Ethereum founder Vitalik Buterin said the blockchain’s long-standing approach to scaling through layer-2 networks needs a rethink, as Ethereum’s core network grows faster than expected and many secondary chains struggle to meet earlier goals.
In a detailed post, Buterin said two developments have weakened the original case for treating layer-2 networks, or L2s, as extensions of Ethereum itself.
First, progress by L2s toward full decentralisation and security has been “far slower and more difficult” than expected. Second, Ethereum’s main network is now scaling directly, with transaction fees falling sharply and major increases in capacity planned from 2026 onward.
Together, those shifts mean the original vision for L2s “no longer makes sense,” Buterin said, calling for a new framework to define their role in the ecosystem.
From ‘Ethereum Shards’ to Independent Chains
Ethereum’s original roadmap imagined L2s as “branded shards” — tightly integrated networks that would inherit Ethereum’s security and censorship resistance while dramatically increasing transaction capacity.
But that vision has not materialised.
Some L2 developers have openly said they may never move beyond partial decentralisation, citing technical limits or regulatory demands that require retaining control. While that approach may suit certain users, Buterin said it does not align with the goal of scaling Ethereum itself.
“If you are doing this, then you are not scaling Ethereum in the sense originally intended,” he wrote.
Crucially, Buterin argued this is no longer a problem. Ethereum’s base layer is now expanding on its own, reducing reliance on L2s to deliver growth.
Ethereum’s Base Layer Gains Momentum
Rising capacity on the main network, combined with low fees, has weakened the argument that L2s must serve as near-identical replicas of Ethereum. Instead, Buterin said, L2s should be viewed as a broad spectrum — ranging from chains deeply secured by Ethereum to more independent systems with looser connections.
Users, he added, should decide how much trust or integration they require, rather than assuming all L2s offer the same guarantees.
What L2 Developers Should Focus On Now
Buterin urged L2 projects to define their value beyond simple scaling.
Possible directions include specialised features such as privacy tools, ultra-fast transaction processing, non-financial applications like identity or social platforms, and systems designed for workloads that even an expanded Ethereum mainnet cannot efficiently handle.
For L2s that rely on Ethereum-issued assets like ether, Buterin said a minimum level of security integration remains essential. Beyond that, flexibility — not uniformity — should be the goal.
A Push for Stronger Native Integration
On Ethereum’s side, Buterin said he has grown more confident in a proposal known as a “native rollup precompile” — a built-in feature that would allow Ethereum itself to verify advanced cryptographic proofs used by L2s.
Such a tool, he said, would reduce reliance on external security committees, improve trustless interoperability, and make it easier for L2s to build safely while adding unique features.
If flaws emerge, Ethereum would take responsibility for fixing them through network upgrades, bringing trust in the system.
Clear Guarantees, Not Perfect Uniformity
Buterin acknowledged that a more open approach will inevitably lead to some L2s being less secure or more centralised than others. That, he said, is unavoidable in a permissionless ecosystem.
“Our job,” Buterin wrote, “should be to build the strongest Ethereum that we can.”
After a brief recovery yesterday, the crypto market has turned red again.
On Monday, prices moved higher after comments from US President Donald Trump, who said he supports crypto and believes the US must lead in digital assets or risk falling behind China. That statement helped lift market sentiment for a few hours.
But the bounce did not last.
Crypto Market Slips Back Into the Red
At the time of writing, the total crypto market value has fallen 3.95% in the last 24 hours, dropping to $2.62 trillion.
Market sentiment remains weak
The Fear & Greed Index is at 17, showing extreme fear
Most major coins are still down sharply over the past week
Bitcoin, Ethereum and XRP are all trading lower again, along with most large altcoins.
Bitcoin Is Driving the Decline
Bitcoin continues to lead the market lower.
Bitcoin dominance is near 59%
This means the entire market is closely following Bitcoin’s price moves
When Bitcoin weakens, most other coins fall with it
Bitcoin is down more than 11% over the past seven days, keeping pressure on the broader market. Over $55 million worth of long positions were wiped out in just two hours as prices suddenly dropped.
The selloff came despite positive news around the U.S. government shutdown. BTC is currently down by more than 4%.
Ethereum Is Making Things Worse
Ethereum has fallen even harder than Bitcoin.
Ethereum is down more than 22% in the last week
This sharp drop has hurt confidence across the altcoin market
Many traders remain bearish, with little buying interest visible
Because Ethereum has such a large market value, its decline has added to the overall market losses.
Market Is Ignoring Stocks and Gold
Crypto is currently moving on its own, not in line with traditional markets.
Correlation with the S&P 500 is low
Correlation with gold is negative
This shows crypto is being driven mainly by internal fear and selling pressure
What Happens Next?
The market is at a critical level.
Holding above $2.59 trillion in total market value is important
A break below this level could lead to another sharp drop
Traders are watching US Federal Reserve signals and ETF fund flows for direction
Despite supportive comments from political leaders, crypto prices are falling again due to:
Continued Bitcoin weakness
Heavy losses in Ethereum
Extreme fear among investors
Lack of strong buying demand
Until Bitcoin stabilizes and sentiment improves, the market is likely to remain volatile.
The rejection of $3000 has pushed the Ethereum (ETH) price into a strong bearish trajectory. The price is failing to secure an important range of around $2300, which has become a major resistance to break. Meanwhile, the bulls have been defending the pivotal support at $2,150, keeping the bullish possibilities alive. This may point towards an upcoming trend reversal, but a popular analyst, Ali, suggests the bottom has not been reached yet.
Large Holders Remain in Disbelief
The big players seem to be not confident in the current price rebound, as they have been distributing instead of accumulating. The data from Glassnode shows that the Ethereum whales have been steadily reducing their holdings, possibly relocating them to other tokens.
The declining bars are the number of wallets holding more than 10,000, which has declined from 1,262 to 1,120. This validates the claim of a possible supply rotation, as they are not aggressively adding or holding at current levels. This points towards a weakening of upside momentum as buying pressure fades off. This may not follow a sudden crash but rather keep the price consolidated within a tight range.
Ethereum is Yet to Reach the Bottom
A better way to determine whether the ETH price is undervalued or overvalued is to analyse the MVRV values. The chart below shows the Ethereum MVRV ratio and how it behaves at the extreme levels over time. Historically, when ETH’s MVRV moves into the red zone above ~3.2, it has marked overheated conditions and major tops, where profit-taking tends to kick in. On the flip side, when MVRV drops toward the green zone around 0.8–1.0, it has often lined up with cycle bottoms, signaling that ETH is undervalued and long-term accumulation starts.
Right now, MVRV is sitting closer to the lower band, not in extreme greed territory. Historically, the Ethereum price bottoms when the MVRV ratio drops below 0.8. Currently, the ratio sits at 0.96, which suggests the typical bottom conditions haven’t fully formed yet.
ETH Price May Plunge Below $2000
The second-largest token has been facing strong upward pressure over the past few days; still, the support at $2000 was held tight. However, the data revealed by the MVRV pricing bands suggests the ETH price may find its bottom below $2000. MVRV pricing bands are used to map out where ETH tends to be undervalued, fairly valued, or overheated based on on-chain data rather than pure price action.
Historically, when ETH trades near the lower blue/green bands (0.8–1.0 MVRV), it has marked strong accumulation zones and cycle lows. On the other hand, moves towards the yellow and red bands (2.4–3.2 MVRV) have aligned with market tops, where price becomes stretched and profit-taking increases. Right now, ETH is trading above the lower bands but well below the red zone, suggesting it’s no longer deeply undervalued, yet still far from euphoric territory. They hint that Ethereum has room to explore lower levels, and based on this model, a cycle bottom could form below $1,959.
Wrapping it Up
Ethereum has long been viewed as one of the more stable assets in the crypto market, yet even the strongest ETH bulls are now deep in the red. BitMine, led by Tom Lee, is currently sitting on an estimated loss of nearly $6.8 billion. Meanwhile, prominent crypto whale Garrett Jin has faced losses of around $770 million, including a $195 million ETH long liquidation. In another major hit, Jack Yi, founder of Capital Inc., has reportedly lost close to $680 million.
These losses reflect the broader market environment, where sentiment remains firmly fearful amid extreme volatility across major cryptocurrencies, including Bitcoin and Ethereum. At the same time, buying pressure remains negligible, keeping the probability of a near-term reversal low. Given the current structure, traders may prefer to stay cautious until market conditions stabilize and bulls show clear intent. A sustained move above $3,500 would be required to confirm that ETH is breaking out of bearish influence and regaining upside momentum. Until then, downside risk remains firmly in play.
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The crypto market has turned green over the last 24 hours, offering some relief after a sharp sell-off earlier this week. Total market value has climbed back to around $2.66 trillion, while sentiment remains careful, with the Fear and Greed Index still deep in “extreme fear” territory.
Bitcoin Finds Support Above $75,000
Bitcoin is trading near $78,700, staying above the $75,000 level, which many analysts see as a weekly support. This zone was tested recently, and so far, buyers have managed to defend it.
On the weekly chart, Bitcoin has slipped below both the 20-week and 50-week moving averages, which is typically a bearish signal. However, this does not automatically mean a long-term bear market. It can also happen after a heavy correction.
One possible scenario is that $75,000 becomes the bottom, with Bitcoin holding the April 2025 low and forming a higher low. If that happens, the broader uptrend of higher highs and higher lows would remain intact, and the recent drop would be seen as a pullback rather than a trend break.
For a stronger bullish signal, Bitcoin would need to reclaim and close above the 50-week moving average, currently near $100,400. A clean weekly close above that level would suggest momentum has shifted back in favor of buyers.
Ethereum Holds Near Important Levels
Ethereum has rebounded to around $2,370, after recently trading near levels that some analysts had flagged months in advance as potential support. Activity on the Ethereum network is reportedly picking up, with increased on-chain usage as traditional financial players continue building infrastructure.
While Ethereum is still down significantly from recent highs, the current bounce has raised hopes that a short-term bottom may be forming if prices can hold above the $2,300–$2,400 zone.
XRP Shows Strong Support
XRP is trading around $1.64, with strong demand seen between $1.60 and $1.65. This area has been tested multiple times, and buyers continue to step in, suggesting a solid base is forming.
If this support holds, analysts say XRP could attempt a move back toward $2.00, with $3.00 or higher possible over time if overall market conditions improve.
What’s Driving the Market Mood?
Recent selling pressure was fueled by ETF outflows, signaling institutional investors were reducing exposure. A hotter-than-expected inflation report and uncertainty around US monetary policy also weighed on risk assets.
However, some market watchers believe the worst may be over. Veteran strategist Tom Lee has said crypto may have just bottomed, pointing to a rare alignment of time and price targets, along with rising activity on Ethereum.
Ethereum (ETH) entered the week under heavy pressure, falling nearly 8% today and slipping decisively below the $2300 level amid a broader crypto market selloff. The move unfolded quickly, with downside momentum accelerating as leveraged long positions were forced out and spot demand failed to stabilize prices. While on-chain behaviour shows capital moving toward exchanges rather than into long-term storage alongside the rising macro uncertainty suggest Ethereum price is facing more than a routine pullback, resembling that ETH may be entering a distribution phase.
On-Chain Flows Signal Elevated Distribution Risk
Ethereum’s downside was preceded by a notable shift in on-chain behavior, particularly among large holders. Exchange inflow data shows a sharp and synchronized increase in ETH deposits, a signal often associated with preparation for selling, hedging, or risk reduction. On February 1, inflows into Binance alone surged to roughly 357,000 ETH, marking the exchange’s highest daily inflow since September. At the same time, total inflows across all major exchanges approached 600,000 ETH, one of the largest coordinated spikes seen in recent months.
Such concentrated inflows rarely appear during periods of strong accumulation. Instead, they tend to surface when large holders reposition exposure near key price levels. The timing of this inflow surge just ahead of ETH’s breakdown below $2,300, significantly increased the market’s sensitivity to downside moves. Combined with rising leverage, these inflows reduced the market’s ability to absorb selling pressure, amplifying the liquidation cascade once price began to slide.
Liquidation Pressure Builds as Leverage Unwinds Aggressively
Derivatives data shows Ethereum at the center of the latest liquidation wave. Over the past 24 hours, ETH-related liquidations surged to approximately $280 million, surpassing Bitcoin’s $250 million and reinforcing Ethereum’s role as the primary stress point in the market.
The liquidation heatmap reveals that long positions dominated losses, confirming that bullish leverage had become overcrowded near recent consolidation highs.
Once ETH slipped below short-term support, cascading stop-outs accelerated the move lower, pushing price swiftly through thin liquidity zones. This pattern reflects structural weakness rather than panic selling. When liquidations cluster this tightly, price movements tend to overshoot fair value before stability returns, leaving Ethereum vulnerable to additional volatility in the near term.
Ethereum Price Structure Weakens Below Key Support
Ethereum’s recent breakdown below the support zone of $2500 carries meaningful implications. The loss of the $2300-$2500 support level invalidated the prior consolidation structure and shifted market control firmly toward sellers. Ethereum price is now trading below its short-term moving averages, with momentum indicators pointing lower rather than stabilizing.
The absence of strong buying volume on the way down further suggests that demand remains cautious rather than aggressive. The immediate support sits near $2000, which if breaks a major decline toward $1600 could be seen next.
Is the Worst of the ETH Selloff Already Priced In?
Despite the ongoing selloff, Ethereum’s higher-timeframe structure is beginning to hint at a potential inverse head-and-shoulders formation. The structure formed after ETH’s slide toward the $2100-$2500 zone, where selling momentum started to fade and volume failed to expand on fresh lows. Recent price action suggests a right shoulder may be developing, indicating stabilization rather than going lower.
This reversal scenario gains credibility only if ETH price reclaims the $2500 neckline on strong volume. Until then, the pattern remains conditional, with a loss of $2100 invalidating the setup and restoring downside risk. A period of consolidation or a technical relief bounce cannot be ruled out if ETH holds its current demand zone. Until reclaim levels are decisively broken, the broader outlook stays cautious, with volatility likely to remain elevated.
FAQs
Why Ethereum Is Going Down Today?
Ethereum is dropping due to rising exchange inflows, leveraged long liquidations, and weak buying amid broader crypto market pressure.
How much ETH was liquidated recently?
Over $280 million in ETH long positions were liquidated in the last 24 hours, highlighting market stress and weak support.
Could Ethereum stabilize or reverse soon?
A potential inverse head-and-shoulders pattern suggests stabilization, but ETH must reclaim $2500 on strong volume to confirm.
The crypto market is facing a major sell-off today, with total market value dropping to $2.66 trillion, down more than 6% in the last 24 hours. Bitcoin, Ethereum, XRP and other major cryptocurrencies have all fallen sharply, wiping out nearly $500 billion from the market in just a few days.
The biggest reason behind this fall is global uncertainty around interest rates. Investors turned bearish after news related to a new US Federal Reserve leadership appointment, which raised fears that future monetary policy could stay tighter for longer. When interest rates are expected to remain high, risky assets like crypto usually suffer, as investors move money into safer options.
This macro-driven fear pushed both stock markets and crypto lower at the same time. Over the past week, crypto prices have shown a strong link with US equities, showing how closely digital assets now react to traditional financial markets.
The decline was made much worse by massive liquidations. As prices started falling, leveraged traders were forced out of their positions. Over the last three days, nearly $5 billion worth of leveraged long and short positions were liquidated. When this happens, exchanges automatically sell assets to cover losses, which adds extra selling pressure and accelerates the crash.
Ethereum has been hit particularly hard. Reports of large unrealised losses held by institutional players increased fear around ETH, dragging down the wider altcoin market. As Ethereum weakened, confidence across the market dropped further.
Here’s how major cryptocurrencies were affected:
Bitcoin fell around 13%, losing nearly $265 billion in market value.
Ethereum dropped about 25%, erasing roughly $91 billion.
XRP declined close to 22%, wiping out around $24 billion.
Solana crashed more than 23%, losing about $16 billion.
Market sentiment has turned extremely bearish. The Fear and Greed Index has slipped to 18, a level classified as Extreme Fear. Many technical indicators now show the market is oversold, meaning prices may have fallen too fast in a short time.
Looking ahead, the short-term outlook depends on whether Bitcoin can hold the $77,000 support level. If that breaks, further downside is possible. Investors are also closely watching upcoming signals from the US Federal Reserve, which could determine whether markets stabilise or see another wave of selling.
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