Institutions Pull Back from Ethereum, But ETH Remains in Their Wallets
Despite Selling Pressure, Institutional Faith in Ethereum Lingers — For Now
Ethereum, the world’s second-largest cryptocurrency by market cap, is facing one of its most turbulent chapters. Usage on its base layer has plummeted, network fees are at multi-year lows, and even co-founder Vitalik Buterin is advocating for a foundational overhaul. In response, some institutional giants are reducing their Ether (ETH) holdings — but they haven’t walked away entirely.
Ethereum Enters a “Wait and See” Phase
Ethereum’s current landscape is a mix of innovation, concern, and uncertainty. While Layer-2 networks like Arbitrum and Optimism continue to flourish, they are diverting attention and value away from Ethereum’s core network. And investors are taking notice.
Major players such as Galaxy Digital and Paradigm have recently reduced their ETH exposure, signaling growing unease about Ethereum’s ability to retain its lead in a rapidly evolving blockchain world.
“Institutions are not abandoning Ethereum — they’re hedging their bets,” said one analyst. “ETH remains in their portfolios, just with a lighter touch.”
Galaxy and Paradigm Slash ETH Holdings
In April, Galaxy Digital deposited 65,600 ETH (worth $105.5 million) to Binance, reducing its exposure from a February peak of 98,000 ETH to 68,000 ETH, according to Arkham data. Despite this drop, its current holdings are still higher than earlier in the year.
Similarly, Paradigm has moved significant ETH reserves to Anchorage Digital and later to centralized exchanges. Once holding 236,000 ETH in 2019, the firm now retains just 2,873 ETH.
“Institutions bought into Ethereum’s ‘ultra-sound money’ narrative,” said Jayendra Jog, co-founder of Sei Labs. “But declining protocol revenues and weakening tokenomics are forcing a rethink.”
From Deflation to Inflation: Ether’s Supply Concerns
Ethereum’s recent shift back into an inflationary state has further muddied the waters. Post-Merge, ETH became deflationary due to fee-burning mechanics and lower issuance. But that trend reversed in early 2024.
By February 2025, ETH supply had climbed above its Merge-era levels by 186,705 ETH. Fee burns dropped dramatically, with April network fees falling to 2017 levels — a stark indicator of reduced usage.
Vitalik’s Radical Solution: Scrap the EVM?
On April 20, Vitalik Buterin proposed a major change: replacing Ethereum’s virtual machine (EVM) with the RISC-V instruction set. The proposal is seen as a fundamental admission that Ethereum’s existing architecture is hitting its limits.
“This is less evolution and more an acknowledgment of a ceiling,” said Jog. “You don’t suggest ripping out the core unless it’s absolutely necessary.”
Rollups Under Scrutiny, Layer-1 Scaling in Focus
Ethereum’s previous strategy of pushing transactions to rollups — Layer-2 scaling solutions — helped ease congestion but also fragmented the network and reduced fee-burning on the base layer.
In a shift of tone, Tomasz Stańczak, co-executive director at the Ethereum Foundation, announced renewed focus on Layer-1 scalability improvements, marking a pivot back to core network development.
Whales Accumulate While Prices Stay Low
Despite the turbulence, some deep-pocketed investors are buying the dip. Blockchain data shows wallets accumulating tens of millions in ETH, viewing the current price below $2,000 as a potential bargain.
Standard Chartered Bank has cut its 2025 price forecast for ETH from $10,000 to $4,000 — but still sees significant upside.
Ethereum Isn’t Dead — It’s Under Construction
While Ethereum faces undeniable structural challenges, it is still deeply embedded in the crypto economy. Institutions may be reducing exposure, but they’re not exiting completely. The underlying sentiment? Ethereum may not be the favorite right now, but it’s too foundational to fully abandon.
