could become a powerful catalyst for price appreciation, especially if demand from ETFs or institutional investors increases.
Layer 2 Expansion Fuels Demand for ETH
Layer 2 networks like Arbitrum and Optimism are not just scalability solutions—they’re significant sources of ETH demand. Every transaction on these rollups requires gas fees paid in ETH, creating a direct economic link between user activity and native token utility.
Currently, more than 3.5 million ETH is bridged or locked within the L2 ecosystem. As these platforms grow in users and transaction volume, so does the demand for ETH as both a transactional asset and collateral layer. This expanding utility reinforces Ethereum’s position not just as a base layer, but as the economic engine powering scalable decentralized applications.
Coinbase highlights that this L2-driven demand is often overlooked in price analyses but could play a critical role in future valuation models.
Frequently Asked Questions (FAQ)
Q: Why does Coinbase believe Ethereum can outperform the market in 2025?
A: Coinbase cites Ethereum’s dual role as both a store of value and a technical platform, strong stablecoin and DEX dominance, growing L2 adoption, and the expected approval of a spot ETF as key reasons for its bullish outlook.
Q: How does ETH staking affect price?
A: Staking removes ETH from circulating supply, creating scarcity. With over 30% of ETH staked and minimal sell pressure from validators, this dynamic supports long-term price appreciation.
Q: Will Layer 2 networks reduce Ethereum’s relevance?
A: No—L2s enhance Ethereum’s scalability while relying on its security. They increase ETH usage through gas fees and bridging, ultimately strengthening the network’s utility and demand.
Q: Is the spot Ethereum ETF really inevitable?
A: Coinbase believes so. Following the approval of Bitcoin spot ETFs and increasing regulatory clarity, a spot ETH ETF is seen as a matter of timing rather than possibility.
Q: How does Ethereum compare to Solana in stablecoin adoption?
A: Ethereum leads significantly. Not only is more stablecoin supply issued on Ethereum, but growth on its L2s is also outpacing Solana’s overall stablecoin expansion.
Q: Does high L2 activity dilute Ethereum’s value?
A: No. L2 transactions still depend on Ethereum for settlement and security. Increased L2 usage translates into higher demand for ETH through gas fees and cross-chain interactions.
👉 Explore how Layer 2 growth is driving new demand for ETH
Spot Ethereum ETF: A Catalyst on the Horizon
Historically, ETH’s price movements have closely followed Bitcoin’s trends—more so than any other altcoin. However, Coinbase points out that this correlation began to shift after the U.S. approved Bitcoin spot ETFs. The influx of institutional capital via ETF products introduced a new structural demand layer that decoupled BTC from broader crypto market swings.
The firm expects a similar inflection point for Ethereum once a spot ETH ETF is approved. Such a product would open the door to traditional finance (TradFi) investors who are restricted from holding direct crypto positions but can access regulated ETFs. Given Ethereum’s established use cases and regulatory progress, Coinbase views approval not as if, but when.
This anticipated shift could redefine ETH’s market dynamics—potentially leading to stronger price momentum, reduced volatility, and broader adoption across pension funds, asset managers, and retail investment platforms.
Final Thoughts
While Ethereum may have started 2025 slowly, the underlying fundamentals tell a compelling story. From staking-driven scarcity and L2 expansion to stablecoin leadership and looming ETF approval, multiple catalysts are aligning to support a strong second half.
Coinbase’s analysis underscores that Ethereum is more than just a smart contract platform—it’s evolving into a core financial infrastructure layer with growing economic moats. For investors focused on sustainable growth rather than short-term hype, ETH remains one of the most strategically positioned assets in the digital economy.
As the ecosystem matures and adoption deepens, those who recognize Ethereum’s dual narrative early may stand to benefit most when market sentiment shifts back in its favor.