The Ethereum Foundation has once again dumped ETH. How much longer can the foundation's funds last? Does Ethereum still have a future?

Author: Tina

Editor: Xiao Lu

The Ethereum Foundation has recently sold off ETH again, exacerbating the decline in ETH prices. So, how long can the Ethereum Foundation's funds last? What does the future hold for Ethereum?

1. ETH Price Performance

In this bull market, BTC has surpassed the historical high of the previous bull market, but ETH, as the second-largest cryptocurrency in the world, has yet to break its historical high.

The historical highest price of ETH occurred in November 2021, around $4,800, while in this bull market, the highest price for ETH was only around $4,000 in March this year.

Currently, the price of ETH is around $2,400, down 40% from the high in March. Compared to other altcoins that often see declines of 70%, a 40% drop for ETH is relatively decent.

However, as the pioneer of smart contracts and the second-largest cryptocurrency, the market has placed overly high expectations on Ethereum. Given such price performance, especially the significant gap compared to BTC, ETH's performance is far below people's psychological expectations, which is understandably hard for holders to accept.

2. Continuous Selling by the Ethereum Foundation

In 2024, the Ethereum Foundation has sold ETH at least 6 times, with a sale of up to 35,000 ETH on August 24.

From the records of these sales, it can be seen that after the Ethereum Foundation sells ETH, the price of ETH generally declines, or they have often sold at short-term price peaks, leading some to sarcastically comment that the Ethereum Foundation is quite adept at selling coins.

The Ethereum Foundation (EF), as a non-profit organization, is dedicated to supporting the development of Ethereum and related technologies. Its activities mainly revolve around providing funding and non-financial support for innovative projects within the Ethereum community.

Therefore, the Ethereum Foundation is inherently an organization that continuously spends money. Selling ETH to support the development of the Ethereum ecosystem is actually normal, and it will certainly continue to sell ETH in the future. To maximize benefits, the higher the selling price of ETH, the better.

However, for ETH holders, the Foundation's selling behavior can be interpreted as a lack of confidence in ETH from the project side, shaking the confidence of holders. The selling behavior further stimulates the decline of ETH, and in the context of ETH's continuous price drop, the Foundation's selling is undoubtedly adding insult to injury.

Regarding the Foundation's continuous selling of ETH, some ETH holders have even begun to worry about how long the Foundation's funds can last with such ongoing sales. Once the Foundation sells all its ETH, what will it use to support the development of the Ethereum ecosystem?

On September 5, Ethereum Foundation core researcher Justin Drake responded that the Foundation currently has an annual budget of about $100 million. At current prices, the Foundation's wallet still holds $650 million in ETH, roughly estimating that the Ethereum Foundation's financial reserves can cover 10 years of budget.

3. Continuous Net Outflow of Spot Ethereum ETFs

On July 23, the U.S. Securities and Exchange Commission (SEC) approved the applications for 9 spot Ethereum ETFs, marking an important step for digital assets entering the mainstream financial market in the U.S., with a trading volume exceeding $1 billion on the first day.

After the SEC approved Bitcoin spot ETFs, Bitcoin prices continued to rise for two months, ultimately reaching a historical high of $73,000 in mid-March.

Given this, many ETH holders were filled with anticipation, believing that the approval of spot Ethereum ETFs would replicate the glory of Bitcoin spot ETFs and lead ETH prices to new highs.

However, despite the approval of spot Ethereum ETFs being seen as a monumental positive, ETH prices did not rise as expected, and there has been a continuous net outflow of ETH, with prices continuing to decline.

Of course, objectively speaking, we cannot blame ETH entirely; the entire cryptocurrency market has been in a downtrend in recent months, making it difficult for ETH to stabilize.

4. Lack of Innovation in Ethereum

The poor performance of ETH prices is also related to the lack of strong innovation in Ethereum during this bull market, leading to insufficient market confidence in Ethereum's future.

In the previous two bull markets, Ethereum undoubtedly played a core role as a leader.

Taking the ICO (Initial Coin Offering) bull market as an example, Ethereum opened an unprecedented new era where anyone or any project could easily issue cryptocurrencies and create decentralized applications (DApps) on Ethereum, significantly promoting the popularization and application of blockchain technology and fostering the vigorous development of the entire cryptocurrency ecosystem.

Entering the new round of DeFi bull market, Ethereum once again became the pioneer leading the trend.

DeFi is reshaping the financial industry at an unprecedented speed. Through smart contract technology, DeFi platforms can provide users with financial services that are intermediary-free, highly transparent, and easy to operate, lowering the barriers to financial services and allowing more people to enjoy the convenience of financial technology.

During the DeFi bull market, classic DeFi platforms such as Uniswap, AAVE, Compound, and Synthetix were born, all of which have become important infrastructures in the cryptocurrency industry.

However, in this round of the cryptocurrency bull market, Ethereum lacks industry innovations that can compete with ICOs and DeFi, and its future development is also unclear. As Zhu Su said, the biggest problem with the Ethereum Foundation is its current inability to provide a coherent roadmap and effective leadership for the ecosystem.

5. Trading Volume Diverted to Solana and Layer 2

As the pioneer of smart contracts and a leader in public chains, Ethereum does not hold advantages over other public chains in terms of transaction gas fees and transaction confirmation speed, which has given rise to opportunities for other public chains to emerge.

For example, in the public chain ecosystem, Solana far surpasses Ethereum in both transaction confirmation speed and gas fees, leading many DePIN and AI projects to choose to create on the Solana public chain.

In addition to Layer 1 public chains like Solana diverting trading volume from the Ethereum mainnet, Layer 2 has also taken away some trading volume from the Ethereum mainnet, resulting in a continuous slump in Ethereum mainnet trading volume, with gas fees often dropping below 1 Gwei.

With the continuous net outflow of spot Ethereum ETFs, the Ethereum Foundation's selling, the lack of innovation in the ecosystem, and the absence of a clear development roadmap, the market is filled with concerns about Ethereum's future, and ETH prices have remained stagnant.

In summary, the current market sentiment towards ETH is largely pessimistic. Besides the inherent issues within the Ethereum ecosystem, it is also influenced by the overall market conditions in the cryptocurrency space. Apart from Bitcoin, most altcoins have seen declines far exceeding those of ETH, simply because the market has set overly high expectations for ETH.

Additionally, the Ethereum ecosystem is still worth looking forward to. For example, the Pectra upgrade is the next major milestone for Ethereum, expected to launch in the first quarter of 2025. It will merge the Prague (execution layer) and Electra (consensus layer) updates, and it is likely that hype around the Pectra upgrade will begin in the fourth quarter of this year.