Deeply embroiled in internal and external troubles, is it feasible for Ethereum to maintain a neutral stance?

Authored by: Oluwapelumi Adejumo

Translated by: Saoirse, Foresight News

As Ethereum's native token ETH enters a mid-term downtrend, overall market sentiment has sharply declined. Data from blockchain analytics platform Santiment shows that discussions about ETH across the network have continued to rise in May, but the public opinion is generally filled with negative sentiment, with investors worried that the price will further decline.

Ethereum market sentiment (Data source: Santiment)

Analysts indicate that multiple bearish factors have erupted simultaneously, dragging down the market: weak spot prices, continuous outflows of ETF funds, key personnel leaving the Ethereum Foundation, longstanding community supporters publicly questioning, while competitors like Hyperliquid, Zcash, Solana, and others in the same track continue to strengthen.

CryptoQuant’s comprehensive market data also confirms that institutional investment enthusiasm has significantly cooled down. Currently, ETH price approaches the critical support level of $2,000, with both spot market and fundamental indicators showing clear signs of weakness.

Ethereum’s relative performance compared to the broader market is deteriorating, with ETH to Bitcoin exchange rate dropping to about 0.02758, hitting a ten-month low, indicating that ETH’s price action in this cycle is far weaker than Bitcoin’s. Spot investors continue to reduce holdings, market liquidity is shrinking, and large institutions have mostly ceased buying.

Continuous spot selling, Ethereum lacks effective buy support

Over the past two quarters, institutional holdings have been shrinking steadily. In October 2025, institutional holdings once exceeded 7 million ETH, but now have fallen back to around 5.5 million. During the prolonged price decline, major investment institutions have been trimming their core positions.

The compliant ETF market is also under pressure. Currently, the total assets under management of Ethereum ETFs are about $12.14 billion, down 23% from the January peak. Data from SoSoValue shows that May’s market trend was severe, with ETF funds experiencing two consecutive weeks of net outflows, totaling about $470 million, marking one of the most intense capital escapes of the year.

Ethereum ETF weekly capital outflows (Data source: SoSoValue)

Coinbase’s premium index has remained in negative territory throughout, reflecting that US institutional investors have no appetite for spot purchases. As institutional holdings decrease, ETH market liquidity also tightens. Since February 2026, the average daily trading volume of institutions has continued to decline, well below the one-year average, with recent daily trading scales only maintaining between $17 million and $42 million.

Market bottom-fishing sentiment is waning, spot trading activity is sluggish, and negative news can easily trigger sharp price fluctuations.

Options market hedging heats up, with traders still holding long positions

While spot selling pressure intensifies, the derivatives market shows huge divergence on future trends, with industry opinions split on whether ETH is entering a long-term downtrend or about to rebound.

Professional traders are buying put options to hedge risks, while perpetual contracts still hold large long positions, with starkly contrasting attitudes. Data from Block Scholes shows that over a seven-day period, ETH’s 25-delta risk reversal deviation is close to -7%, indicating traders are willing to pay premiums to buy puts to hedge against downside risk.

Deribit exchange data shows that total open interest in put options at strike prices of $2,000 and $2,100 has surpassed $380 million, making these two price levels the core battleground for short-term institutional speculation.

Ethereum options trader positions (Source: Deribit)

Market interpretation: The large-scale deployment of put options suggests that the market generally expects continued weakness. The price has already broken below the $2,100 support level, and risk appetite continues to decline. Without spot buying support, the market can only rely on hedging operations to manage risk.

Perpetual contract signals are more complex. CryptoQuant statistics show that Ethereum contract funding rates remain stably positive, with the rate reaching 0.0082 on May 21. Despite declines in market cap, institutional holdings, and spot trading volume, speculative bullish sentiment has not completely dissipated.

Ethereum funding rate (Source: CryptoQuant)

The conflicting long and short positions make the market highly uncertain. If spot buying suddenly rebounds, a short squeeze could trigger a rebound; but if the price falls below the $2,000 support, large open positions could lead to chain reactions of liquidations, intensifying volatility.

Key personnel leaving, increasing controversy over Ethereum’s value

While the price performance remains poor, the Ethereum Foundation, a Swiss nonprofit responsible for core development, has experienced large-scale senior personnel departures.

Senior developers Carl Beek and Julian Ma have officially resigned, causing internal upheaval. Carl Beek, who has been involved for seven years, was mainly responsible for the Beacon Chain design; Julian Ma led the development of the lab’s incentive framework.

Since February, at least nine senior staff have left or stepped back from core roles, with five leaving just in May, including former co-CEO Tomasz Stańczak, co-chair Josh Stark, protocol developer Trent Van Epps, protocol team leader Barnabé Monnot, and Tim Beiko. Senior researcher Alex Stokes is also on a three-month leave. During this prolonged downturn, core technical team members have shrunk, leading to gaps in technical leadership.

Industry analysts believe that the trigger for this personnel shake-up was the publication of the Foundation’s strategic document in mid-March. This 38-page document established four core principles: resistance to censorship, open-source deployment, privacy protection, and underlying network security.

The document clearly states that the Foundation positions itself as an ecosystem guardian rather than a commercial operator. Its main responsibilities are to maintain network neutrality, not to increase token prices, boost investor returns, or promote commercial expansion.

As other public chains continue to seize market share, the Foundation’s commitment to a neutral development philosophy makes it increasingly difficult to gain market recognition. Tommy Shaughnessy, co-founder of venture capital firm Delphi Ventures, said that the negative impact of personnel loss far exceeds appearances; after reform-minded members leave, it becomes difficult for internal dissenting voices to emerge.

Rising calls for reform, neutral development mode faces severe test

Many former core members believe the Foundation’s efforts toward commercialization are insufficient and are calling for governance restructuring. Dankrad Feist, a well-known researcher who left the Foundation last year to join emerging public chain projects, publicly proposed establishing a new independent organization to ensure the network’s economic competitiveness.

He suggests that the new organization should have an initial capital of at least $1 billion, partly funded by staking yields. This entity would be directly accountable to token holders, with the core mission of expanding ETH’s commercial applications and increasing its market value.

Dankrad Feist pointed out that currently, the Foundation holds less than 0.1% of the total circulating supply of tokens, unable to earn staking rewards or on-chain transaction fees, leaving the ecosystem without a professional institution capable of actively promoting the token in capital markets.

Bankless co-founder Ryan Sean Adams agreed with this view, stating that Ethereum’s development cannot rely solely on the Foundation. The ecosystem needs well-funded, competitive professional institutions focused on improving capital efficiency, communicating development value externally, and implementing commercial projects—functions that are outside the Foundation’s scope.

Reform proposals across sectors do not call for abolishing the existing Foundation but advocate for a dual-organization collaboration model: one upholding original principles, safeguarding network neutrality, and building public infrastructure; the other focusing on token promotion and competing for institutional capital.

Bullish investors believe that the market overinterprets short-term fluctuations, and personnel changes are just normal team succession. Ryan Berckmans, an investor, said that talent mobility is a normal process for a stable development team. Ethereum has successfully navigated regulatory challenges, leadership changes, and major technological upgrades like the Merge and Blob transactions, with on-chain assets remaining industry-leading. Global enterprises are continuously deploying stablecoins and asset tokenization, providing long-term support for network development.

Major institutional holders remain optimistic. Thomas Lee, chairman of the publicly listed company BitMine, which holds the largest ETH position, believes that current market panic is just a normal correction within the cycle. The company holds 5.2 million ETH, with assets worth over a billion dollars staked.

BitMine key metrics (Source: BitMine Tracker)

Thomas Lee stated that blockchain is the underlying infrastructure for AI-driven business systems and institutional financial settlements. Ethereum, with its mature security system, ample market liquidity, and broad institutional recognition, still maintains irreplaceable industry advantages.

How can Ethereum recover from negative sentiment and re-enter an upward trajectory?

Industry insiders believe that Ethereum’s future trend depends on whether its technical roadmap and business barriers can be converted into attractive investment logic. Galaxy Digital, an investment firm, said that to stop the outflow of funds, Ethereum must steadily implement operational plans.

The immediate priority is to successfully launch the Glamsterdam upgrade, steadily advance the Hegotá version iteration, clarify internal responsibilities within the Foundation, and focus resources on core commercial tracks. Key areas include high-value decentralized finance, institutional asset issuance, real-world asset tokenization, stablecoin settlement, and privacy financial infrastructure. Ethereum’s neutrality and security will be central advantages in these sectors.

At the same time, Ethereum needs to accelerate deployment in next-generation industry hotspots, including blockchain scalability solutions, on-chain privacy, post-quantum security, and native AI economic systems. These technical frameworks are already included in open-source development roadmaps. The biggest current challenge is coordinating the development of commercial entities and institutional resources.

While the Foundation’s strategic guidelines clearly define underlying technology development principles, they lack a clear token value growth logic and do not have dedicated operational bodies to counter competitive threats.

This price decline is no longer just a simple market correction but a deep test: whether the decentralized system can reasonably divide commercial functions while maintaining stable operation and completing institutional role adjustments.

If the ecosystem can leverage personnel changes to clarify responsibilities and turn technological plans into clear investment value, this downturn could become an opportunity to optimize governance models. Conversely, if adjustments are not made, ongoing weakness in spot markets, frequent personnel losses, and changing track dynamics will lead the market to doubt whether the Ethereum network’s strength can support token value stability.