Why Ethereum’s Record Activity Isn’t Raising the Price of ETH

The Ethereum network’s growth strategy appears to focus on winning the adoption race first, and then generating fees later.

Ethereum’s layer 1 network reached all-time highs across all usage metrics in Q1 2026, with monthly active users up 53.5% quarter-over-quarter to 13.2 million and the number of transactions reaching 200.4 million, even as ETH’s market cap fell 30% and fees on the base layer fell almost 50%.

But according to Token Terminal’s Ethereum Q1 2026 report, the divergence between rising activity and falling revenue is the whole point.

Ethereum usage hits record despite falling fees and valuation

The report, released on June 17, shows that the numbers fall clearly along two lines. On the usage side, everything increased, including monthly active users, which increased 85.9% year-over-year; transactions, which increased by 81.5% year-on-year to just over 200 million; and throughput, which reached 25.78 transactions per second, a jump of 81.7% year-on-year.

However, on the dollar side, things were not so bright. Total ecosystem value locked averaged $316.2 billion, down 11% from Q4 2025, but still up nearly 23% year-over-year. At the same time, base transaction fees totaled $39.9 million, down nearly 48% from the previous quarter and 81.9% lower than a year ago.

Per Token Terminal, the fee squeeze had a direct cause, namely the second Blob Parameters Only (BPO #2) fork of the Fusaka upgrade cycle in January, which increased Ethereum’s data capacity and made block space cheaper. As a result, the number of transactions increased by 38% while total fees decreased by almost half during the same period.

Etherealize, the group working to extend Ethereum’s capabilities to traditional finance and a contributor to the report, put it this way:

“Ethereum is deliberately scaling the network at the expense of short-term fee capture, betting that cheaper block space will unlock much more demand (and possibly network revenue) in the long term.”

They are looking forward to the Glamsterdam upgrade, which targets a more than 3x gas limit increase in Q3 2026, with Ethereum’s roadmap ultimately heading towards 10,000 TPS and near-instant finality by 2029.

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Regarding Ethereum’s structural position in tokenized assets, the report indicates that it remained largely intact throughout the quarter, with the total market capitalization of tokenized assets averaging $203.4 billion, just 0.7% lower than the previous quarter. However, it grew 42.9% year-over-year, with stablecoins leading the way at $178.9 billion, of which Tether’s USDT ($94.1 billion) and Circle’s USDC ($54.5 billion) accounted for the bulk.

Tokenized assets proved to be the fastest growing segment, growing 60% quarter-on-quarter and 325.9% year-over-year to $4.7 billion, most of which was represented by tokenized gold, namely Tether Gold and PAX Gold. Tokenized funds also saw similar growth rates, increasing 5% to 19.4 billion during the period under discussion. BUIDL’s regulated institutional products, BlackRock’s WisdomTree and Superstate were among the biggest holdings, alongside yield-generating on-chain dollar products from Sky and Ethena.

And among the top 5 blockchain networks, Ethereum had a 71% share of the total TVL, worth $316.2 billion, compared to $129 billion for Tron, Solana, BNB Chain, and Plasma collectively. It also holds over 79% of active DeFi loans, nearly 62% of stablecoins and 73% of tokenized funds, as well as 84% ​​of tokenized commodities.

However, DEX trading volume was the only area where Ethereum did not lead, with BNB Chain handling $162.5 billion compared to $134.5 billion, with Solana coming in third after raising $104.9 billion.

ETH price under pressure

Interestingly, none of the activities described above translated into price strength for Ethereum’s native token. On the one hand, the coin’s fully diluted market capitalization averaged $290 billion in Q1 2026, a decline of 30.3% quarter-over-quarter and almost 10% year-over-year.

At the time of writing, it was hovering around the $1,700 level after briefly hitting a 14-month low near $1,500 earlier in June, before recovering somewhat on news of a U.S.-Iran peace deal.

Analyst sentiment on this is mixed, with some like Daan Crypto Trades noting that ETH is on track for its second worst first half since 2022 after a 29% drop in the first quarter and another 21% drop so far in the second quarter. That puts it on track for three straight double-digit quarterly losses.