Wall Street Rushes into Ethereum, but Has It Become a Castoff for Investors?

marsbitPublished on 2026-07-31Last updated on 2026-07-31

Abstract

Wall Street Embraces Ethereum, But Investors Remain Wary Ethereum is gaining significant institutional adoption from major financial firms like JPMorgan Chase, Robinhood, and Morgan Stanley, which are launching products and building on the network. A new non-profit, Ethereum Institutional, has also been formed to accelerate enterprise use. Technically, Ethereum co-founder Vitalik Buterin has unveiled a major multi-year upgrade plan called "Lean Ethereum," aiming to enhance privacy, security, and quantum resistance. Despite these positive fundamentals, the market reaction has been negative. ETH's price remains around $1,900, down over 60% from its all-time high. Analysts cite weak investor demand and persistent outflows from spot Ethereum ETFs. Citi has downgraded its 12-month price target to $2,240. A key challenge is the decoupling of network activity from ETH's value accrual. While Layer 2 scaling solutions have successfully reduced costs and increased throughput, most transactions now occur off the mainchain. This reduces the fee revenue and ETH burn on Ethereum itself, benefiting users but creating uncertainty for ETH holders. Price predictions are highly divergent, ranging from Citi's conservative $2,000+ outlook to StanChart's $4,000 by 2026 and even a long-term $25,000 forecast from Tom Lee. The consensus is that while Ethereum is increasingly likely to become core financial infrastructure, the extent to which ETH token holders will benefit remains unclear.

Written by: Alex O'Donnell, Coinmarketcap

Compiled by: Saoirse, Foresight News

The Ethereum network is gaining recognition from Wall Street, yet investors remain less than fully optimistic about ETH.

In recent months, institutional adoption of Ethereum has accelerated significantly. Since May, several financial institutions including JPMorgan Chase, Robinhood, and Morgan Stanley have successively launched various Ethereum-related products and services. In July, several former members of the Ethereum Foundation established a non-profit independent organization, Ethereum Institutional, aimed at accelerating the adoption of Ethereum by major institutions.

Meanwhile, Ethereum co-founder Vitalik Buterin released a major network upgrade roadmap titled "Lean Ethereum." This upgrade aims to enhance Ethereum's privacy capabilities and resistance to quantum attacks.

However, the market has not responded positively. At the time of writing, ETH is trading just above $1,900, a drop of over 60% from its all-time high of around $4,950 in August 2025. Analysts widely believe it will be difficult for ETH to return to its previous peak in the short term. On July 1, Citigroup lowered its 12-month price target for Ethereum from $3,175 to $2,240, citing weakening investor demand and continuous net outflows from Ethereum ETFs as reasons for the downgrade.

The research team at Galaxy institutional noted that the reason for the disconnect between market performance and fundamentals is clear: a growing number of investors are confused about the value proposition of ETH.

Wall Street's Expanding Footprint

Today, institutional applications of blockchain are no longer limited to pilot projects, and Ethereum is one of the biggest beneficiaries of this trend.

In May, JPMorgan Asset Management launched its second tokenized money market fund, JLTXX, on the Ethereum public blockchain. In July, online brokerage Robinhood launched Robinhood Chain, an Ethereum Layer-2 network specifically designed for financial services and tokenized assets.

Morgan Stanley is also pushing ETH further into mainstream securities accounts. Qualified E*TRADE users can now trade and hold Ethereum, Bitcoin, and SOL.

The reason major institutions continue to increase their bets on Ethereum is its mature developer ecosystem and its large-scale, decentralized network of validator nodes. Subsequent institutional adoption is likely to accelerate further.

ConsenSys CEO Joe Lubin stated in a July 1 announcement: The vast majority of stablecoin issuance, tokenized assets, decentralized finance, and various on-chain financial infrastructure will prioritize Ethereum.

Ambitious Upgrade Plans

Additionally, Ethereum is on the verge of comprehensive technological innovation, which will further enhance its appeal to various institutions.

In July, Buterin unveiled the "Lean Ethereum" development plan, with the entire reconstruction cycle spanning three to four years. He stated that the scale of this upgrade is comparable to Ethereum's network-wide transition to a Proof-of-Stake consensus mechanism in 2022.

The upgrade aims to reduce Ethereum's usage costs, enhance network security, and improve user privacy protection—a key consideration for institutional traders. If successfully implemented, Ethereum could become one of the first blockchains with reliable resistance to quantum attacks.

Ethereum Foundation researcher Justin Drake said in July that robust security features would be a natural advantage in attracting global institutions to migrate to Ethereum.

Economic Fundamentals Full of Uncertainty

Despite a steady stream of positive news, ETH's price remains sluggish.

One root cause lies in Ethereum's scaling solutions. Ethereum heavily relies on Layer-2 blockchains to achieve lower-cost, higher-efficiency transaction processing.

In theory, higher on-chain activity generates more transaction fees, which should increase market demand for ETH. However, data from L2Beat shows that since 2024, the vast majority of transactions in the Ethereum ecosystem have been processed by Layer-2 networks, which only periodically complete final settlement on the Ethereum mainnet.

While scaling solutions have significantly reduced transaction costs, enabling Ethereum to handle greater traffic, they have also decoupled the link between on-chain activity and ETH demand: with a large volume of transactions moving off the mainnet, the fees earned by the Ethereum mainnet have decreased accordingly.

Researchers at 21Shares noted in January: This change benefits regular users but presents a mixed bag for ETH holders. Unless the overall on-chain transaction volume surges enough to compensate for the gap created by reduced fees, lower fees will decrease the amount of ETH being burned.

Divergent Market Predictions

Currently, it is increasingly likely that Ethereum will evolve into a core financial infrastructure. However, how much profit ETH holders will ultimately reap remains uncertain. Price forecasts from various industry players show significant divergence.

Citigroup predicts ETH will be just above $2,000 in 12 months; Standard Chartered is much more optimistic, expecting ETH to reach $4,000 by the end of 2026 and $40,000 by 2030.

BitMine Chairman Tom Lee is even more aggressive, believing ETH's long-term price could reach as high as $250,000, corresponding to a total market capitalization of approximately $30 trillion.

In summary, the probability of Ethereum becoming mainstream core financial infrastructure is increasing, but whether ordinary token holders can fully share the dividends of this industry development remains fraught with uncertainty.

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Related Questions

QAccording to the article, what are some recent institutional developments related to Ethereum?

ARecent institutional developments include: JPMorgan Asset Management launching its second tokenized money market fund (JLTXX) on the Ethereum blockchain in May; Robinhood launching an Ethereum Layer-2 network called Robinhood Chain for financial services and tokenized assets in July; Morgan Stanley enabling qualified E*TRADE clients to trade and hold ETH, BTC, and SOL; and the formation of the nonprofit organization Ethereum Institutional in July by former Ethereum Foundation members.

QWhat is the main reason given by Galaxy's research team for the disconnect between Ethereum's positive fundamentals and its price performance?

AGalaxy's research team stated that the disconnect is due to a growing number of investors being confused about the value accrual logic of ETH.

QWhat key issue does the article highlight regarding Ethereum's scaling solutions and their impact on ETH?

AThe article highlights that while Layer-2 scaling solutions lower transaction costs and allow Ethereum to handle more traffic, they decouple on-chain activity from ETH demand. Most transactions now occur on Layer-2 networks, which only settle periodically on the mainnet. This reduces the fees earned and burned on the Ethereum mainnet, potentially diminishing the economic benefits for ETH holders unless overall transaction volume increases massively to offset the lower fee rate.

QWhat is the name and primary goal of the major Ethereum upgrade plan mentioned in the article?

AThe major upgrade plan is called 'Lean Ethereum.' Its primary goals are to reduce Ethereum's costs, improve network security, enhance user privacy, and make Ethereum one of the first blockchains with reliable quantum attack resistance.

QWhat is the range of price predictions for ETH mentioned by different analysts in the article?

AThe price predictions vary widely: Citigroup lowered its 12-month price target to $2,240; Standard Chartered predicts ETH could reach $4,000 by the end of 2026 and $40,000 by 2030; and BitMine's chairman Tom Lee gave a more aggressive long-term prediction of up to $250,000.

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