Ethereum, Solana Fall Despite Rising On-Chain Activity as Gap With Fundamentals Widens

On-chain activity across major blockchain networks such as Ethereum and Solana has increased even as token prices have fallen by more than half over the past year, widening the disconnect between network fundamentals and market prices, The Block reported on July 28, citing a recent quarterly staking report from crypto asset manager Bitwise.

"There is a big disconnect between the fundamentals of major blockchain networks and market sentiment," Kam Benbrik, Bitwise's head of on-chain research, said in the report. While prices have fallen from 2025 levels, blockchain usage costs have declined and on-chain activity has increased.

Bitwise said the drop in network revenue was driven mainly by protocol design changes intended to make block space cheaper and more abundant, rather than by weakening on-chain activity. Some networks were hit by softer demand, but the firm said that was not a market-wide trend.

Institutional inflows stood out in the staking market. Most of the new Ether added to Ethereum validator pools this year came from institutional demand, including exchange-traded funds and corporate treasury operations.

Staked Ether reached a record 40.2 million ETH at the end of the second quarter, accounting for about one-third of total supply. Benbrik added that on-chain flow data showed most of those inflows came from institutions.

Staking yields were higher on Solana than on Ethereum. Ethereum's annualized staking yield was 2.84% in the second quarter, compared with 6.25% for Solana.

Still, most staking rewards came from new token issuance rather than network fees. Newly issued tokens accounted for 93% of Ethereum staking rewards and more than 90% of Solana staking rewards.

Bitwise said token holders who do not stake could face dilution from new issuance. It also said yields may decline as staking participation rises because rewards would be distributed across more participants.

Liquid staking is a viable option for clients seeking exposure to both staking yields and on-chain activity, Benbrik said. Investors can earn base staking returns while also using those tokens in decentralized finance for liquidity provision or collateralized lending, he added.