Ethereum went through a cratering third quarter of 2025, Ethereum Price collapses ethereum market dominance crashes. The unexpected drop canceled out all the progress made in 2024. It further sparked a wider crash across the crypto landscape. Several factors contributed to Ethereum's struggles, including the rise of Layer 2 solutions, decreasing activity on the Ethereum mainnet, and increased competition from other cryptocurrencies.
Dramatic Price Decline and Market Share Loss
Indeed during the time period Q1 2025 Ethereum prices crashed by 45.3%! The collapse in prices led to a massive drop in overall market capitalization. It fell by 18.6% from that mid-January high, falling from $3.8 trillion down to $2.8 trillion. Ethereum’s share of the crypto market fell to a low of 7.9%, its worst showing since late 2019.
Ethereum’s market share has been cratering. This trend was exacerbated when legitimate alternatives, such as Bitcoin and Solana, began to gain traction. These rivals made inroads as Ethereum faltered, eating away at its share of the market as the top cryptocurrency. The price drop was hardly unexpected. It was in sync with the new growing hype of Layer 2 solutions that improve scalability and reduce transaction fees.
Ethereum’s average daily trading volume took a big hit too with volumes declining 27.3% to $146 billion. This significant decrease in trading activity was indicative of the much broader decline seen in investor confidence and interest in Ethereum that quarter. Ethereum would suffer a great reality of losing market share. This was fueled by the combination of declining prices, decreased trading activity, and increased competitive pressures.
Impact on DeFi Sector
The challenges with Ethereum soon gripped the decentralized finance (DeFi) industry where it had for so long been the primary powerhouse. Ethereum’s dominance over the various DeFi market segments fell to 56.6% at the end of the quarter. The dominance didn’t last long as competitors like Solana and other DeFi platforms overtook its leap to glory. Investor confidence was severely battered as well during this period.
The price decline of Ethereum caused a significant drop in the total value locked (TVL) within the DeFi sector. As the value of Ethereum holdings decreased, investors withdrew their assets, leading to a contraction in the overall DeFi market. The growing disillusionment among investors towards the speculative meme coin craze has sharpened the effects on DeFi specifically. In fact, these meme coins are some of the most popular traded on the Ethereum network.
Contributing Factors and Market Impact
Here are a few reasons that helped lead to QE’s disappointing performance during Q1 2025. The shift towards Layer 2 solutions, while intended to improve scalability, drew activity away from the Ethereum mainnet, impacting its transaction volume and overall usage. Moreover, the emergence of rival cryptocurrencies and DeFi platforms offered investors new alternatives, adding to Ethereum’s market share dilution.
Ethereum’s price drop played a major role in the overall bear market in the digital currency space. This story played out over the first quarter of ’25. Ethereum, the second most successful cryptocurrency, is in real trouble. This chaos has spilled over to the price performance of other digital assets and dampened overall investor sentiment. The convergence of all these factors made for a particularly hostile environment for Ethereum and the cryptocurrency market as a whole.
