Ethereum Climbs but Faces Challenges Amid Layer 2 Network Shifts
Ethereum (ETH) has seen a 7% increase over the past month, reaching $2,724 as of October 5, 2026. Despite this rise, the cryptocurrency remains 45% below its all-time high of $4,946. Over the past year, Ethereum has dropped about 40%, and this month's gains have only recovered a small portion of that decline.
Ethereum has significantly underperformed Bitcoin (BTC) over the past year. Bitcoin has dropped 30%, currently trading about 32% below its peak of $126,080. In contrast, Ethereum’s decline has been steeper, falling 40% over the same period. This discrepancy indicates that investing in ETH carries more risk but offers less reward. U.S. spot Bitcoin funds hold around $109 billion, while Ethereum funds hold only about $18 billion, highlighting a lack of consistent support for ETH.
Layer 2 networks, which offer lower-cost transaction alternatives, have shifted transaction fees from the main chain to these secondary networks. This affects ETH’s overall demand. A recent incident with Blast, a Layer 2 network, illustrates this issue. The network held around $2.2 billion in July 2024 but lost nearly 97% of that and is now shutting down, urging users to withdraw their funds by October 26.
Despite the price challenges, developers continue to innovate within the Ethereum ecosystem. On October 1, the Ethereum Foundation launched zkAPI, a framework that allows users to pay for AI tools anonymously. Additionally, developers are set to test Glamsterdam on the Sepolia testnet on October 6, aiming to create a faster main chain that could potentially reclaim some of the activity lost to Layer 2 networks.
It’s not too late to consider buying Ethereum, as a 7% monthly increase has hardly made a dent in a 45% drop from the high. However, Ethereum has lagged behind Bitcoin, its supply can grow with lower main-chain activity, and recent developments like zkAPI and Glamsterdam haven’t yet positively impacted the price. Ethereum might be a suitable choice for buyers willing to hold through another tough year, but investors should monitor key price levels to gauge the strength of the recovery.