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Ethereum Foundation Injects $120M into DeFi as Network Activity Declines: A Mixed Picture for Q1 2025

Arslan Butt•Friday, February 14, 2025•2 min read
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In a significant move that signals renewed confidence in Ethereum’s DeFi ecosystem, the Ethereum Foundation has deployed 45,000 ETH (approximately $120 million) across major lending protocols, even as the network faces challenging market conditions and declining staking rates.

Ethereum Foundation Injects $120M into DeFi as Network Activity Declines: A Mixed Picture for Q1 2025
Ethereum price analysis

Foundation Deploys Largest-Ever DeFi Investment: 45,000 ETH Across Major Protocols

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In a strategic pivot from previous ETH selling patterns, the Ethereum Foundation has allocated 45,000 ETH ($120 million) across leading lending platforms:

  • Aave Core: 20,800 ETH ($54.1 million)
  • Aave Prime: 10,000 ETH ($26 million)
  • Spark Protocol: 10,000 ETH ($26 million)
  • Compound: 4,200 ETH ($10.9 million)

Network Metrics Show Concerning Trends: 72% Drop in Fees Despite TVL Growth

Ethereum’s market indicators show a complicated picture even with this vote of confidence. With 21.8 million ETH locked in smart contracts, the network’s TVL (total value locked) has hit its highest level since October 2022. But this higher TVL has not shown up in more robust network activity:

  • Over recent weeks, transaction fees dropped 72%.
  • Month over-month, total transaction volume has dropped 37%.
  • Since January 31, ETH price has dropped 21%. It is now trying to keep levels above $2,800.

Layer-2 Activity Decline:

  • Arbitrum: 44% decrease in transactions
  • Base: 10% decrease in transactions
  • Polygon: 4% decrease in transactions

ETH Staking Participation Records First-Ever Decline Since 2023 Launch

Ethereum’s staking rate has dropped from its late 2024 peak of 29% to 27% in a notable change, the first notable drop since staking became well-known in May 2023. With Lido keeping control in the liquid staking derivative market at 69% market share, 33.5 million ETH still remains staked.

Development Timeline Acceleration: 20 EIPs Planned for April’s Pectra Upgrade

Ethereum developers have agreed to quicken the technical road map of the network in meantime. Consensus emerged at a recent “All Core Devs” meeting to apply future hard forks more quickly. With up to 20 Ethereum Improvement Proposals (EIPs) concentrated on wallet functionality and scaling improvements, the forthcoming Pectra upgrade, set for April, could be Ethereum’s biggest to date.

Market Position: 52.8% DeFi Dominance Amid Growing Competition

Ethereum maintains its market leadership but faces increased competition:

  • Current DeFi market share: 52.8%
  • Nearest competitor (Solana): 8.2%
  • BNB Chain: 3% TVL decline over 30 days

Top Performing Ethereum DApps (30-Day Growth):

  • Royco Protocol
  • CIAN Protocol
  • StakeStone
  • Stargate Finance

2025 Outlook: ETH Price Recovery Hinges on ETF Developments

ETH/USD

Market analysts identify several key factors for potential ETH/USD price recovery above $3,000:

  • SEC decisions on staking integration in spot ETFs
  • Recovery in network fee generation
  • Success of accelerated development timeline
  • Institutional adoption of staking products

The combination of the Foundation’s significant DeFi investment and aggressive development timeline demonstrates strong institutional backing, but declining network activity and staking participation suggest near-term headwinds. The success of upcoming technical upgrades and regulatory developments, particularly around ETF staking integration, may prove crucial for market performance through 2025.

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ABOUT THE AUTHOR See More
Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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