Ethereum Outlook: Mid-Term Scenarios, Layer-2 Dynamics, and ETF Momentum

Key Points :

• Citigroup projects Ethereum (ETH) could fall to $4,300 by end-2025 in base case; weak case as low as $2,200, strong case up to $6,400.
• Layer-2 ecosystem growth is strong, but the “value transfer” back to the Ethereum base layer is assumed by Citigroup to be only ~30%.
• ETH’s ETF inflows are meaningful, yet still smaller relative to Bitcoin, with effects on ETH price amplified due to its smaller market cap.
• Macro factors (e.g. equity market, risk sentiment) provide only limited additional support.
• Recent developments reinforce some of these dynamics: large ETF inflows, rising staking yields, supply burn (deflationary pressure), strong Layer-2 adoption.

1. Citigroup’s ETH Price Scenarios

Citigroup’s recent forecast for Ethereum presents a wide range of possible outcomes for ETH price by end of 2025:

• Base (or medium) case: ~$4,300 — somewhat below current trading levels (roughly $4,515 at time of forecast).
• Bearish case: ~ $2,200 — if downside risks dominate (poor transfer of value, weak macro, stalled innovation).
• Bullish case: ~ $6,400 — if positive forces align, including stronger value accrual to ETH, high institutional demand, Layer-2 breakthroughs.

The analysts note that despite strong growth in network activity, much of it is happening on Layer-2 protocols (rollups, sidechains, etc.). These are scaling solutions built on top of Ethereum, which reduce congestion and improve transaction cost and speed, but the extent to which the benefits (fees, demand, utility) return to the base layer (i.e. to ETH itself and Ethereum’s consensus and security layer) is uncertain.

Citigroup assumes a ~30% “transfer” of Layer-2 value to Ethereum base layer for its model. They believe current ETH prices are above what their activity-based model would predict, implying that investor sentiment, ETF and tokenization/stablecoin expectations are contributing to overhang above intrinsic/modelled value.

2. Layer-2 Growth and Base Layer Value

Layer-2 scaling is a central theme in current Ethereum development. Some of the relevant dynamics include:

• Layer-2 protocols help reduce gas fees, increase throughput, and make user experience smoother.
• Upgrades like Dencun and proposals such as EIP-4844 are aimed at further improving the throughput and lowering transaction/data cost for rollups.
• But there is always the question: how much of that improved usage (volume, fees, demand) benefits ETH (through base layer validators, staking incentives, ETH burns, etc.) vs staying with Layer-2 operators or being “absorbed” off-chain.

In recent months, there has been strong adoption in Layer-2 in terms of transactions, DeFi usage, NFT/collectibles, etc. This has created pressure both for improved scalability on base layer and for better mechanisms (e.g. data availability, bridging, fees) so that value flows back.

3. ETF Inflows, Supply & Yield Drivers

Recent data suggests ETH is benefiting from institutional interest, ETF investments, supply dynamics, and staking yields:

• ETH-focused ETFs had ≈ $33 billion net inflows in Q3 2025.
• Deflationary pressure comes from ETH burns (post-Merge) and staking locking ETH out of supply.
• Staking yields are material (around 4–5% annual in some reports) and draw institutional investors.
• “Whale accumulation” has picked up: large addresses adding ETH holdings.

These dynamics help support ETH’s price, particularly relative to modelled intrinsic value, and may explain why price is above some activity-based forecasts.

4. Technicals & Near-Term Price Zones

Beyond the Citigroup forecast, technical analysis and other forecasting sources suggest important resistance/support zones and potential for shorter-term price moves:

• ETH is holding key support in the $4,000-ish range.
• Resistance observed near $4,500, with upside targets of $4,750-$5,000 if breakout occurs.
• If momentum weakens, downside risk toward $3,600-$3,800 is possible.

These technical zones are relevant for traders, but also for anyone considering entering ETH or related Layer-2/growth plays.

5. Macro Environment & Risk Factors

While many internal factors are positive for Ethereum, there are external/macro elements that could hinder upside:

• Equity markets are near levels that may cap further gains—if risk sentiment sours, ETH (as a risk asset) could suffer. This aligns with Citigroup’s view that macro adds limited extra tailwinds.
• Regulatory risk: how regulators in U.S., EU, and Asia treat crypto, staking, taxation, stablecoins, etc., will impact ETH demand and adoption.
• Competing blockchains / Layer-1 / Layer-2: other chains (e.g. Solana, others) or even non-Ethereum rollups may compete for developer mindshare and usage.
• Technical scaling & infrastructure risk: data availability, security issues, costs of bridging, etc.

6. Recent Trends & Updated Observations

Since the time of Citigroup’s report, there are a number of developments that reinforce or modify parts of their model:

• ETF inflows continue strong: Spot ETH ETFs have seen major inflows in recent months.
• Layer-2 adoption remains robust, as noted earlier, plus improvements via protocol upgrades (e.g. Dencun, upcoming upgrades) that aim to lower costs of rollups.
• Support levels appear relatively stable, and technical momentum suggests potential for move toward $5,000 if resistance zones breach.
• There is also increasing focus on yield (staking etc.), supply constraints, and deflationary mechanics (burns) improving ETH’s “tokenomics” profile.

Final Takeaway

Putting everything together, here’s what readers—and potential investors or practitioners—should consider:

• Base case expectation: ETH may modestly decline or drift downward from current levels to something like $4,300 by end of 2025, especially if Layer-2 value doesn’t sufficiently accrue to the base layer, or macro headwinds intensify.
• Bullish potential: If ETF flows remain strong, staking yields rise, deflationary pressure increases, and Layer-2 upgrades make value transfer easier and cheaper, ETH could reach $6,000-$6,500 or higher.
• Downside risk: Failure to maintain $4,000 support, regulatory shocks, or competitive threats could push ETH toward $2,000‐$3,000 territory.

For those looking for “next revenue sources” in the blockchain space, opportunities lie in:

• Building or investing in Layer-2 infrastructure or apps that benefit from ETH’s base layer but don’t assume full value accrual.
• Participating in staking, or developing/using projects that service staking or validator infrastructure.
• Paying attention to ETF products, tokenization, stablecoins and their regulation—these are likely to drive capital flow, and may offer arbitrage or yield opportunities.
• Monitoring technical support & resistance zones for entry/exit points; also, keeping an eye on macro shifts (rate policy, regulatory environment, competition).

Overall, Ethereum remains a core asset with promising fundamentals. But it’s not without risk. Much will depend on how well the system scales (especially via Layer-2), how regulation evolves, and how investor sentiment plays out.