Despite reaching record highs, Ethereum’s DeFi sector remains $17 billion below its 2021 peak. With Ether (ETH) hitting an all-time high of over $5,000, the broader DeFi ecosystem has yet to recover to its former levels. As of now, the total value locked (TVL) in DeFi stands at $156 billion, a figure that mirrors mid-2022 levels but falls short of the $173 billion TVL recorded in 2021. This discrepancy suggests a disconnect between Ethereum’s price performance and its DeFi ecosystem’s recovery. Analysts note that while Ethereum’s fundamentals—such as its token-burning mechanism and growing stablecoin usage—support long-term value, the DeFi sector remains underdeveloped relative to its peak.

Ethereum’s price has surged more than 240% since April 2025, driven by a combination of institutional adoption, capital inflows into ether ETFs, and renewed demand from digital asset treasury companies. The long-term holder (LTH) net unrealized profit/loss (NUPL) indicator has entered the “belief” phase, a historical precursor to significant price rallies. This suggests that the market is in a phase where investors believe in Ethereum’s long-term value but have not yet reached a state of euphoria, typically associated with market peaks. The market value to realized value (MVRV) ratio currently stands at 2.08, significantly lower than its 3.8 peak in 2021 and 6.49 in 2017, indicating that Ethereum remains undervalued in terms of unrealized gains.

From a technical perspective, Ethereum’s price movement has validated bullish chart patterns. A weekly megaphone pattern, forming since December 2023, suggests a target of $10,000. Additionally, the price has broken above a rounded bottom pattern on the daily chart, with a technical target of $12,130. Analysts like Jelle and Mickybull Crypto have emphasized Ethereum’s potential for continued gains, citing the possibility of interest rate cuts, capital inflows via spot Ethereum ETFs, and rising demand from ETH treasury companies. However, the MVRV ratio suggests that Ethereum could face a correction before reaching its peak, as historical data indicates that MVRV values above 3.0 often precede selloffs.

The DeFi sector, while growing, is still in the early stages of recovery. Ethereum continues to lead in stablecoin usage, holding $138.6 billion in stablecoin liquidity, or roughly half of the total $272.6 billion stablecoin market cap. This positions Ethereum as a key infrastructure layer for bridging the gap between traditional finance and decentralized systems. However, the rise of alternative layer-1 networks, such as Solana and Avalanche, has introduced new competition, particularly in high-frequency trading and low-cost transaction environments. Solana, for instance, processes significantly more transactions at lower fees, making it a preferred choice for real-time applications and gaming. Despite Ethereum’s first-mover advantage and strong developer ecosystem, these newer chains are rapidly gaining traction in specific use cases.

While Ethereum’s price action is bullish, the DeFi TVL data highlights a more complex picture. The rise in TVL is driven by a handful of major dApps and stablecoin protocols, rather than a broad-based recovery. This suggests that the DeFi market is still consolidating and lacks the widespread participation seen in 2021. Furthermore, the transition to a post-FTX environment has led to increased scrutiny of DeFi projects, with regulators and investors prioritizing security and transparency. Ethereum’s upcoming upgrades, including sharding and account abstraction, aim to future-proof the network for higher transaction throughput and lower fees, but these changes are still in development. Until these upgrades are fully implemented, Ethereum’s dominance in DeFi may face challenges from more scalable alternatives.

Source: [1] Ether Price Enters ‘Belief Zone’ Following $5K All-Time Highs (https://cointelegraph.com/news/20k-eth-price-in-play-ethereum-belief-zone) [2] Ether, Ethereum’s coin, breaks 2021 all-time high (https://www.axios.com/2025/08/24/ether-all-time-high) [3] DeFi resurgence 2025: Layer-1 leaders poised for a post-… (https://cryptoslate.com/defi-resurgence-2025-layer-1-leaders-poised-for-a-post-biden-comeback/) [4] Solana vs. Ethereum: Key Differences Explained (https://builtin.com/articles/solana-vs-ethereum) [5] Ethereum vs. Solana: Comparative Report (https://messari.io/compare/ethereum-vs-solana)