Ethereum continues to lag behind Bitcoin, and one of the ecosystem’s veterans believes it’s not about market cycles or coordination problems. In his opinion, the reason lies in specific mistakes by the Ethereum Foundation.
Reed joined Ethereum back in the ICO days and still works within the ecosystem. He sharply criticized the Ethereum Foundation and stated that the ETH drop against Bitcoin by 65% after The Merge is not a coincidence and not just a weak market.
According to him, the foundation accumulated mistakes over the years: sometimes they took too long to make decisions, sometimes they missed the mark with products, and sometimes they simply didn’t do what the market needed. In his analysis, Reed gave specific dates, names, and examples to show that the problem is not abstract but quite concrete.
65% Drop: The Numbers Speak for Themselves
Reed’s main argument is supported by market data. After The Merge, which took place in September 2022, the ETH/BTC ratio peaked at about 0.085.
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Since then, the figure has gradually decreased and by the end of May dropped to about 0.028. This reflects a serious lag of Ethereum behind Bitcoin over the past few years.
Currently, ETH is trading below $2,000. Over the past 12 months, the asset’s price has dropped by about 21%, further highlighting Ethereum’s weak performance compared to BTC.
ETH to Bitcoin ratio. Source: Longterm Trends
Criticism Not in Theory but in Specific Decisions
Reed disagrees with Bankless co-founder David Hoffman, who previously described the current growth ceiling for Ethereum as a kind of fair cap for the asset.
According to Reed, the problem is not in abstract market mechanisms or insufficient community coordination. He believes that Ethereum fell short of investor expectations due to very specific decisions and missed opportunities, behind which are real people and certain events.
Reed himself specializes in credit products and real-world asset (RWA) tokenization. In his career, he has worked at Figure and Securitize. He also emphasizes that he still holds ETH and maintains a long-term bet on Ethereum.
Problems With Positioning and Staking
According to Reed, after The Merge Ethereum focused on advantages that were not actually important to the market. The main emphasis was on reducing the network’s energy consumption by 99.95%, although, according to the analyst, institutional investors were more interested in yield, developers in transaction finality, and regular users in low fees.
While Ethereum promoted the environmental agenda, Solana focused on network speed. During the same period, the project actively developed its ecosystem and attracted new users.
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Reed also recalled that the transition of Ethereum to Proof-of-Stake had been on the roadmap since 2015, but it took about seven years to implement. During this time, Solana managed to launch the beta version of its mainnet in March 2020 and then quickly develop key products—wallets, decentralized exchanges, and money markets.
He also drew attention to publications by Vitalik Buterin in 2024 and 2025. According to Reed, the founder of Ethereum increasingly discussed digital pluralism and the concept of network states, whereas previously his materials focused on the network’s technical development and the implementation of Casper.
One of the main problems, according to Reed, is the lack of a native staking application even three years after The Merge.
Currently, the official way to participate in staking still requires running a validator and having at least 32 ETH. Therefore, most users prefer third-party solutions like Lido. At the moment, about 24% of all ETH is staked through this protocol, despite regular warnings from developers about centralization risks.
‘We do not pick winners’—Reed considers this position a sign of unwillingness to compete directly.
‘That is usually what organizations say when they just do not want to fight for leadership,’ he said.
Rollups Weakened the Network’s Base Layer
Another complaint from Reed concerns Ethereum’s strategy of focusing on rollup development. In his view, this approach effectively weakened the main network and reduced its revenues.
After the EIP-4844 update launched in March 2024, fees for using blob space plummeted and for most of 2024–2025 remained around 1 wei. This significantly reduced the cost of second-layer solutions but at the same time cut the base layer’s income for Ethereum.
As a result, the network’s revenue from fees dropped significantly. According to Reed, Ethereum’s quarterly income from transaction fees fell by about 95% compared to peak levels at the end of 2021. At that time, the network earned about $4.3 billion in fees in one quarter.
In his opinion, the development of rollups helped scale the ecosystem, but at the same time, some economic activity and revenue gradually moved outside the main Ethereum network.
Ethereum revenue from transaction fees since 2021. Source: Token Terminal
L2 Networks Are Capturing More Value
Reed notes that second-layer solutions not only attracted part of Ethereum’s activity but also started making significant money from it. For example, Arbitrum reported an operating margin of 90–98% for its L2 networks. By mid-2025, Base, launched with support from Coinbase, had accumulated nearly 70% of all profits among rollups.
An additional problem, according to Reed, was the emergence of native tokens for almost every major L2 network. This led to capital within the ecosystem being distributed among many assets instead of concentrating around ETH.
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For comparison, he cites Solana, where all activity is concentrated within a single first-layer network. In this model, fees and economic value are directly reflected in the native SOL token, without additional liquidity fragmentation among numerous projects.
As a result, Reed believes that the future of Ethereum will depend on whether the Ethereum Foundation changes its approach to product development and decision-making speed.
The market itself will answer this question. According to the analyst, it is the dynamics of the ETH/BTC pair in the remainder of the current cycle that will show whether Ethereum has managed to solve its accumulated problems or if the lag behind Bitcoin will continue.
