Ethereum's "Landslide Dam" Moment: Fundamentals Hit New Highs, Why Is ETH Price Falling?

Entering 2026, Ethereum presents a contradictory landscape: key on-chain metrics—whether staking size, total value locked (TVL), or ecosystem activity—all hit record highs, yet the price of its native token ETH significantly “decouples” from these fundamentals. Market observers liken this unique phenomenon to a “damming lake” moment: upstream, massive technological dividends and asset values converge, but downstream value release channels seem not fully open. This article will analyze the multi-layered logic behind this phenomenon and provide the latest market insights based on Gate market data.

Hundred-billion Staking and Vitalik’s “Key to Unlock”: Native DVT Against Centralization Risks

Ethereum’s staking ecosystem is undoubtedly one of its most solid foundations. As of January 23, 2026, data shows over 36 million ETH staked, with a total value approaching $120 billion, accounting for about 30% of its circulating supply. This clearly indicates market confidence in Ethereum’s long-term security.

However, beneath the prosperity lurks concerns. Currently, the top five liquidity staking providers hold nearly 48% of the market share, and this high degree of centralization raises community worries about potential single points of failure and censorship risks. This is the core background behind Vitalik Buterin’s recent proposal of “Native Distributed Validator Technology (DVT).” The plan aims to fundamentally reduce the operational barriers and failure risks of validator nodes through protocol-level multi-private key management and threshold signature techniques, thereby enhancing network decentralization and censorship resistance. Although the proposal is still under discussion, it points to an important future direction for Ethereum: moving beyond efficiency pursuit to defend its core values of trustlessness and decentralization through technological innovation.

TVL Surpasses $300 Billion: Ethereum’s “Liquidity Black Hole” Effect

Another key data point supporting Ethereum’s fundamentals is its leap in TVL. Early 2026, the total value locked in on-chain applications on Ethereum broke through the historic $300 billion mark. This is not just a numerical jump but also signifies the maturity and diversification of the Ethereum ecosystem.

A deeper analysis of the composition shows that stablecoins dominate, accounting for about 58% of Ethereum’s TVL. Mainstream stablecoins like USDC, USDT, and emerging yield-bearing stablecoins like Ethena have jointly built a deep “liquidity moat” on Ethereum. They are not only transaction media but also underpin over $19 billion in DeFi loans as collateral. With regulatory frameworks like the “Genius Act” becoming clearer, traditional finance is expected to accelerate adoption of compliant stablecoins. As the primary settlement layer, Ethereum’s “liquidity black hole” effect is likely to further strengthen.

Noise Beneath Prosperity: Surge in Transaction Volume, L2 Diversification, and Value Capture Challenges

Despite impressive fundamentals, some recent on-chain activity details are worth noting. Ethereum’s 7-day average transaction count recently hit a record high of 2.49 million transactions, while average Gas fees remain at historic lows. Some security researchers suggest that a significant portion of this incremental activity may come from low-value “address poisoning” and spam transactions, which somewhat exaggerate genuine user demand growth and weaken market confidence in viewing transaction volume as a direct catalyst for ETH price.

Additionally, Ethereum’s ecosystem success has brought new challenges. To foster Layer 2 expansion, Ethereum mainnet proactively reduced data submission costs for L2s in 2025. While this strategy greatly promoted the prosperity of Arbitrum, Optimism, and other L2s, it also led to a decrease in mainnet revenue. According to Growthepie data estimates, in 2025, the fees paid by L2 ecosystems to the mainnet dropped significantly, prompting the community to reassess ETH’s capacity as a value-capturing asset. If mainnet revenue growth remains sluggish relative to ecosystem expansion, it could impact the effectiveness of its deflationary model.

Latest Data and Market Insights Based on Gate Market Data

According to Gate market data, as of January 23, 2026, Ethereum (ETH) is priced at $2,960.35. Its market capitalization is $357.57 billion, accounting for approximately 11.26% of the entire cryptocurrency market. In the past 24 hours, ETH price changed by -2.09%, and over the past 7 days, it declined by -10.59%.

Historical data shows ETH’s all-time high was $4,946.05. Based on Gate’s market analysis model, the predicted average price for 2026 is around $2,960.67, with a fluctuation range between $1,865.22 and $4,381.79. Looking long-term to 2031, the model indicates a possibility for ETH to reach $5,319.74.

“Valuation Inversion”: An Undervalued “Digital Oil Field”?

Currently, ETH faces an intriguing market paradox: “valuation inversion.” Ethereum carries about 59% of the entire crypto market’s TVL, yet its market cap accounts for only about 14% of the total crypto market capitalization. This significant disparity may imply that the market is currently pricing its on-chain applications (such as DeFi, stablecoins, RWA) but has not fully valued its ultimate worth as a foundational settlement network and “digital property rights.”

As real-world assets (RWA) go on-chain, institutional adoption deepens, and Ethereum’s own tech stack continues to evolve, its role as a global open finance and asset settlement infrastructure will become more solidified. This “value dam” built by technology, community, and capital, once the market completes a cognitive shift or finds a more efficient value capture mechanism, could unleash energy that drives a revaluation.

Conclusion

Ethereum’s “damming lake” moment is essentially a pain point in its transition from rapid growth to high-quality, sustainable development. On one hand, Vitalik and the community are actively addressing long-term risks like staking centralization through DVT and other tech solutions; on the other hand, the continued prosperity of TVL and the ecosystem demonstrates its irreplaceable network effects. Although short-term prices are suppressed by trading noise, L2 value sharding, macro market sentiment, and other factors, the depth and breadth of its fundamentals continue to strengthen.

For investors focused on Ethereum, the current stage may be more about its long-term property rights as a “digital oil field” rather than short-term price fluctuations. As Gate market data reveals, the cryptocurrency market is always in flux. Making informed decisions requires a deep understanding of underlying logic and independent research.